On 17 July 2024, the Luxembourg Government submitted bill n°8414, introducing a new tax package to enhance the country’s competitiveness and attractiveness. These reforms presented by Finance Minister Gilles Roth in the State of the Nation address, align with the government’s 2023-2028 coalition agreement.

The bill includes measures such as reducing the corporate income tax rate, offering a subscription tax exemption for ETFs, and implementing new employee benefits like the inpatriate regime and bonuses for young workers. These initiatives aim to align Luxembourg’s tax rates with EU and OECD averages, promoting a more favorable business environment and supporting talent retention and recruitment efforts.

Key highlights include:

For Companies:

➡ Corporate Income Tax Reduction:

◽ From 17% to 16% for taxable income over EUR 200,000.
◽ From 15% to 14% for SMEs.
◽ Starting 2025, also taking into consideration the municipal business tax and the solidarity surcharge for the employment fund, companies in Luxembourg City with taxable income over EUR 200,000 will see an overall tax rate reduction from 24.94% to 23.87% (from 22.80% to 21.73% for small businesses), aligning closer to EU (21.2%) and OECD (23.6%) averages.

➡ ETF Exemption:

◽ Actively managed ETFs will be exempt from subscription tax starting in 2025.

➡ SPF (« Société de gestion de patrimoine familial »):

◽ Minimum subscription tax increase to EUR 1,000.
◽ Certification of the SPF to be transmitted electronically by the domiciliary agent.
◽ Amendment to the withdrawal of the SPF’s tax status procedure and administrative fines for non-compliance with legal obligations.

For Individuals/Employees:

◽ Individual Tax Rate Decrease: effective from 1 January 2025.
◽ More Advantageous Tax Calculation: for individuals in tax class 1a.
◽ Increased Single-Parent Tax Credit: and allowance for extraordinary expenses for dependent children.
◽ Increased Deductible Interest: on loans for the purchase of an existing dwelling.
◽ Profit-Sharing Bonus: increased to 7.5% of company profits, with a tax-exempt limit raised to 30% of gross annual remuneration.
◽ Inpatriate Regime: simplified to offer a 50% exemption on gross annual pay, capped at EUR 400,000.
◽ Young Employee Bonus: 75% tax exemption for bonuses between EUR 2,500 and EUR 5,000 for those under 30 with their first permanent contract (no tax exemption if the annual gross salary is above EUR 100,000).
vOvertime Tax Credit: up to EUR 700 annually for cross-border workers to compensate potential taxation in their state of residence.

The bill will now proceed through the legislative process, and further changes may be made.

Explore the full details of the bill here: https://www.chd.lu/de/dossier/8414

For detailed guidance and support, please contact our Corporate Tax Team led by Mathieu Ledoux.