Marriage, PACS or cohabitation in Luxembourg: the real differences

The quick comparison table

Before diving into the details, here's the big picture. This table sums up the key differences between the three statuses in Luxembourg.

Taxes: who pays the least?

Tax class 2 and joint taxation

In Luxembourg, how much tax you pay depends largely on your tax class. Married resident couples automatically get class 2 and joint taxation. In practice, the progressive tax scale is applied to half of the household income (this is the "splitting" mechanism), which reduces the marginal tax rate. On monthly payslips, one spouse is in class 2 and the other at the flat rate of 15%.

In practice, if one spouse earns significantly more than the other, the tax advantage is substantial. The bigger the income gap, the more class 2 saves you.

PACS and joint tax return: same result, different path

PACS gives access to the same tax advantages as marriage, but the path is slightly different. PACS partners initially keep their individual tax status (class 1 or 1a) on their payslips. They then need to request joint taxation through the annual tax return (model 100).

At the end of the day, with identical incomes and deductions, a PACS couple and a married couple pay exactly the same amount of annual tax. The difference is in monthly cash flow: the married couple pays less tax each month, while the PACS couple pays more at source but gets the overpayment back when filing. Same result, different timing.

Cohabitation: every person for themselves

In cohabitation (living together without any official registration), each partner is taxed individually. No class 2, no joint taxation possible. Each stays in class 1 (or 1a if a single parent with a dependent child), with the progressive scale applied to the full amount of their personal income.

For a couple with a single income or very unequal incomes, the tax difference can reach several thousand euros per year compared to a married or PACS couple.

What about the 2028 reform and the single tax class?

The Luxembourg government filed bill no. 8676 on 6 January 2026 to replace the three current tax classes (1, 1a and 2) with a single tax class called "Class U" from 1 January 2028. The vote is planned before the end of 2026, with implementation in 2027.

This reform aims to individualise taxation and treat all taxpayers equally, regardless of couple status. Class U will be modelled on the current class 1a, with the tax-free income threshold doubling (from €13,230 to €26,650). Couples married or in a PACS before 1 January 2028 will be able to keep the old class 2 tax treatment for a 25-year transition period (until 2052), or switch to Class U at any time - but this choice will be irreversible.

In short, the tax trade-offs between marriage, PACS and cohabitation will matter less from 2028 onwards. But for now, the current rules still fully apply. If you're hesitating about getting a PACS or marrying for tax reasons, the timing is still favourable.

Inheritance: the real trap of cohabitation

Inheritance is where the differences between the three statuses are most stark. And it's often where cohabiting couples discover they're not protected at all.

Marriage: legal heir and tax exemption

The married spouse is a legal heir. Without a will, they can choose between a child's share in full ownership (minimum one quarter of the estate) or usufruct of the family home and its furnishings. Without children, the surviving spouse receives the entire estate.

On the tax side, this is the most advantageous status. Inheritance between spouses with common children is fully exempt from inheritance tax. Without common children, the base rate is 5% with a €38,000 allowance on the net share received.

PACS: almost the same, but after 3 years

The PACS partner is not automatically a legal heir. Without a will, they receive nothing. This is a major difference from marriage. Writing a will is therefore strongly recommended as soon as the PACS is concluded.

However, from a tax perspective, PACS catches up with marriage after 3 years of registered partnership in Luxembourg. After this period, inheritance between PACS partners with common children is exempt from tax, exactly like for spouses. Without common children, the same 5% rate with a €38,000 allowance applies. Before 3 years of PACS, the surviving partner is treated as a third party for inheritance tax.

PACS also grants the right to a survivor's pension (ouvre dans un nouvel onglet), subject to conditions similar to those for marriage.

Cohabitation: a minimum 15% rate without a will

This is where things get really problematic. In cohabitation, your partner is not recognised by law as an heir. They don't exist in Luxembourg's order of succession. Without a will, your partner receives absolutely nothing, even after 20 years of living together.

And even with a will, the inheritance tax is that applicable to "non-relatives": a base rate of 15%, with surcharges depending on the amount (ouvre dans un nouvel onglet). For a share of €200,000, the effective rate can exceed 25%. On a property in Luxembourg City, the bill adds up fast.

For comparison, a married couple with children would pay nothing on the same inheritance.

How to protect your cohabiting partner: will, life insurance, donation

If you're cohabiting and don't plan to marry or get a PACS, a few tools can still protect your partner - but none completely eliminates the tax disadvantage.

A will is the absolute minimum. Without one, your partner inherits nothing. A handwritten will (written, dated and signed by you) is valid in Luxembourg, but going through a notary makes things more secure.

Life insurance is an interesting tool because the capital paid to the named beneficiary falls outside the legal estate. It lets you pass on an amount to your partner outside the standard inheritance rules.

However, if your beneficiary is your partner, taxation may apply

Lifetime donations are also an option, with registration fees that remain lower than inheritance tax. Be careful though: if the donor dies within a year of the donation, it's folded back into the estate.

A tax adviser or notary can help you structure all of this based on your situation. Every case is different, and the amounts at stake often justify professional guidance.

Day-to-day partner protection

Survivor's pension and social security

Both marriage and PACS entitle you to a survivor's pension paid by the national pension insurance fund (CNAP), provided the legal conditions are met (minimum contribution period of the deceased partner, etc.). In cohabitation, no right to a survivor's pension. The surviving partner receives nothing from the deceased's social security.

For special leave, married and PACS partners have the same rights (leave in case of a partner's death, for example). Cohabiting partners don't have access to these.

Shared housing in case of death

The married spouse can choose usufruct of the family home. This is real protection: they can continue living in the family home even if the property belonged to the deceased.

The PACS partner does not automatically get this protection. It needs to be arranged through a convention or a will.

The cohabiting partner has no rights over the shared home. If the property belonged to the deceased, the surviving partner may be forced to leave, sometimes at very short notice. This is one of the most painful scenarios of unplanned cohabitation.

Separation: what rights?

Marriage requires divorce proceedings before a judge, with division of assets according to the chosen matrimonial regime (legal community by default, separation of property, or universal community).

PACS can be dissolved much more simply: by joint declaration of both partners at the municipality, or even by unilateral declaration (ouvre dans un nouvel onglet) from one partner (with notification by bailiff). No need to go before a judge.

Cohabitation ends without any formalities. This is both the advantage and the risk: there's no legal framework to organise the separation, divide assets or arrange any compensation.