We would like to focus on a series of new HR & Payroll rules entered into force on 01.01.2024.

This newsletter is also an opportunity to review other current topics

• NEW INCOME TAX SCALE

From January 2024, the income tax scale is adjusted by 4 index brackets. This corresponds to an increase of all tax brackets of +/- 10%, resulting in tax relief for taxpayers.

Married frontier workers who are eligible for a personalized tax rate under the tax assimilation regime can benefit from this relief by reassessing their tax rate via: https://guichet.public.lu/en/citoyens/fiscalite/declaration-impot-decompte/fiche-retenue-impot/imposition-collective-individuelle.html

• END OF CRÉDIT D’IMPÔT CONJONCTURE (CIC) AND INTRODUCTION OF CI-CO2 TAX CREDIT

The « crédit d’impôt conjoncture » introduced in 2023 will no longer apply from the 2024 tax year.

On the other hand, a CI-CO2 tax credit will be introduced from the 2024 tax year onwards, to limit the impact of the CO2 tax on individuals with low to medium income, as follows:

• REDUCTION OF WAGE-EARNER TAX CREDIT (CIS)

From tax year 2024 onwards, the wage-earner tax credit is adjusted as follows:

• TAX CLASS 1A

A draft Grand-Ducal regulation aims to update the list of taxpayers eligible for tax class 1a.

• SOCIAL SECURITY CONTRIBUTIONS FOR COMPANY PARTNERS/ SHAREHOLDERS AFFILIATED AS SELF-EMPLOYED WITH CCSS

• MEAL VOUCHERS

From 01.01.2024, the face value of meal vouchers may be increased to €15 (instead of €10.80) at the employer’s discretion.

The maximum tax exemption has been raised to €12.20 (instead of €8 on a meal voucher of €10.80). The employee’s personal contribution (or taxable benefit in kind) of €2.80 remains unchanged.

In addition, it is specified that:

• meal vouchers are now limited to the purchase of food 7/7 in both restaurants or stores;
• the use of meal vouchers is now limited to a maximum of €75/day, i.e. 5 meal vouchers with a face value of €15;
• meal vouchers are digitalized (the use of paper lunch vouchers is authorized until 31.12.2024).

• GERMAN FRONTIER WORKERS – 34-DAY TAX THRESHOLD

Luxembourg and Germany have agreed on a tax tolerance threshold of 34 days. From 2024, German frontier workers are therefore authorized to work up to 34 days a year (instead of 19) outside Luxembourg (in Germany or a third country) on behalf of their Luxembourg employer without triggering taxation in Germany.

• SOCIAL ELECTIONS

Elections for employee representatives will take place on 12.03.2024.

As a reminder, it is compulsory to set up a staff delegation in all companies employing at least 15 people during the 12 months preceding 01.02.2024.

The timetable (with details of the steps to follow) and the guide to organizing social elections are available on the ITM website: https://itm.public.lu/fr/conditions-travail/elections-sociales.html

• MUTUALITÉ DES EMPLOYEURS: REDUCTION OF CONTRIBUTION RATES

From 2024 and to compensate for the 3rd wage indexation introduced in September 2023, the contribution rates to the « Mutualité des Employeurs » are reduced as follows:

See our newsletter on the social parameters applicable from 01.01.2024: https://ptb.ovh/bakertilly/bakertilly-newsletter-parametres-sociaux-au-01-01-2024-en/

• ACCOMMODATION & TRAVEL EXPENSES

As from 01.01.2024, lump-sum allowances for accommodation & travel expenses granted by an employer to its employees who travel in Luxembourg or abroad are adjusted.

These lump-sum allowances are tax free up to the amounts foreseen by the new Règlement du Gouvernement en Conseil of 18.12.20233 : https://legilux.public.lu/eli/etat/leg/rgc/2023/12/18/a806/jo

• COMPANY CARS AND VAT

When an employer provides his employees with a company car used for private purposes, this constitutes a service subject to VAT. Traditionally, this VAT was payable in Luxembourg, regardless of the employee’s country of residence.

Since a new interpretation of the relevant legal provisions, VAT is now due in Luxembourg or in the employee’s country of residence, depending on certain criteria (see our last newsletter on this subject: https://ptb.ovh/bakertilly/bakertilly-newsletter-voitures-de-societe-ou-la-tva-est-elle-due-dans-un-contexte-transfrontalier-quelles-implications-pour-les-employeurs-en/).

• EMPLOYER ACTIONS FOR FRENCH FRONTIER WORKERS EXCEEDING THE TAX THRESHOLD IN 2023

Companies employing French frontier workers (maintained under Luxembourg social security) who have exceeded the 34-day tax tolerance threshold in 2023, must declare to the French tax authorities the portion of remuneration taxable in France for each of them. This declaration must be made no later than 10.02.2024.

• TELEWORKING AND OTHER ACTIVITIES OUTSIDE LUXEMBOURG PERFORMED BY FRONTIER WORKERS – SOCIAL SECURITY IMPLICATIONS AND PROCEDURES

From 01.07.2023, employers must cover their frontier workers who work outside Luxembourg with an A1 pluri-activity certificate:

• DIRECTORS’ FEES AND VAT

As a reminder, AED circular n°781 of 30.09.2016 required independent board directors to register for VAT from 01.01.2017.

On 21.12.2023, in response to a preliminary question from the Tribunal d’arrondissement of Luxembourg, the CJEU issued a long-awaited decision clarifying how the VAT directive should be understood in relation to board directors’ activity. The decision clarifies that director’s fees received by a board director should no longer be subject to VAT when the director is not acting on his/her own behalf and does not bear the economic risk associated with his/her activity.

The AED reacted without delay and issued a new circular n°781-1 on 22.12.2023 which immediately suspends the circular n°781 of 30.09.2016, pending the decision of the « Tribunal d’arrondissement ».

In practice, most board directors should be exempt from this VAT requirement. However, a case-by-case analysis is still recommended.

We are awaiting the next AED circular, which will provide the necessary details regarding the regularization procedure (see also the AED communication of 15.01.2024: https://pfi.public.lu/fr/actualites/2024/admincjue.html).

¹ Also applicable to the director of a limited company (S.A.) who is not a shareholder.
² Via 164 R/NR form.
³ Regulation for civil servants, also applicable to employees.