fscholtus@deloitte.lu, Sacha Thill neuvoo™ 【 Calculateur de salaire et d'impôt en ligne : Luxembourg 】 fournit votre revenu après impôt si vous faites un revenu dans cette région. Pensions and annuities on which residents must normally pay tax unless the pension is paid by a foreign government with which Luxembourg has a double taxation treaty. The Luxembourg tax authorities issued guidance regarding the new remuneration model, the prime participative (or profit-sharing bonus) on 11 February 2021 in a circular (circular L.I.R. The total amount of bonus (i.e., the bonus pool) that may be granted to employees is limited to 5% of the employer’s profits for the fiscal year immediately preceding the fiscal year in which the bonuses are granted (i.e., 2020 profits in case of a bonus granted in 2021, as imputed in the standardized chart of accounts, 142 – Results for the financial year). © 2021 Copyright owned by one or more of the KPMG International entities. Capital gains on the sale of private assets held for 6 months or less (speculative gain) are taxed as ordinary income at the normal tax rates. 15 LITL to treat it as an operating expense. 13(a) of the Luxembourg Income Tax Law (LITL), modifying article 95 al. A shareholding is significant when the transferor has owned, directly or indirectly, alone or together with their spouse/declared domestic partner and minor children, a shareholding of more than 10 percent, at any point of time during the 5 years period preceding the sale or redemption. In principle, gains relating to goods held in the private wealth are taxable according to the conditions noted in the section Taxation of Capital Gains. Capital gains held for more than 6 months are exempt from income tax. The recharge of salary costs can play a role in this determination, but is not a decisive factor on its own. In principle, the foreign tax credit must be determined separately for the income and tax paid in each foreign country/jurisdiction (per country/jurisdiction method), and cannot exceed the Luxembourg tax on that income. The income to be taxed in Luxembourg will be the director's fee paid in relation to non- executive directorship (attendance to board meetings) in Luxembourg. The profit-sharing bonus received by an executive director/manager and shareholder, who may also be the sole beneficiary of the bonus is to be considered income derived from a salaried occupation, which is subject to both the employer-level and employee-level conditions discussed above. b) Will the answer be different if the cost directly or indirectly is charged to/allocated to the company situated in Luxembourg (i.e. You will not continue to receive KPMG subscriptions until you accept the changes. A bespoke tax regime is to be introduced for bonuses granted to employees on the basis of an employer's annual results. Sale proceeds relating to the sale of principal residence are in principle tax exempted. The remuneration is paid by the employer as of the first day of work disability until the end of the month during which the 77th day of incapacity for work is located. Residents of Luxembourg are subject to Luxembourg tax on their worldwide income, including salary earned from working abroad. The maximum deduction in other instances amounts to EUR672 per year. This applies to taxpayers who hold a significant participation (>10 percent), and applies retroactively to 2015. All rights reserved. Capital losses may be set off against capital gains incurred during the same year. member of the Board of Directors in a group company situated in Luxembourg) trigger a personal tax liability in Luxembourg, even though no separate director's fee/remuneration is paid for their duties as a board member? Children benefiting from a child bonus before 1 August 2016 in the form of a monthly cash payment of EUR76.88 per child, irrespective of the taxable income of the parents, which is granted to taxpayers if the children are entitled to child benefits in Luxembourg, will still benefit from this payment. Until the end of 2018 a temporary measure applied regarding the capital gains on the sale of immovable property held during more than 2 years. Save what resonates, curate a library of information, and share content with your network of contacts. Taxation of savings for Luxembourg residents. As the bonus is likely to constitute the only income from Luxembourg source during that year, it may be subject to individual income tax at the lower progressive income tax rates. Class 2 for married persons as well as civil partners (under certain conditions). However, the following benefits are tax exempted: Gift and inheritances are not subject to individual income tax in the hands of the beneficiaries, but are subject to the inheritance and gift tax provisions. While this top rate might sound high, it remains lower than the likes of neighboring countries such as Belgium. Employeeâs contribution to a qualifying occupational (second pillar) pension scheme up to EUR1,200 per year is deductible. These elections can be made every year. More about Luxembourg. Do the immigration authorities in Luxembourg provide information to the local taxation authorities regarding when a person enters or leaves Luxembourg? All rights reserved. You will not receive KPMG subscription messages until you agree to the new policy. With it you can also calculate contributions (health, pension and care insurance) and taxes. The Luxembourg tax authorities issued guidance regarding the new remuneration model, the prime participative (or profit-sharing bonus) on 11 February 2021 in a circular (circular L.I.R. The parental leave can be either full time for 6 months, or part time for a year (the latter being subject to employerâs