Grand Duchy of Luxembourg

Last modification: 19 May 20

Although Luxembourg is an exemplary member of the EU and has complied with all European and international rules governing fiscal practice, it maintains its reputation as a fiscal paradise. The Grand Duchy is certainly company car-friendly: they are fully fiscally deductible, as is the 17% VAT tariff, with low road and registration taxes.

The economy of the Grand Duchy depends largely on the financial sector, where almost half of the GDP of the country originates. About 150 different banks operate in or around the capital. The Grand Duchy of Luxembourg is the most important European marketplace for investment funds (second in the world behind the US) and has the greatest number of private banks in the Eurozone. 

There is also, still, a strong steel industry with the ArcelorMittal group, employing 4.260 people in Luxembourg; and many international companies such as Amazon, AOL, eBay, Paypal, Skype and Apple iTunes that have their European seat in the Grand Duchy, thanks to the interesting taxation laws and favourable investment climate.


Chapter 1: Economic and business environment


613,900 inhabitants (2019)

Source :


Luxembourg (77,000 inhabitants)

Major cities

1.    Luxembourg
2.    Esch-sur-Alzette (28,228 inhabitants)
3.    Dudelange (18,013)
4.    Schifflange (8,155)
5.    Bettembourg (7,437)
6.    Pétange (7,187)
7.    Ettelbruck (6,364)
8.    Diekirch (6,242)
9.    Strassen (6,006)    
10.    Bertrange (5,615)

Source: Geonames


Luxembourgish, French and German are all official languages. 

Luxembourgish is a Franconian language with a Germanic syntax and grammar, but heavily influenced by French for its vocabulary. 

Unlike neighbouring Belgium, where different languages are linked to different regions of the country (Dutch in Flanders, French in Wallonia, both in Brussels), the multilingualism in Luxembourg is functional rather than geographic: different languages are used in different situations.

Some examples:

  • At primary school, all courses are taught in German. Also in secondary school, up to the 9th grade – except for maths and sciences, which are taught in French. In higher grades, the primary language may be entirely French. In either case, Luxembourgish is used to provide explanations.
  • In parliament, bills are typically written in German, debated in Luxembourgish and codified in French. 
  • Most newspapers are in German, some are in French, and one uses the three languages, sometimes on the same page. 
  • Written advertising tends to be in French, but sometimes also in Luxembourgish. 
  • Informal conversations tend to be in Luxembourgish, more formal ones in French or German. 

Due to the large influx of guest workers and EU officials, other languages prominently used in Luxembourg are Portuguese, Italian and English. 

  • $69.5 (€62.8) billion (2018), +2.6% compared to 2017
  • $113,192 (€102,327) per capita (2018), +7.1% compared to 2017
Unemployment rate

5.5% (July 2019)

Source: Trading Economics

Main industries

financial services (responsible for nearly half the country’s GDP), construction, real estate services, metallurgy, ICT and telecoms, transportation and logistics, chemicals, engineering, tires, glass, aluminium, tourism, biotechnology.



Interest rate
  • ECB harmonised Long-term Interest Rate (August 2019): -0.54% (down from -0.28% in July)
  • EURIBOR Short-term Interest Rate (August 2019): -0.43%

Source: CEIC

Fleet Maturity Index (scaling)


Political key info

Luxembourg is a constitutional monarchy with a parliamentary system. The monarch, Henri (b.1955; r. 2000- ), is the world's only head of state with the title 'Grand Duke'.

The government is led by Xavier Bettel, first elected in 2013 and re-elected in 2018 - the world's first openly gay head of government to be elected for a second term. He leads a coalition government between his own centre-right Democratic Party, the Socialist Workers' Party and the Greens. 


Core consumer prices in Luxembourg increased 1.80% in August of 2019 over the same month in the previous year. Core Inflation Rate in Luxembourg averaged 1.68% from 1996 until 2019, reaching an all time high of 2.90% in July of 2001 and a record low of -1.60% in January of 1999.

Source: Trading Economics

Chapter 2 : Automotive market, segments & sales

Total Car park

Total Car park (2019)

496,326 units (+2.97% compared to 2018)

  • 201,287 cars (-0.45%)
  • 213,715 mixed-use vehicles (+6.37%)
  • 34,833 LCVs (+5.5%)
  • 5,348 trucks (-3.5%)

‘Mixed-use vehicles’ serve to transport persons and/or merchandise, and can include vans, combis, breaks, etc.      



