Cross-Border Workers in Luxembourg: What’s New in 2026 (Taxes, Pensions, Work)

From January 1, 2026, a tax credit may be granted (upon request only) to the parent whose child lives in shared custody and who, under a shared family allowance arrangement, does not benefit from tax class 1a. The amount of this credit can reach €922.50 per child, and the measure applies only to the 2025 and 2026 tax years.

A new tax deduction, called the “Deduction for Continuing Professional Activity” (Abattement de Maintien dans la Vie Professionnelle, AMVP), will be introduced for individuals eligible for early retirement who voluntarily choose to continue working until age 65. This deduction will allow a reduction of taxable income by up to €9,000 per year. To benefit, it will be necessary to obtain a certification of pension eligibility from the competent Luxembourg pension authorities.

The tax-deductible ceiling for retirement savings contracts will be raised from €3,200 to €4,500 per year to support the third pillar of pension insurance based on individual initiative and encourage supplementary retirement savings schemes.

From January 1, 2026, employers hiring seasonal, occasional, or intern workers for temporary tasks will be able to apply a flat-rate tax withholding on wages up to €18 per hour (up from €16 in 2025). The maximum continuous work period to benefit from this regime is extended to 30 days in the agricultural, viticultural, and forestry sectors, covering all seasonal assignments such as grape harvests.

uxembourg is considering a major income tax reform to replace the current three tax classes (1, 1A, and 2) with a single, individualized scale inspired by class 1A. This reform aims to simplify the tax system and treat taxpayers fairly, regardless of their family or marital situation.

Note: The draft bill is expected to be submitted in 2026, but implementation is only planned for 2028, with possible transitional measures and subject to parliamentary and budgetary approvals.

Starting January 1, 2026, pensions in Luxembourg will increase by 1.5% to keep pace with the average level of contributable salaries.

The minimum full-rate monthly pension (40 years of contributions) will therefore be €2,376.62 in 2026.

From January 1, 2026, several changes to the pension system will gradually take effect to strengthen its financial sustainability while maintaining the legal retirement age at 65. Key measures include:

• An increase in contributions,
• Introduction of a progressive pension,
• Greater flexibility in accounting for years of study,
• Gradual extension of the contribution period required to benefit from early retirement,
• Implementation of the Deduction for Continuing Professional Activity (see Taxation section).

A bill adopted on December 18, 2025, harmonizes the conditions for early retirement for employees and self-employed individuals, correcting a recognized inequality and applying uniform anti-cumulative rules.

Consequently, expect changes aimed at making the rules identical for all beneficiaries.

From July 4, 2026, companies will be required to implement a system ensuring the right to disconnect for employees using digital tools for professional purposes. This system, defined at the company or sector level, must include technical measures, training, and any compensation, while complying with working time legislation. Employers who fail to comply may face administrative fines. The right to disconnect will also apply to remote workers.

In 2026, starting a business in Luxembourg will be simplified through the merging of procedures: establishment authorization, VAT number, and employer registration can now be obtained through a single process.