approval). Beneficiaries of income tax treaties may in general be exempt from Luxembourg individual income tax on certain income, but such exempt income must nevertheless be reported on the individual income tax return and it is used to increase the rate of tax applied to other taxable income (that is, exemption with progression). Employees hired abroad by a Luxembourg company or by a company located in the European Economic Area to work in Luxembourg for the company. All forms of private pension are included in taxable income even when paid from abroad. The circular specifies the procedure necessary to meet the LITL’s reporting requirements: employers wishing to use the prime participative must send a detailed communication to the appropriate wage tax office (i.e., RTS) responsible for verifying payroll tax deductions at the time the bonus is granted to the chosen employees. The difference between the amount of the voucher (up to 10.80 euros to benefit from the maximum exemption) and the employee’s contribution is exempt from tax and social security contributions for the employee. Do not delete! Maternity leave starts 8 weeks before the anticipated date of birth and ends 12 weeks after the effective date of birth. In your first and last year of employment, the 13th month bonus (and any holiday bonus related to vacation time) is paid pro rata if you don’t work a full calendar year. Three tax classes have been defined: Class 1 for single persons. Non-recurring expenses: removal and repatriation expenses, housing (furniture), special travel costs (e.g. A work accident is defined as an accident which occurs by reason of, or on the occasion of work. pjestagerie@deloitte.lu, Marleen Vandenput The capital gain is equal to the difference between the sale price and the revalued acquisition cost, including related expenses. Tax prepayments calculated by the Luxembourg tax authorities are due four times per year: 10 March, 10 June, 10 September, and 10 December. The principle of a split salary structure consists of diversifying the geographical income sources and location of professional activities in order to apportion the right of taxation of the global income between several countries/jurisdictions. Royalties (Luxembourg-sourced) paid to a non-Luxembourg resident are subject to a 10 percent withholding tax. Dans ce cas, le salarié bénéficie d’un avantage en nature, dont la valeur sera estimée en tenant compte des caractéristiques particulières de l’immeuble ou par analogie au loyer que paierait un tiers sur le marché pour une habitation similaire. Get the latest updates on tax, regulations, laws and directives. In case of transferable stock options, the employee is regarded as receiving a benefit in- kind at the date of grant of the options. a) Will the taxation be triggered irrespective of whether or not the board member is physically present at the board meetings in Luxembourg? Get the latest KPMG thought leadership directly to your individual personalized dashboard. Go to the calculator. Deloitte Digital combines Deloitte’s globally recognized strength in business transformation and technology implementation with the capabilities of a world-class digital agency. All information contained in this publication is summarized by KPMG Luxembourg, Société coopérative, the Luxembourg member firm affiliated with KPMG International Cooperative (âKPMG Internationalâ), a Swiss entity, based on the Luxembourg Income Tax Law of 4 December 1967 and subsequent amendments; Luxembourg law of 29 August 2008; Grand- Duchy regulation of 5 September 2008; the Luxembourg web site of Ministry of Foreign and European affairs, the Luxembourg website Guichet.lu and Ministère des Finances. In principle, an overpayment of tax may be refunded. Si c'est un bonus exceptionnel alors le taux qui avait calculé était erroné. Luxembourg, officially the Grand Duchy of Luxembourg, is a country in western Europe. Tel: +352 45145 4940 housing or the use of a company car), as well as all sick pay, maternity benefits or other disability payments made in lieu of salary.Exempt from income tax are certain bonuses paid for … Upon termination of Luxembourg residence (domicile), the taxpayer leaving Luxembourg may have to file an income tax return for income received during the tax year until the date of departure, which is confirmed by the taxpayerâs deregistration at the commune of residence. Such different allocation of income will have no impact on the ceilings of deductions for special expenses. Browse articles, set up your interests, or Learn more. The calculation of Luxembourg income taxes depends on The tax prepayments and the tax withheld at the source are provisional and can be credited against the final income tax due at the individualâs level. The Circular LTIL n°104/2 dated 29 November 2017 states new strict deadlines that apply with respect to the employerâs reporting obligations towards the wage tax office: for plans implemented in 2015 and before: a detailed report should be made upon the specific request of the relevant wage tax office (usually during a payroll audit), for plans implemented in 2016: a detailed report must be made by the employer before 31 January 2018. for plans implemented in 2017: a detailed report must be made by the employer before 31 March 2018. This calculation assumes a married taxpayer resident in Luxembourg with two children whose 3-year assignment begins 1 January 2018 and ends 31 December 2020. a. Liquation of a Luxembourg corporation: no tax is due, including no withholding tax, in Luxembourg on the distribution of profits to shareholders regardless of their legal status or place of residence. family status). The employer has the legal obligation to make the correct withholding tax on the salaries paid to employees. The 1.4 percent dependence insurance has not been taken into account for these calculations. The taxable salary of residents cannot be reduced by allocating income to foreign business trips, except where exclusions are available under double taxation treaties. There is no de minimus number of days in Luxembourg. Exemple de calcul de la retenue d'impôt sur une rémunération non périodique (gratification) - année d'imposition 2020 L'exemple qui suit s'applique à une fiche de retenue d'impôt principale. 