Isolating cars (private and mixed-use), we see the number rise steadily over the last decade. The most recent figures:

  • 2017: 390,738 units
  • 2018: 403,115
  • 2019: 415,002

Over the last two years, an average of 33 new cars have been registered each day. If current growth rates persist, the number is expected to reach 500,000 by 2026. 

In 2016, Luxembourg had 739 cars per 1,000 inhabitants – the highest ratio in the entire EU. 

However, this is not entirely thanks to the Luxemburgers themselves. Since a little under 170.000 people work but don’t live in the Grand Duchy of Luxembourg, of whom quite a lot do drive a Luxembourg-registered company car (benefiting from the attractive taxation), many of the registered cars don’t stay in the country overnight.

Luxembourg’s car fleet is younger than the EU average, but it is aging: the share of cars under two years old is shrinking, that of cars over 10 years old is growing. 51% are less than 5 years old, down from 55% in 2014. 


Age division in 2019:

  • Less than 2 years: 23.8%
  • 2 to 5 years: 27%
  • 5 to 10 years: 26.6%
  • Older than 10 years: 22.6%

The percentage of luxury cars is rising, from 0.35% of total registrations in 2016 to 0.55% in 2018. In all, 45% of luxury cars are registered as company cars. 

Source: KPMG’s Automotive Breakfast 2019

New vehicle registrations (Cars, LCV, Trucks)

52,811 units (cars and LCVs) in 2018 (+0.06% compared to 2017) 


Top 5 brands (total market)

Top 5 brands Sales of New Passenger Cars in 2018

1. Volkswagen (6496 units, +2.96% compared to 2017)
2. BMW (4955, +0.24%)
3. Mercedes (4778, +4.11%)
4. Renault (3752, -7.42%)
5. Audi (3498, -21.7%)

Clearly, the Luxembourg car market is dominated by German brands, and the premium ones in particular. 


Dealer network (including fleet dealer network)

Fegarlux, the Federation of Luxembourg Car Dealers, has 132 members. 


Used car market/renewal cycle

26.600 second-hand cars were sold in 2017; the average age of passenger cars in Luxembourg is 6,2 years 

Source: ACEA

About half of all vehicles registered in Luxembourg in 2017 were used vehicles. There are two main reasons for the popularity of the pre-owned vehicle market in Luxembourg:

  • Luxembourg residents have a high purchasing power, which means it’s easier for them to buy new cars – this is beneficial for the average quality of used vehicles from Luxembourg.
  • For people living near the Luxembourg border, it can be interesting to buy a used vehicle registered in Luxembourg, as the VAT rate (17%) is lower than in Germany (19%), France (20%) and Belgium (21%). Importing a car into the buyer’s home country is relatively simple, but local registration fees and road taxes still apply. 


Chapter 3: Company car market

Total Fleet Park (company cars)/Fleet penetration in total fleet sales

At the start of 2019, there were 86,481 company cars in Luxembourg. That is 20.9% of the national fleet. 

Source: KPMG’s Automotive Breakfast 2019

In 2017, the average age of a car in Luxembourg was 7,7 years, a full 2 years under the European average age and also lower than that of neighbouring countries Germany (9 years on average), Belgium (8,8) and France (8,8). This is thanks to the large penetration of the fleet segment in the overall market. 

Evolution fleet sales (last 5 years)

From 2017 to 2018, the number of company cars has increased by 1583 units, but their share in the total has declined by 1.1 percentage points. 

Source: KPMG’s Automotive Breakfast 2019

Chapter 4: Taxation & legislation

Get the complete analysis about taxation and legislation in the Fleet Europe Taxation Guide, developed in collaboration with PWC. Click here for more info

Car registration up in Luxembourg from 1 March 2020

Registering a new vehicle in the Grand Duchy of Luxembourg will become more expensive from 1 March 2020. 

This is due to a change in calculating the CO2 tax, from the old NEDC emissions test procedure to the newer WLTP one. WLTP more accurately reflects the actual fuel consumption of vehicles, which is generally 20% to 25% higher than the NEDC values. 

According to the Luxembourg government, switching from NEDC to WLTP will make a difference to the annual tax intake of an estimated €600 million. 


Tax reform for sustainability

As part of tax reform, measures have been introduced to promote sustainable mobility.

