Taxes

Insurance premium tax in Luxembourg in 2025

This is a detailed guide to the insurance premium tax (IPT) in Luxembourg for 2025. It explains who has to pay the tax, the current rate of 4% (the lowest in Europe), and the main exemptions, including life and marine insurance. It is a useful resource for companies operating in Luxembourg to understand their obligations and avoid costly fines.

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Insurance premium tax luxembourg is one of the taxes that form the state budget. In this article, you will know who and why should pay this tax in 2025, when and where to file a declaration, and compare tax rates in the Grand Duchy with other European countries.

Overview of insurance premium tax in Luxembourg

Insurance premium tax is a tax on general insurance premiums, which in Luxembourg applies to all types of insurance except for life and marine insurance. The insurer is liable for the tax calculation and payment. The cost is passed on to customers most of the time and is included in the price for the insurance.

The main purpose of insurance premium tax is to ensure the flow of money into the state budget. This is typical not only for the Grand Duchy, but also for other countries where this type of tax exists.

Revenue generation - after the insurer collects premiums from the policyholder, a certain percentage of them is paid as a tax to the government
Market regulation
Economic balancing

The IPT rate in Luxembourg is 4%, the lowest rate in Europe. There are currently no other IPT rates applicable. The main exemptions are: insurances for life, disability, spacecraft and reinsurance.

A tax return must be filed for each tax period, i.e. each quarter. The obligation to pay the tax applies to insurance companies who fit in the following rules:

Luxembourg-based non-life insurance companies
non-life insurance companies operating on a freedom-of-services basis
branch offices of foreign non-life insurance companies.

If the head office of an insurance company is located outside the EU and the company does not have a permanent establishment in the Grand Duchy, the insurance premium tax must be paid by the insurer's designated tax representative. This representative must be established in Luxembourg or domiciled there for tax purposes. Insurance premium tax in the Grand Duchy does not apply to reinsurance companies.

Comparison of IPT rates across Europe

As already mentioned, in Luxembourg the insurance premium tax rate is one of the lowest in the EU and in Europe as a whole. For comparison, we have compiled a small table with IPT rates in the largest European countries.

Country	Standard rate	Exemptions
Luxembourg	4%	Life insurance, maritime vessel insurance
Germany	19%	Insurance of goods in international transit, health insurance, life, reinsurance.
France	9% (General liability)	Aviation, marine (except pleasure craft), cargo and goods in transit
Belgium	9,25%	Accident at work, commercial marine and aviation, trade credit and reinsurance premiums
Austria	11%	Reinsurance, goods in transit for international cargo and export credit

Only Estonia, Latvia, Lithuania and the Czech Republic can compete with Luxembourg – the IPT rate in these countries is 0%

Requirements for IPT in Luxembourg

Payment of insurance premium tax by insurance companies is an obligation. Each company must inform the office of the Registration Duties, Estates and VAT Authority (Administration de l’enregistrement, des domaines et de la TVA - AED) about this within 15 days from the start of its activity. For this purpose, a special form should be filled in and submitted - the initial declaration. The declaration itself on insurance premium tax must be submitted through the MyGuichet.lu website to the Registration Duties, Estates and VAT Authority. Failure to pay the tax entails serious consequences.

What are the fines if an insurance company doesn’t comply with the rules:

The insurer fails to file a tax return and pay the tax on time: a fine of between €50 and €50,000 or 10% of the unpaid tax.
Intentional tax evasion or fraudulent actions to obtain a tax refund: a fine of 10% of the tax, but not less than €125.
Inaccuracies in the tax return: ex officio tax assessment by the insurer or their tax representative.
All tax penalties are determined by the director of AED or his deputy. Penalties must be paid in the month in which written notice of the penalty is received.

The tax return must be filed and the tax paid by the 15th day of the month following the tax period. For example, if the tax period is the first quarter of the year, the tax return must be filed by 15 April. The declaration must include all information necessary to calculate the amount of tax payable for a given tax period.

The following information has to be included on the declaration:

Address information, collect the basic information about the insurance company.
Amount of tax received, the amount of taxes that the company received in insurance premiums.
Tax rate, determine the correct tax rate to apply.
Amount of tax to pay, the amount of tax to pay for each type of insurance for which policies were sold.

For any questions, please contact Registration Duties, Estates and VAT Authority (AED):

Phone: (+352) 247 80 624
Address: 308, route d'Esch, L-1471 Luxembourg
Website: pfi.public.lu

The tax system of Luxembourg is one of the most complex, but also one of the most advantageous in Europe. However, it is quite difficult to understand it on your own. In order not to break the law and not to pay fines, it is best to seek advice from professionals.