2. What are the general tax credits that may be claimed in Luxembourg? Income exempt under Luxembourg double taxation treaties may include salaries paid abroad for services rendered there to foreign companies, income from the rental of foreign real estate, and foreign business income when the taxation right goes to the other contracting state. Otherwise, the bonus is merged with the family allowance, and a unique amount of family allowance is paid per child born as from 1 August 2016 (EUR265/month). Our privacy policy has been updated since the last time you logged in. She focuses on personal income tax. A customary place of abode is deemed to exist if an individual has been present in Luxembourg for a period of at least 6 months. For Luxembourg residents, the foreign rental income is however taken into account for the determination of the global tax rate applicable to the taxable Luxembourg source income. Are there any areas of income that are exempt from taxation in Luxembourg? Income from trades or businesses, including net profits from a trade or business, including agriculture and forestry income;; Employment income, including salary and all benefits-in-kind (e.g. Tel: +352 45145 4374 The bonus cannot exceed 25% of the employee’s gross ordinary annual remuneration (i.e., excluding any cash, and/or in-kind benefits, bonuses, premiums, etc.) The circular is complemented by a Q&A, which aims to provide further clarifications regarding the new remuneration model. In presence of a clause of inalienability of the share (after exercise of the option), a tax reduction equal to 5 percent per year of the share value is granted (with a maximum of 20 percent). In that case the income might be qualified either as service fee or directorâs fees. Capital losses may only be deducted from and up to the amount of taxable capital gains in the same year, there is no carry-over to other years. Alice and Jack are married, live in France, and work in Luxembourg. Tax treaties and totalization agreements are ignored for the purpose of this calculation. Taxpayers in this category apply the tax rates to one half their incomes and then multiply the liability by two (that is splitting system). The allowance is granted for both spouses if each one takes out separate insurance. Lump sum can be doubled (i.e. For real estate located in a non-double taxation treaty country/jurisdiction, Luxembourg would tax rental income and allow that the taxes paid in the other country/jurisdiction are credited against the Luxembourg individual income tax due. A once-off allowance of EUR50,000 (doubled for couples filing jointly) is granted to each taxpayer per 11-year period. A global survey of income tax, social security tax rates and tax legislation impacting expatriate employees. Tax rates Progressive tax rates ranging from 0% to 45.78% apply to taxable income not exceeding €200,004 (€400,008 for couples taxed jointly). For instance, social contributions related to exempted salary income, such as a prime participative, are not deductible for wage tax calculation purposes. If the non-resident employer does not have any legal requirements to withhold taxes and to grant tax credits on salary and does not do it on a voluntary basis, the employee will have to file a Luxembourg individual income tax return to the Luxembourg tax authorities in order to benefit from this regime. These capital gains were taxed at a quarter of the global tax rate. Child tax relief is still applicable however under limited conditions. Nous calculons le montant de votre masse salariale après déductions fiscales pour tous les lieux. The income tax withheld monthly on employment income and pension income is computed according to tax tables set forth by the government. If the assignee receives, after repatriation, an income which relates to a professional activity performed in Luxembourg (such as cash bonus), this income is taxable in Luxembourg. Will a non-resident of Luxembourg who, as part of their employment within a group company, is also appointed as a statutory director (i.e. Do the taxation authorities in Luxembourg adopt the economic employer approach to interpreting Article 15 of the Organisation for Economic Co-operation and Development (OECD) treaty? First pillar pension is taxable in Luxembourg if paid by Luxembourg State. Luxembourg has a stable and high GDP, which is supported by its strength in financial services. Finally, the circular provides information on a prime participative that is allocated to executive directors/managers and shareholders of limited liability companies who earn income derived from a salaried occupation. A double taxation treaty is in force between Luxembourg and the country/jurisdiction concerned, which provides for an exemption (with progression) of the employment income from Luxembourg taxes. For couples requesting to file separately, most tax deductions applicable to the household should then, in principle, be equally split between spouses/registered partners. Itemized deductions or a flat-rate deduction may be made. Interest income is not remitted to Luxembourg. The employer-level conditions are as follows: The employee-level