  • From 1 January 2017:
    • A tax deduction on privately-owned zero-emission vehicles (bicycles, pedelecs and cars);
    • A reassessment of company car benefits in kind based on the vehicle's greenhouse gas emissions (in particular CO2) and its air pollution emissions (in particular NOx and particles).
  • From 1 January 2018:
    • A tax deduction on privately-owned PHEVs;
    • A tax credit for zero-emission company cars, not subjected to any lease contract

The government has opted for an incentive rather than a repressive approach:

  • Zero-emissions vehicles such as 100% electric vehicles, bicycles and pedelec25, fully benefit from the new incentive measures;
  • Low-emission vehicles such as Plug-in Hybrid Electric Vehicles benefit from less incentive measures

A tax deduction or a reassessment of benefits in kind for eco-responsible drivers is being implemented for Private cars, Company cars and Business cars.

Source: Developpement Durable

Cars registered after 1 January 2019 are taxed based on fuel type and CO2 emission level. 

Diesels are taxed 33% more than non-diesel cars: even though a diesel emits 10% less CO2 on average than a petrol car, the tax system still favours non-diesel fuels. 

The annual tax difference mentioned above is an average. It increases as emissions go up. Some examples:

  • 80 g CO2/km: €36 (diesel), €31 (non-diesel)
  • 130 g CO2/km: €105.3 (diesel), €70.2 (non-diesel)
  • 180 g CO2/km: €228.8 (diesel), €151.2 (non-diesel)

To incentivise the purchase of eco-friendly cars, Luxembourg offers tax allowances specifically for hybrid company cars. This is on top of allowances relating to fully electric cars. From 1 January 2018, the rule is as follows:

  • €5000 tax allowance for cars and LCVs which are 100% electric
  • €2500 tax allowance for cars and LCVs which emit less than 50 g CO2/km

Source: KPMG’s Automotive Breakfast 2019

A brief overview of all taxes due:


Road tax

  • Taxable event: The tax is due on all vehicles that are registered in Luxembourg.
  • Taxable person: The person mentioned on the car’s registration document, i.e. the owner or the holder of the vehicle.
  • Tax due: The tax due is calculated based on either the engine capacity for vehicles first registered before 1 January 2001 or on the CO2 emission for vehicles first registered after this date. The tax can be calculated on the simulator provided by the Automobile Club du Luxembourg (
  • Taxable period: The road tax is due every year and can be paid yearly or half-yearly.

Annual circulation tax

  • Taxable event: A stamp tax of EUR 50 (EUR 100 in case of personalized plate numbers) is due upon registration.
  • Taxable person: Owner or holder of the vehicle.
  • Tax due: EUR 50 / EUR 100 (EUR 24 for the re-use of a personalized plate number)
  • Taxable period: Indefinite


From a corporate tax point of view, all costs relating to cars –leased or owned – are
in principle 100% allowed for deduction as a business expense for both Luxembourg
corporate income tax (CIT) and Luxembourg municipal business tax (MBT), to the
extent that they are in line with the business purpose of a Luxembourg tax resident

#3 VAT

VAT on car costs incurred for business purposes is in principle fully deductible, in
so far the business activities for which the car is used are not exempt from VAT
(without entitlement to VAT credit).

Hire purchase
This transaction is deemed to be a supply of goods. The VAT is due on the total
amount of instalments once the lessee takes possession of the vehicle.


  • If the leasing agreement provides the option for the lessee to purchase the car at the end of the contract, the lease itself is to be considered as a supply of services. The VAT must be calculated on each instalment paid. If at the end of the contract the option to purchase the car is used, the sale of the car is treated as a supply of goods. The taxable basis for the sale is the option price of the vehicle.
  • If the leasing agreement does not provide an option to purchase the car at the end of the agreement, the rental agreement is to be considered as a supply of services. The VAT due is to be calculated on each instalment paid.


VAT due on private use of company cars
Where a company puts vehicles at the disposal of its employees and the employees
can also use them for their private needs, the company is deemed to supply services for consideration for VAT purposes except if the company did not deduct VAT borne on the acquisition lease of the car.

Company car in personal tax returns – benefit in kind
The taxable benefit in kind should be valued at fair market value. However, if the allocation of the company car is not compensated by a decrease in the gross salary, the taxable benefit may alternatively be calculated taking into account a lump-sum valuation method, whereby the CO2 emission level and engine type of the car are taken into consideration. With the tax reform 2017, the lump-sum valuation of the benefit in kind for an electric vehicle is considerably lower than for other vehicles.


Private car in the personal tax return

  • Commuter traffic

Commuting expenses are deductible on a lump-sum basis (i.e. no actual commuting expenses can be claimed).

  • Business kilometres

The reimbursements by the employer of expenses incurred by an employee exclusively on the behalf of his employer do not qualify as taxable employment income provided that such reimbursements are not made on a lump-sum basis (i.e., disregarding the distance travelled). On the contrary, a lump-sum reimbursement of costs or the reimbursement of commuting expenses by the employer always qualify as taxable employment income.


