Director's fees in Luxembourg: the 20% withholding and why they aren't deductible

In short. A director's fee (tantième) paid in Luxembourg carries a withholding at source of 20% on the gross amount (raised to 25% if the company bears the tax itself), to be declared and paid within 8 days using form 510bis. Above all, the fee is not deductible for the paying company, unlike a daily-management salary. It is the third way to pay a company director, the least understood, and the one that costs the most when used without knowing it.

Salary and dividends get all the attention when a director wonders how to pay themselves. The director's fee stays in the blind spot, even though it touches every board member of a Luxembourg company. Mistaking it for a salary risks a forgotten withholding and a cost the authority will refuse to deduct. Here is what a tantième really is, how it is taxed, and why it is not handled like the other two channels.

Director's fee, attendance fee, salary: three different things

A tantième (director's fee) pays for a corporate mandate: that of a member of the board of directors, a statutory auditor (commissaire) or a person performing a similar function. It rewards a supervisory and decision-making role, not salaried work: there is no relationship of subordination. The "attendance fee" (jeton de présence) refers, in everyday language, to the same category of income, paid for taking part in the company's governing bodies.

A daily-management salary, by contrast, pays for actual work in the company. This is a point many miss: a director who also runs day-to-day operations has that part of their pay treated as salaried income, not as a director's fee. The mandate and the work are two things, with two regimes. Confusing them means applying the wrong tax treatment to one or the other.

The 20% withholding at source

This is the central mechanism, and it resembles the one for dividends without being identical. When it pays a director's fee, the company must:

• withhold 20% at source on the gross amount allocated (25% if the company chooses to bear the tax itself, the base then being grossed up);
• file the withholding-tax return on director's fees using form 510bis, and pay the amount to the competent office of the Direct Tax Authority (Administration des contributions directes);
• do so within 8 days of the income being made available.

Since 1 January 2025, this return is filed electronically, through MyGuichet.lu with a LuxTrust certificate, possibly via an agent such as your accountant. Eight days is not eight weeks: the decision to allocate a fee and the tax step are prepared together. A general meeting that votes an allocation without telling its accountant almost always causes a delay, with the interest that comes with it.

The non-resident director

For a beneficiary resident outside Luxembourg, the 20% withholding is a final tax as long as gross director's fees for the year do not exceed 100,000 EUR. Above that threshold, the income moves to assessment-based taxation, meaning a full return. This is worth checking before setting the amount, especially on boards with foreign members.

The point that changes everything: a director's fee is not deductible

Here is the difference that weighs most, and the one discovered too late. The salary of a director who works in the company is a deductible expense against the company's taxable profit. The director's fee is not: Luxembourg income tax law excludes it from deductible expenses. So the company pays its tax on a profit from which the fee has not been subtracted, and the beneficiary still bears the 20% withholding on top.

In other words, a director's fee is hit at two levels, much like a dividend, whereas a salary reduces the company's tax before being taxed in the director's hands. This is exactly why you do not pick a director's fee "because it is simpler". Weighing it against salary and dividends means looking at both levels together, not just the final withholding. We set out the salary-versus-dividend trade-off in our article on how to pay yourself as a SARL manager, and the detail of the dividend in dividends from a Luxembourg SARL.

The three channels, side by side

Set against each other, the three ways to pay a director differ almost point by point. This table sums up what separates them.

The useful reading is not "which is least taxed", but "which matches what I actually do in the company". A director who works pays themselves a salary first, which reduces the company's tax and opens rights. The director's fee rewards a board role, often on top, and is decided at a general meeting. The dividend rewards capital out of available profit. Mixing them without telling them apart means using the wrong regime.

What a director's fee does not provide

Let us be clear on the limits. A director's fee pays for a mandate, not subordinated salaried employment: on its own, it does not build the social cover and pension rights that a director's salary opens. A board member paid only in fees does not build the same protection as a manager who is salaried or affiliated as self-employed. That is one more reason not to treat the fee as a salary substitute: it is a tool in its place, not an optimisation trick. For holding structures or complex wealth situations, the question goes beyond bookkeeping, and we point you towards the specialist advice that fits, without claiming a regulated title we do not hold.

Frequently asked questions

What is the withholding tax on director's fees in Luxembourg?

The company withholds 20% at source on the gross amount of the fee, raised to 25% if it bears the tax itself. It files the return using form 510bis and pays the withholding to the Direct Tax Authority within 8 days of the income being made available. Since 1 January 2025, the return is filed electronically through MyGuichet.lu.

Are director's fees deductible for the company?

No. Unlike a salary paid for daily management, which is a deductible expense, director's fees allocated to board members are not deductible against the company's taxable profit. The company is therefore taxed on a profit that has not been reduced by the fee, and the beneficiary bears the 20% withholding on top.

What is the difference between a director's fee and a manager's salary?

A director's fee pays for a corporate mandate, with no relationship of subordination; a salary pays for actual work in the company. The salary is deductible for the company and opens social rights; the fee is not deductible and does not, on its own, build the same cover. A director who runs daily management has that part treated as salary.

Is a non-resident director taxed the same way?

The 20% withholding is a final tax as long as gross director's fees for the year do not exceed 100,000 EUR. Above that, the income is taxed on assessment, by return. The threshold should be checked before setting the amount, particularly on boards with foreign members.

When must the withholding on director's fees be declared and paid?

Within 8 days of the fee being made available, using form 510bis, electronically through MyGuichet.lu since 2025. It is a short deadline: the decision to allocate the fee and the tax step are prepared together to avoid delay and interest.

Read more

• How to pay yourself as a SARL manager in Luxembourg: salary, dividends or both
• Dividends from a Luxembourg SARL: 15% withholding, half-dividend and the real cost
• Corporate tax in Luxembourg: CIT, municipal business tax and net wealth tax
• Accounting obligations of an SME in Luxembourg: the full list
• Accounting firm in Luxembourg: the complete guide for an SME

Why Advena?

We keep the accounting and payroll of Luxembourg SMEs of 1 to 50 employees on a fixed fee, from 325 EUR per month, all in. On a director's-fee question, that concretely means we see your profit and your situation in real time in the Odoo where we keep your books, we prepare the withholding and file the 510bis within 8 days, and we frame the trade-off between salary, director's fee and dividend before you decide, not after. We inform and we point you in the right direction; for a holding structure or complex wealth matters, we will tell you plainly when specialist advice is needed.

Information current as of 1 September 2026, based on the Director's fees (Tantièmes) note of the Direct Tax Authority and the withholding-tax-on-director's-fees procedure of Guichet.lu. This article is for information and does not constitute individual tax advice.