Luxembourg withholding tax on directors' fees
Withholding tax on directors' fees in Luxembourg is no year-end formality: it falls due within eight days, and directors' fees are never deductible for the company that votes them.
What is the withholding tax on directors' fees in Luxembourg?
The withholding tax on directors' fees in Luxembourg is 20% of the gross amount allocated, with no deduction whatsoever, and 25% of the amount actually made available to the beneficiary where the Luxembourg paying company itself bears the tax that should have been withheld. The debtor declares and pays it within eight days of the income being made available.
The base is gross in the strictest sense. The withholding applies to gross income, with no deduction for income-related expenses, operating expenses, special expenses, taxes, duties or other charges borne by the beneficiary. A director who pays for their own travel or liability cover does not offset it against the withholding base: it is taken into account, where relevant, at the stage of their personal assessment.
The fees must still be Luxembourg-source. They are domestic income where the debtor is a public or private law entity whose registered office or central administration is in the Grand Duchy. It is therefore the location of the paying company, and not the residence of the director receiving the fees, that triggers the withholding obligation.
Liability, for its part, is not shared: the debtor of the fees is personally answerable for declaring and paying the tax it withheld or should have withheld. We regularly see boards resolve to allocate directors' fees with nobody having budgeted for the withholding; the company then bears it out of its own funds, at the higher rate, months after the due date.
| Situation | Rate | Base |
|---|---|---|
| Directors' fees allocated in the ordinary way | 20% | Gross amount allocated, with no deduction |
| The paying company bears the tax itself | 25% | Amount actually made available to the beneficiary |
| Remuneration for day-to-day management | Wage withholding tax | Employment income, outside the scope of directors' fees |
What counts as a director's fee, and what does not?
A director's fee is, in Luxembourg, the indemnity remunerating the activity of directors, statutory auditors and persons performing analogous functions in joint-stock companies, limited liability companies, cooperative societies or other collective entities.
The definition is broad by design. Special indemnities and benefits granted alongside or in place of directors' fees follow the same treatment: for an individual, they fall within profits from the exercise of a liberal profession, within the meaning of article 91, paragraph 1, number 2 of the income tax law. The heading used in the board's resolution governs nothing; the function being remunerated governs everything.
The decisive dividing line is day-to-day management. Remuneration granted to a director for the day-to-day management of the company or body does not fall within the notion of directors' fees: it is employment income and therefore follows wage withholding, with an ordinary tax card and ordinary payroll handling. The same officer may accordingly receive, in one and the same year, a salary for day-to-day management and directors' fees for the mandate.
Attendance fees follow the directors' fees regime where they remunerate a mandate. An allowance for out-of-pocket costs does exist, but its scope is narrowly drawn: it covers delegates of the professional chambers and federations, of the national health fund, of the sickness funds and social insurance bodies, of the Economic and Social Council, as well as members of municipal councils, municipal committees and the administrative committees of the national mark, at 15 euros per sitting, subject to a ceiling of 45 euros per month and 540 euros per year. An officer of a commercial company does not benefit from it.
| Remuneration | Income category | Withholding at source |
|---|---|---|
| Fees voted for a director's or statutory auditor's mandate | Profits from the exercise of a liberal profession | Directors' fees withholding |
| Special indemnities and benefits granted alongside or in place of directors' fees | Profits from the exercise of a liberal profession | Directors' fees withholding |
| Remuneration for day-to-day management | Employment income | Wage withholding tax |
How are directors' fees withholding returns filed and paid?
Withholding tax on Luxembourg directors' fees is declared on form 510bis and paid within the eight days following the date on which the income is made available, electronically through MyGuichet.lu using a LuxTrust product since 1 January 2025.
Payment is made as a single global amount, with no identification of the beneficiaries, to the wage withholding office competent for the place of the company's registered office. The return may be filed by an intermediary — an agent, a fiduciary or another representative — acting on the debtor's behalf, which does not shift the burden: liability remains that of the debtor of the fees.
Alongside the return comes a documentary obligation that is often overlooked. The debtor keeps a withholding register recording, in chronological order, the date the fees were made available, for each beneficiary their name and address, the gross amount allocated and the tax withheld, then the date that tax was paid to the collector. That register is the first document requested in an audit.
