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In brief
- On 11 December 2024, the Luxembourg Parliament approved two legislative proposals containing certain individual income tax, corporate income tax, net wealth tax and fund taxation measures.
- The proposed changes for individual taxpayers include a number of measures to alleviate the tax burden on households and to increase the attractiveness of Luxembourg as a workplace.1
- Although some formal legal steps still need to be taken before the proposals become law, these steps are expected to occur before year-end.
On 11 December 2024, the Luxembourg Parliament adopted legislation that will affect individual taxpayers and employers.
The new legislation enhances the existing profit-sharing regime (“prime participative”) by raising the total bonus allocation a company may grant from 5% to 7.5% and the individual bonus limit from 25% to 30%. In addition to significantly reducing the administrative burden for employers, the legislation significantly overhauls the existing expatriate tax regime by proposing a tax exemption of 50% of the total gross annual remuneration paid to highly skilled employees relocating to Luxembourg, capped at €400,000. The law furthermore introduces a young-employee bonus, providing a 75% tax exemption for bonuses that employers pay to qualifying employees, subject to certain conditions being met.
In addition, the legislation adjusts the personal income tax scale and introduces other measures that reduce the tax burden of households, such as an increase in the maximum amount of extraordinary expense allowance for dependent children not living in the taxpayer's household and an increase in the single-parent tax credit.
Additionally, a temporary tax credit for low-income taxpayers is introduced and the application of the tax regime for child tax credits and allowances in cases of parental separation and joint parental authority are clarified.
Finally, the law proposes a new tax credit, applicable as from tax year 2024, for salary for overtime paid to certain nonresident employees.
The final laws are expected to be published in the Official Gazette before year-end and most of their provisions will apply as from tax year 2025.
Summary
On 11 December 2024, the Luxembourg Parliament approved two legislative proposals containing certain individual income tax, corporate income tax, net wealth tax and fund taxation measures.
The proposed changes for individual taxpayers include a number of measures to alleviate the tax burden on households and to increase the attractiveness of Luxembourg as a workplace.