A THREE-STEP INCREASE

The 2018-2023 coalition agreement provides for an increase of the minimum social wage (MSW) of €100 net per month as of 1 January 2019. To implement this measure, the government has proceeded in three stages:
  1. Increase of the MSW by 1.1% on 1 January 2019 (law of 21 December 2018 amending art. 222-2 and 222-9 of the Labour Code in order to allow the structural adaptation of the MSW).
  2. Second increase of the MSW by 0.9% with retroactive effect as of 1 January 2019 (Law voted by the Parliament on 25 June 2019).
  3. Introduction with retroactive effect from 1 January 2019 of the new «Minimum social wage tax credit» (Crédit d’impôt salaire social minimum – CISSM) of €70 per month for employees earning between €1,500 and €2,500 gross per month (law of 26 April 2019 introducing article 139 quater L.I.R). A gradual reduction of the CISSM from €70 to €0 is applied to employees earning a salary between €2,500 and €3,000 gross per month.

These three measures combined result in a net increase of €100 of the minimum social wage:

The CISSM is retroactive as of January 1, 2019. The CISSMs due for the months of January to June 2019 are to be granted in full on employees’ payslip of July 2019.

The CISSM is in addition to the tax credit for employees and does not replace it.

The CISSM is calculated based on the employee’s gross monthly salary (including the benefits in kind but excluding the non-periodical income if less than €3,000 on the year) when he works full-time for an entire month. If the threshold of €3,000 is exceeded during the year, the CISSM granted in the previous months are not regularized.

For employees working part-time or only part of the month, the CISSM is calculated based on a theoretical gross monthly salary (i.e. the salary that the worker would have earned if he had worked full-time for an entire month). Examples of calculations are available on the tax administration website: https://impotsdirects.public.lu/fr/az/c/CISSMexemples.html

In case the withholding tax is less than the CISSM, the excess of CISSM is refunded to the employee by the employer.


IF Group is not responsible for any errors, omissions or for the results obtained from the use of this information. The information contained in this document is for general guidance on matters of interest only.

EXPERTS EN FORMATIONS FISCALES ET SOCIALES

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JANIQUE BULTOT
PARTNER
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janique.bultot@ifgroup.lu
LAURENT GARRIC
SENIOR ADVISER
T +352 47 68 47 - 524
laurent.garric@ifgroup.lu