Electric vehicles are subject to a flat road tax of EUR 30. A specific lump-sum valuation method applies for the benefit in kind valuation.

Source: Fleet Europe 

Chapter 5: Car policies

This section is empty…for now. Want to help us in filling it? Fill in your text in this section and become a wikifleet contributor!

Chapter 6: Funding methods

Of the total volume of company cars,

  • 53% are purchased
  • 15% are in financial leasing, and
  • 31% are in operational leasing

Source: Fleet Europe

The Luxembourg car leasing sector is represented by Mobiz, the Rental and Mobility Business Association, the new name of the organisation that was formerly known as FLLV, representing the main providers of long and short term lease, counting twenty-two members managing some 37.500 leased cars and LCVs. The most important lease companies in the Grand Duchy are international players such as ALD Automotive, LeasePlan, Alphabet, Arval and Athlon, but local companies also play their role.

It is through those leasing companies that the German premium brands were and
are able to gather such important market shares in Luxembourg.

Source: Fleet Europe

Chapter 7: Fuel

Diesel decline

‘Dieselgate’ has been a factor in reducing the popularity of diesel cars in Luxembourg. The net increase has been in petrol cars, not alternative fuels. For now, diesel remains firmly in the majority.

   2017  2018  2019
Diesel  64.21%  61.81%     58.95%
Petrol  34.67%  36.69%  39.17%
Alt fuels  1.09%  1.47%  1.87%

Source: KPMG’s Automotive Breakfast 2019

EV introduction

Luxembourg is lagging behind in the introduction of electric vehicles. The share of full EVs and hybrids together on the Luxembourg car market:

  • 2017: 0.81%
  • 2018: 1%
  • 2019: 1.51%

As mentioned above, the share of vehicles using alternative fuels on the Luxembourg car market was 1.87% in 2019. In the EU as a whole, it was 5/1% in 2016 already. 

Source: KPMG’s Automotive Breakfast 2019

EV charging network project

In order to actively support the breakthrough of electric cars, the distribution network operators in Luxembourg decided to put in place an infrastructure of charging stations under the name ‘Chargy’. However, Chargy has experienced some delay. The 800 number is now targeted for 2021.

  • 2017: 104 (actual)
  • 2018: 246 (actual)
  • 2019: 446 (projected)
  • 2020: 646 (projected)
  • 2021: 800 (projected)

Source: KPMG’s Automotive Breakfast 2019

Chapter 8 : TCO components

The Total Cost of Ownership for Luxembourg fleet vehicles consists of the usual elements, with a lesser fiscal burden than in neighbouring countries

  • monthly financing
  • interest cost
  • annual road tax based upon the vehicle’s CO2-emissions (
  • stamp tax upon registration (50 € of 100 € in case of personalised license plate)
  • maintenance and repairs
  • tyres
  • roadside assistance
  • insurance and all risk cover
  • fuel
  • fleet management costs
  • car parking, car wash, ...


· In Luxembourg, the 17% VAT tariff is fully deductible for company cars if the user of the car is VAT-taxable and the business activities for which the car is used are not exempt from VAT (without entitlement to VAT-credit)

· The fiscal deductibility of car costs is fixed at 100%.

Chapter 9: Safety, insurance and telematics

This section is empty…for now. Want to help us in filling it? Fill in your text in this section and become a wikifleet contributor!

Chapter 10: Environment

CO2 emissions

Luxembourg’s average CO2 emissions per car had been declining steadily since 2007 (app. 170 g/km) to around 2015 (app. 130 g/km), when the share of petrol cars started rising due to ‘Dieselgate’. 

Since then, emissions figures have stabilised. In 2017, the most recent year for which figures are available, they were at 126 g/km (EU average: 118 g/km). 

Based on these figures, Luxembourg will not reach the EU target for 2021 of 95 g/km, but will stall at 111 g/km. The EU  recommendation for 2030 (88 g/km) seems unattainable. 

Source: KPMG’s Automotive Breakfast 2019

Chapter 11: Mobility

Luxembourg’s leasing companies are developing new mobility products and initiatives in a rapid pace.

For example, ALD Luxembourg has announced the creation of an experience centre in the Grand Duchy in which they want to help companies to better understand their employee mobility needs. Using augmented reality masks, that give a technological note to the exercise, ALD invites companies to discuss internally to establish the best leasing policy. Like in the Netherlands, ALD sees the experience centre on mobility as a testing environment for new mobility solutions.

Source: Fleet Europe

Chapter 12: Key trends to watch