Measures for corporations
Decrease of the corporate income tax rate
The corporate income tax rate is set to decrease by one percentage point to 16% as from fiscal year 2025. The reduced corporate income tax rate for income up to 175,000 euros would also decrease from 15% to 14%. For companies resident in Luxembourg City, the consolidated corporate tax rate (taking into account the solidarity surcharge and the municipal business tax) would accordingly decrease from 24.94% to 23.87% as from fiscal year 2025.
Adjustments to the regime for private wealth management companies
The minimum annual amount of subscription tax payable by private wealth management companies (“société de gestion de patrimoine familiale” or “SPF”) would increase from EUR 100 to EUR 1,000. There is also a clarification that the portion of debt taken into account in the subscription tax base is determined based on the balance sheet at the opening of the book year (currently: on 1St January). These changes will apply as from the first day of the quarter following the entry into force of the law.
In addition, the procedure for withdrawing the SPF status for an SPF that fails to comply with its legal obligations will be clarified, following various court cases. The director of the indirect tax authorities (AED) may impose fines of up to EUR 250,000 for severe breaches of the law and would in addition be entitled to withdraw the SPF status, if such breaches are not remedied within a 6-month tolerance period following the notification of the fine. The decision to withdraw the status may be appealed. The effective date of the withdrawal is set by the director of the AED between the first day of the breach and 1st January of the fourth year preceding the withdrawal decision. These changes will apply to breaches occurring or continuing after the entry into force of the law.
Subscription tax exemption for certain ETFs
The bill proposes to exempt actively managed exchange-traded undertakings for collective investment in transferable securities (actively managed UCITS – ETF) from subscription tax.
Measures for individuals
Attraction of talent
The recently introduced profit-sharing bonus (“prime participative”) will be amended: Luxembourg plans to boost its attractiveness by increasing the profit-sharing bonus (benefiting from a 50% tax exemption) from 25% to 30% of the annual remuneration, and by raising the total that an employer can distribute as profit-sharing bonuses from 5% to 7.5% of the employer’s profits.
The bill also plans to modernize the tax regime for impatriates by introducing a 50% tax exemption applicable to the annual gross remuneration of an impatriate. The 50% exemption would not apply to the portion of annual gross remuneration exceeding EUR 400,000. This would replace the current impatriate regime that currently provides for tax benefits mostly in the form of tax exemptions for certain benefits in kind listed in the law and "impatriation” bonuses.
Last but not least, a new “young employee bonus” would be introduced, offering a sliding-scale tax exemption to employees under 30 years old who earn an annual gross salary up to EUR 100,000. The amount of the exempted bonus would be capped at EUR 5,000. The exemption would only be available with the first employer and for a period of 5 years.
Adjustments to the income tax scale and income tax credits
The bill plans to adjust the income tax scale as from fiscal year 2025 to account for inflation of the recent two years and the indexed salary increases. It is expected that this will considerably reduce the tax burden of individual taxpayers across the board.
Tax credits for single parents would be increased, and an overtime tax credit (CIHS) would be introduced for the benefit of employees (other than civil servants) and who are paid for overtime. This may also help resolving tax issues for German cross-border workers who are taxable on such overtime earnings in Germany. The maximum allowance for dependent children who are not members of the household would also be raised.