The eight-day period runs from the income being made available, not from the cash leaving the account. The distinction is anything but theoretical: we regularly see files where the allocation is resolved in the spring, where cash only allows payment in the autumn, and where the withholding is declared in the autumn. Setting the date on which the fees are made available expressly in the resolution that allocates them, and keeping corporate secretarial records current, closes the discussion before it opens.
| Obligation | Medium | Deadline |
|---|---|---|
| Declare the withholding | Form 510bis, electronically on MyGuichet.lu with a LuxTrust product | 8 days following the income being made available |
| Pay the withholding | Global payment to the collector, with no identification of beneficiaries | 8 days following the income being made available |
| Keep the withholding register | Date made available, beneficiary's name and address, gross amount allocated, tax withheld, date of payment | Ongoing |
Are directors' fees deductible for the paying company?
No: directors' fees are not deductible, in the hands of the debtor, as operating expenses, and the Luxembourg company that allocates them adds them back to its taxable base, even though it has paid out the remuneration and withheld the tax at source.
The burden is thus twofold: the cash outflow, then corporate income tax computed on an amount that will never be deducted. The add-back is made under non-deductible operating expenses, in the company tax return. It is not something to discover when the return is prepared: it is budgeted when the board resolves on the allocation.
Remuneration for day-to-day management follows the opposite rule, being an ordinary payroll charge. The difference in treatment is real, but it is not freely arbitraged: it is the nature of the functions actually performed that determines the classification, never the heading chosen in the minutes.
We regularly see one or other of the two symmetrical mistakes: fees voted for day-to-day operational functions, or a salary paid to a director who only holds a mandate. Both expose the company to reclassification, with a knock-on effect on the applicable withholding, on deductibility and on the beneficiary's social security affiliation. Describing the functions in the resolution, and not only the amount, remains the least costly precaution.
How is a resident beneficiary taxed on directors' fees?
A beneficiary resident in Luxembourg reports directors' fees among profits from the exercise of a liberal profession, and the 20% already withheld is credited against their personal income tax assessment. For a resident, that withholding is never final.
The trigger threshold is low: assessment taxation becomes mandatory where taxable income includes more than 1,500 euros of net income subject to the directors' fees withholding. A single mandate in a mid-sized company clears that threshold without difficulty, which brings the beneficiary within the scope of the personal income tax return.
The social security side is the second effect, and it surprises more often than the first. A board member remunerated by directors' fees affiliates with the Joint Social Security Centre as a self-employed worker, even where the company issues a statement that looks like a payslip. Contributions are computed on professional income, between a minimum and a maximum base set by reference to the social minimum wage.
The order of operations matters here as much as the amounts. An affiliation applied for after the fact produces adjustments spanning several years, whereas the same affiliation applied for on taking office produces nothing more than an ordinary statement. That is why we treat accepting an independent director mandate as the start of an activity, and not as one more corporate formality.
How is a non-resident beneficiary taxed on directors' fees?
For a non-resident whose domestic income consists exclusively of Luxembourg directors' fees, the 20% withholding is final taxation where the threshold of 100,000 euros of gross fees per tax year is not exceeded, unless assessment taxation is requested.
Beyond that, the logic reverses. Where the gross amount of the fees exceeds the threshold of 100,000 euros per tax year, the non-resident taxpayer is subject to assessment taxation for those fees alone, and the withholding already operated is credited against the assessment issued.
The option for assessment taxation remains open below the threshold, and it is neither favourable nor unfavourable in itself. It substitutes the tax scale and the taxpayer's actual circumstances for a flat levy computed on the gross amount, which can cut either way depending on the beneficiary's other income. The calculation is made case by case, never as a matter of principle.
That leaves the treaty dimension, which is not settled by eye. The direct tax administration publishes a table of withholding rates applicable under each treaty to dividends, interest, royalties and directors' fees, and circular L.I.R. no. 94/4 of 24 June 2008 is devoted to directors' fees in international relations. The rate is checked country by country before the allocation is resolved.
| Beneficiary | Nature of the 20% withholding | Assessment taxation |
|---|---|---|
| Resident | Credit against the tax assessment | Mandatory above the threshold of 1,500 euros of net income subject to the withholding |
| Non-resident, domestic income limited to directors' fees, threshold of 100,000 euros not exceeded | Final taxation | On the taxpayer's request |
| Non-resident, threshold of 100,000 euros exceeded | Credit against the tax assessment | Mandatory, for the fees alone |
Is VAT chargeable on directors' fees?
