We would like to highlight several new measures that impact staff management and that will come into effect on January 1, 20231.

Profit-sharing bonus for employees: group concept

Since 2021, employers can grant their employees (or a category of employees) a profit-sharing bonus, based on the company’s profit. Under certain conditions, the bonus granted benefits from a tax exemption of 50% on behalf of the employee.

Among these conditions, the total amount of the profit-sharing bonuses must not exceed 5% of the positive result of the fiscal year preceding the one in which the bonus is granted.

Until now, we must take into consideration the profit made by the company paying the salary (reference to the employer mentioned on the employee’s tax card) and not by the group to which it belongs.

As of 01.01.2023, it is now possible (annual option) to calculate the 5% threshold by considering the global result realized by a group of companies (forming a fiscal unit in LXG according to the art.164bis of the tax law) subject to the following conditions:

  • The members of the integrated group must have opted for tax integration during the year in which the profit-sharing bonus is granted as well as the preceding year;
  • Each member of the integrated group must:
    • have realized a commercial, agricultural, forestry or liberal profession profit;
    • keep regular accounts during the year of granting of the profit-sharing bonus as well as the preceding year;
  • The distribution of the total amount available of the profit-sharing bonus is left to the discretion of the members of the integrated group;
  • The integrating company or the integrating subsidiary company must inform the RTS office and provide the list of employees who are beneficiaries of the profit-sharing bonus (for each member of the integrated group).

Favorable tax regime for impatriates: reduction of the eligibility threshold

As a reminder, this favorable regime aims to help companies attracting highly qualified workers by totally or partially exempting, under certain conditions, advantages granted to them (moving expenses, travel, housing, school fees, cost of living differential, tax equalization).

As of 01.01.2023, the employer can apply the exemptions foreseen by the favorable tax regime to employees who receive a fixed remuneration of at least €75,000 per year – excluding benefits in kind and in cash (instead of €100,000 per year previously).

Adaptation of the Minimum Social Wage Tax Credit (CISSM)

Due to the increase of the minimum social wage on 01.01.2023 and in order to avoid that some employees are no longer eligible to the CISSM, the income brackets taken into account are increased as follows:
  • CISSM of €70 per month for employees with a gross monthly salary between €1,800 and €3,000 (€1,500 and €2,500 previously)
  • The CISSM of €70 per month is progressively reduced for employees with a gross monthly salary between €3,000 and €3,600 (€2,500 and €3,000 previously)
  • The CISSM is not granted for a gross monthly salary < €1,800 and > €3,600

Increase in the Single Parent Tax Credit (CIM)

  • The CIM increases from €1,500 to €2,505 for a taxpayer whose taxable income is less than €60,000 (instead of €35,000 previously)
  • For a taxable income between €60,000 and €105,000, it is gradually reduced to €750. Above €105,000, it is maintained at €750
  • The CIM is reduced by 50% of the amount of any kind of allowances granted to the child (except the orphan’s pensions and family benefits) insofar as they exceed a certain annual threshold, which is reviewed from € 2,208 to € 2,424

Adaptation of the tax regime applicable to occasional wages

  • Students / trainees

The employer is exempted from withholding tax on the salaries / indemnities paid to students or trainees provided that the net hourly wage does not exceed €16 (instead of €14 previously).

  • Occasional workers

The employer who uses occasional workers is allowed, under certain conditions, to apply a flat rate withholding tax of 15% on the wages.

One of these conditions is that the net salary of tax and social security contributions does not exceed €16 (instead of €14 previously).

Allowance for children being not part of the taxpayer’s household

The allowance granted for the contribution to care and education costs of children being not part of the taxpayer’s household (alimonies, etc.) increases from €4,020 to €4,422 per year and per child.

Abolition of the social security contributions’ advance payment

The social security contributions’ advance payment is abolished as of 01.01.2023: https://ccss.public.lu/fr/actualites/2022/12/30.html

Wages seizure: adaptation of the income brackets

A draft Grand-Ducal regulation of 13.09.2022 (not yet adopted) foresees to adapt the income brackets in order to take into account the evolution of the sliding scale of salaries, which will lead a decrease of the amount withheld from the salary.

The new brackets will come into effect on the 1st day of the month following the publication of the regulation in the official journal.

Personal income tax return: extension of the filing deadline

The deadline for filing the income tax return is now December 31 of the following year (instead of March 31 until now).

This new deadline will apply for the first time to income tax returns related to the 2022 tax year.

The same applies to requests for individual or collective taxation of resident or non-resident partners / married taxpayers.

1 Law of 23.12.2022 regarding the State revenue and expenditure budget for the 2023 financial year.
– Grand-Ducal Regulation of 23.12.2022 amending the amended Grand-Ducal Regulation of 9.01.1974 implementing article 137 of the amended law of 4.12.1967 regarding income tax.
– Grand-Ducal Regulation of 16.12.2022 abrogating the Grand-Ducal Regulation of 28.01.1987 regarding the social security contributions’ collection by the Center for data processing, registration and collection of contributions.
– Draft Grand-Ducal regulation of 13.09.2022 fixing the rates of seizability of work remuneration, pensions and annuities.

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