Inheritance and Gift Tax in Luxembourg: Rates by Relationship and Planning Tips

Inheritance tax in Luxembourg is often gentler than newcomers expect, especially for close family. The system turns on one question above all: the relationship between the deceased and the heir. Spouses and children benefit from generous exemptions, while distant relatives and unrelated beneficiaries pay progressively more. Add gift tax, real-estate rules and cross-border complications, and careful planning can make a real difference.

This guide explains inheritance and gift tax in Luxembourg for 2026.

> This is general information, not tax advice. Estate planning is highly personal; consult a notary or tax adviser.

Who pays, and on what

Luxembourg levies inheritance tax (droits de succession) on the estate of a person who was resident in Luxembourg at death, on their worldwide movable assets and Luxembourg real estate. For non-residents, a related duty (droit de mutation par décès) applies to Luxembourg-situated real estate. The tax is calculated on each heir's share, and both the relationship and the size of the share determine the final charge.

Rates by relationship

The headline rates depend on how the heir is related to the deceased.

• Direct line (children, grandchildren, parents): the share corresponding to the heir's legal statutory portion is exempt. Only any amount received *above* that statutory portion is taxed, at a base rate of around 2%–5%.
• Spouses and registered partners with common children: generally exempt.
• Spouses/partners without common children: a modest rate applies to the taxable portion.
• Siblings: base rate around 6%.
• Uncles, aunts, nephews, nieces: around 9%.
• Unrelated beneficiaries: the highest band, around 15%.

On top of the base rate, surcharges (majorations) increase the effective rate as the taxable share grows, so large inheritances to distant relatives can be taxed considerably higher than the headline figure suggests.

Rate table

Rates before surcharges; the effective rate rises with the size of the share.

Gift tax

Lifetime gifts made through a Luxembourg notary attract registration duties (droits d'enregistrement) rather than inheritance tax. Rates again scale with the relationship, broadly from around 1.8% for direct-line gifts up to higher percentages for unrelated donees. Gifting during your lifetime can be efficient because it fixes the tax cost now and removes future growth from the estate — but manual gifts and cross-border gifts have their own rules, so structure them carefully.

Real estate

Luxembourg real estate is always within scope: it is taxed in Luxembourg whether the deceased was resident or not. Property is valued at market value at death, and the same relationship-based rates apply. Because real estate is often the largest asset in an estate, its valuation and ownership structure (for example joint ownership or usufruct arrangements) can materially change the tax outcome.

Cross-border estates

Many Luxembourg families have assets or heirs in more than one country. Two issues dominate:

1. Double taxation — the same asset may be taxable in Luxembourg and abroad. Luxembourg has limited inheritance-tax treaties, so relief often depends on domestic credits rather than a treaty.
2. Applicable succession law — under the EU Succession Regulation, the law of the deceased's habitual residence usually governs the estate, but you can elect the law of your nationality in your will. This affects *who inherits*, which in turn affects the tax.

Worked example

Suppose a Luxembourg resident leaves an estate of €900,000 to be split equally between two children.

• Each child receives €450,000.
• Their statutory portion is exempt, so tax applies only to any amount above that reserved share. In a simple two-child estate, the reserved portions absorb most or all of the inheritance, so the tax due is often minimal or nil.

Contrast this with the same €900,000 left to a nephew: with a ~9% base rate plus surcharges on a large share, the tax could run to tens of thousands of euros. The relationship, not the amount, drives the bill.

Planning tips

• Keep close family as primary heirs to use direct-line exemptions.
• Consider lifetime gifts through a notary to lock in lower duties and remove future growth.
• Review ownership structures for real estate, including usufruct/bare-ownership splits.
• Make a valid will and consider a choice-of-law clause for cross-border families.
• Revisit the plan after marriage, birth, relocation or a large asset purchase.

Frequently Asked Questions

Do children pay inheritance tax in Luxembourg? Usually little or none. A child's statutory (reserved) portion is exempt, and only amounts received above that share are taxed, at low base rates before surcharges.

Is my surviving spouse taxed on what I leave them? A spouse or registered partner with common children is generally fully exempt. Without common children, a modest rate applies to the taxable portion of the inheritance.

How are gifts taxed compared with inheritances? Gifts made through a Luxembourg notary attract registration duties, starting around 1.8% for direct-line gifts and rising with more distant relationships — often lower than the eventual inheritance-tax cost, which is why lifetime giving can be efficient.