Since the Court of Justice of the European Union ruled on 21 December 2023 in case C-288/22, a director of a Luxembourg public limited company may not be acting independently, in which case the fees fall outside the scope of VAT.
The reasoning unfolds in two stages. In its judgment of 22 November 2024, the district court held that both criteria for an economic activity were met: the service is supplied for consideration and the activity of board member is permanent in character. It nonetheless held that the activity was not carried out independently, the director neither acting under their own responsibility nor bearing the economic risk.
Circular no. 781-2 of 11 December 2024, which supplements circular no. 781 of 30 September 2016, draws the administrative consequences. The administration does not intend to confine the effect of judgment C-288/22 and of the judgment of 22 November 2024 to directors of public limited companies alone, and it falls to each director concerned to assess for themselves whether they meet the criteria those decisions set out.
For those who were VAT-identified, the circular opens a corrective route: it is for them to issue corrective invoices to their taxable customers and to establish their right to restitution of the VAT wrongly charged. Two levies must nonetheless be kept apart, and this is the point most often conflated: a director's fee may fall outside the scope of VAT while remaining subject to the 20% withholding.
Sources and verification
Written for Financial Services Luxembourg and reviewed before publication by Mickaël LOC, licensed accountant (authorisation 10077274). Sources were verified on 22 September 2026, the date on which every rate, threshold, deadline and reference cited in this article was cross-checked against an official public source.
The sources consulted are as follows. The direct tax administration, for its « Tantièmes » page (definition of directors' fees and of the special indemnities and benefits granted alongside or in place of them, classification as profits of a liberal profession, the 20% and 25% rates, exclusion of day-to-day management, no deduction of the beneficiary's charges, the debtor's non-deductibility and personal liability, the 100,000 euros non-resident threshold), its « Imposition par voie d'assiette » page (the 1,500 euros threshold of net income subject to the directors' fees withholding), its electronic filing section for directors' fees (filing of form 510bis on MyGuichet.lu using a LuxTrust product since 1 January 2025, filing through an intermediary), form 510bis, its withholding taxes section (domestic character of the income), its table of treaty withholding rates, its circular L.I.R. no. 94/4 of 24 June 2008 and its circular L.I.R. no. 45/2 – 152/1 – 168/1 of 14 February 2017. The guichet.public.lu portal, for its pages on declaring the withholding tax on directors' fees (the eight-day deadline, the global payment, the withholding register, the competent wage withholding office) and on identifying and reporting directors' fees or attendance fees (the out-of-pocket allowance). The Joint Social Security Centre, for its pages on affiliating, on professional income and on the contribution base. The pfi.public.lu portal, for circulars no. 781-2 of 11 December 2024 and no. 781 of 30 September 2016 and the news item devoted to judgment C-288/22, and EUR-Lex for that judgment of 21 December 2023.
Four points could not be verified against the primary text and are therefore not asserted here. First, the consolidated income tax law and the direct tax administration's PDF documents are blocked by the network proxy of the drafting environment: sources were read through indexed extracts, and no article number is cited other than article 91, paragraph 1, number 2, as recalled by the « Tantièmes » page. Second, the administrative definition of when directors' fees are made available — the exact starting point of the eight-day period where the allocation and the payment are separated in time — was not found in any official source consulted. Third, the penalties applying to a withholding declared or paid late are not quantified here, for want of an official source establishing them. Finally, treaty rates vary from one treaty to another and are not reproduced. Each of these points can be checked on impotsdirects.public.lu, under its A to Z section and its table of treaty rates, and on guichet.public.lu.
This article states the law as it stands at the date of publication and is not personalised advice: the classification of an officer's remuneration depends on the functions actually performed, on the beneficiary's residence and on the applicable treaty. Report an error to contact@financialservices.lu: the correction is dated in the article.
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