Per Diem

In Luxembourg, fixed travel expenses and distance units are considered under deductible expenses for employees. The tax system allows for a standard deduction to cover work-related expenses, including travel costs.

For employees commuting between home and work, a deduction is applied based on the distance traveled, measured in unités d’éloignement (distance units). If a change in residence or workplace increases the number of distance units, the deduction is adjusted accordingly. However, if the distance decreases, the taxpayer can still claim the more favorable deduction until the end of the fiscal year.

Additionally, Luxembourg provides a flat-rate deduction of 540 euros per year for general professional expenses. Employees who incur higher actual costs may claim the real expenses instead, provided they can justify them with appropriate documentation. Other deductible costs may include professional subscriptions, work tools, and necessary work-related education.

For more details, you can refer to the Luxembourg government portal: Guichet.lu

Mileage

Luxembourg has set a mileage reimbursement rate of €0.30 per kilometer for the use of personal vehicles for business-related travel. Reimbursement above this amount may be subject to taxation. The rate applies to all types of vehicles, and businesses must ensure that their mileage claims are substantiated by proper logs and records​ https://legilux.public.lu/eli/etat/leg/rgc/2015/06/19/n1/jo

Paperless

Luxembourg supports digital record-keeping for tax compliance, including the use of electronic receipts for business-related expenses such as travel and meals. Businesses can store and present digital receipts, provided they meet the criteria for authenticity, accuracy, and accessibility. All digital records should be securely stored and retrievable for audits. These records must be kept for a minimum of 10 years, in line with Luxembourg tax regulations​

For more details on maintaining tax-compliant digital records in Luxembourg, refer to local guidelines from Agençie des Revenus and other official resources​.​

Meals, Benefits & Allowances

Luxembourg provides tax-free meal allowances for employees during business travel. The amounts depend on the country where the employee is on a business trip.

The lump sum reimbursement of the accommodation expenses (per diems) includes a day compensation and a night compensation. The amounts depend on the country where the employee is on a business trip.

A. Day compensation
This per diem covers meal expenses during business trips. It is granted for each full day or part day during which the employee is on a business trip. No receipts are required for the granting of the day per diem.

B. Night compensation
The night per diem covers the price for the hotel room including breakfast, service and related taxes. Although it is a lump sum regime, the full night per diem can be granted only if valid receipts are submitted to the employer. In absence of such documents, a reduced compensation equal to 20 % of the full compensation can be granted free from taxes and social security contributions.

The following day and night per diems are applicable for business trips inside Luxembourg:

• Day compensation: €14
• Night compensation: €56

This is reimbursed tax-free without receipts. International travel meal allowances are adjusted based on the destination. Employers may also provide meal benefits, but they must meet specific conditions to avoid being taxed​.

https://www.bdo.lu/getattachment/d22372e4-6d57-4ae6-a17a-a0eea554e31f/BDO-Luxembourg-s-Memento-Travel-and-accomodation-expenses-2025.pdf

Sales tax rates

Luxembourg’s VAT (sales tax) rates for 2025 are as follows:

• Standard Rate: 17% (applies to most goods and services)
• Reduced Rates:
  • 14% (applies to certain goods like specific wines, fuel, and some financial services)
  • 8% (applies to services like hairdressing, district heating, and minor repairs)
  • 3% (applies to essential goods and services like food, water, pharmaceuticals, books, newspapers, restaurant services, and hotel accommodations)
• Zero Rate (0%) applies to intra-community and international transport.

Luxembourg also has VAT exemptions for specific services, including medical, financial, insurance, educational, and cultural services avalara.com world.salestaxhandbook.com

For companies incurring business travel expenses in Luxembourg, VAT refunds are possible under specific conditions. Non-EU businesses selling in Luxembourg do not require a fiscal representative but may need to provide a bank guarantee or cash deposit. VAT registration is mandatory if a business surpasses a €35,000 turnover threshold or engages in distance selling exceeding €10,000 within the EU.

VAT returns are due monthly, quarterly, or annually depending on turnover, with penalties for late filings ranging from €250 to €10,000. Late VAT payments may also incur interest charges of 10% to 15% per year​ world.salestaxhandbook.com taxually.com