5 July 2023
Employment tax
Impact: High
Summary
The purpose of the law which has been recently passed by the Luxembourg government is to create the legal basis for some of the measures decided in the third tripartite agreement of March 2023. The measures are expected to have a positive impact on the net income of all taxpayers as from 2023.
The Detail
A new tax credit (CIC – credit d’impôt conjuncture) for self-employed individuals, employees and pensioners has been voted into law. The CIC has retroactive effect to 1 January 2023. The CIC will result in a refund of taxes for all taxpayers. As an example – a single employee who earns EUR 5,000 gross per month should expect to have a net increase of EUR 44 per month.
As from 1 January 2024 the CIC will be replaced by adjusting the personal income tax bands. The adjustment is the equivalent of two and a half indexations (i.e. 6.376%).
A supplementary tax credit (CO2-CI) has been introduced for self-employed individuals, employees, and pensioners for the purpose of compensating for the impact of the carbon tax. It is proposed to introduce this tax credit from the 2024 taxation year.
An additional exemption will be effective from the 2023 tax year for net income realized through the rental of housing via organizations who provide social housing. The exemption will increase from the current 50 percent share to a 75 percent share from the 2023 taxation year.
The government have confirmed the extension of the subsidy for fuel oil and the subsidy for liquefied petroleum gas (household bulk propane) until 31 December 2024.
It is important to bear in mind that the impact of these changes will vary depending on each individual situation – family circumstances, income levels etc. Some examples provided by the government may be found by clicking on this link: https://gouvernement.lu
We can help you understand what these changes may mean for your business and your employees.
Contact us
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:
• Eric Paques, Partner | eric.paques@vialto.com
• Denise Chambers, Director | d.chambers@vialto.com
• Renee Inchekel, Senior Manager | renee.inchekel@vialto.com
• Tania Fernandes Morais, Senior Manager | tania.fernandes.morais@vialto.com
• Michael Roser, Senior Manager | Michael.roser@vialto.com
Further information on Vialto Partners can be found here: www.vialtopartners.com
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