conditions are as follows: The discretionary bonus (i) is considered a corporate tax deductible operating expense at the level of the employer, (ii) qualifies as employment income at the employee level, and (iii) benefits from a 50% individual income tax exemption (applicable on the amount subject to the 25% limit). It is essentially based on facts and circumstances. In addition, a dependency contribution of 1.4 percent is due for individuals subject to the Luxembourg social security system on the taxable part of the gains. The 2020 income tax table for single taxpayers (tax class 1) is as follows: A fixed monthly cash bonus of EUR76.88 is granted for each child falling within the scope of the Luxembourg family allowances regime, irrespective of the taxable income of the parents. Registered partners remain taxable individually during the tax year concerned and can opt to be taxed jointly after year-end of the tax year concerned. The exemption covers all income from investments such as dividends, interests not been subject to the 20 percent final withholding tax on credit interests paid by resident paying agents to Luxembourg resident individuals. For tax class 1a the taxable amount is calculated as follows: 50 percent of the difference between net taxable income and EUR45,060, provided that the maximum rate cannot exceed 39 percent for the income bracket between EUR37,842 and EUR100,002, 40 percent for the income bracket between EUR100,002 and EUR150,000, 41 percent for the income bracket between EUR150,000 and EUR200,004 and 42 percent for the income in excess of EUR200,004. Actual expenses covered by the director (or a lump sum deduction) may be claimed to reduce the taxable income. The current-year gross-up method is most commonly used in Luxembourg. votre salaire brut; votre activité (intellectuelle ou manuelle)votre classe d'impôts (célibataire, marié, avec ou sans enfant) vos avantages A lump-sum annual deduction of EUR5,400 for a household help or for child care is granted on request (supporting documents are needed/subject to conditions). See Terms of Use for more information. This tax deduction amounts to EUR2,500 (whereas it amounts to EUR5,000 for zero-emission vehicles and to EUR300 for cycles). The rules set out below (and more specifically the applicable If the employer fails to make the report at the time of the taxable event, the tax authorities will: Benefits taxable at the same date can be put in the same report as long as they belong to the same plan. The individualâs tax liability would come from the employment activity performed in Luxembourg (if any). The result: a higher overall tax obligation initially for the same amount of income. An individual may be considered a Luxembourg resident for tax purposes to the extent the following circumstances are met, subject to double taxation treaty provisions. Article 3 of the 2021 budget law introduced the prime participative, adding the new regime to article 115 al. Stock option plans are treated as follows: Not respecting the above deadlines will trigger the exclusion of the benefit of the stock option regime as provided by the circular for 2018 and beyond. This should be assessed on a case-by-case basis. The deadline for filing such return is also 31 March of the following year. KPMG in Luxembourg has assumed that the social security contributions were due in Luxembourg and the child bonus was paid by the family fund. Click anywhere on the bar, to resend verification email. The old amounts are grandfathered for children born before 1 … Sample calculation generated by KPMG in Luxembourg, Société coopérative, the Luxembourg member firm affiliated with KPMG International Cooperative (âKPMG Internationalâ), a Swiss entity, based on KPMG Luxembourg Tax Calculator. Second pillar pensions schemes are subject to 20 percent withholding tax and to 0.9 percent special tax, fully borne by the employer. Granting cash interests subsidies, or a loan to an employee interest-free or at a reduced interest rate, are considered earned income from employment, and are taxable either at nominal cash value, or at the difference between the interest rate charged and 1.5 percent in 2020. sathill@deloitte.lu. Expatriates who establish their residence in Luxembourg during the course of the year will generally be required to provide the Luxembourg tax authorities with evidence of their salary earned during the part of the year they are not resident in Luxembourg. 5 LITL to treat the prime participative as employment income, and modifying article 46 al. In summary, this means that if an employee is assigned to work for an entity in the host country/jurisdiction for a period of less than 183 days in the fiscal year (or, a calendar year of a 12-month period), the employee remains employed by the home country/jurisdiction employer but the employeeâs salary and costs are recharged to the host entity, then the host country/jurisdiction tax authority could treat the host entity as being the "economic employer" and therefore the employer for the purposes of interpreting Article 15. The excess is subject to 45.78%. The foreign individual income taxes paid on that income may, however, be credited against the Luxembourg tax liability. A 50% tax exemption can be obtained on dividend income paid by a fully taxable company resident in a European Union Member State or a State that has concluded a tax treaty with Luxembourg. Also, for whose risk and benefit the activities are performed play an important role in the determination of economic employer. 1. In this respect, for beneficiaries of transferable stock options/warrants, the report should also include the annual gross salary (as expected/calculated at the grant date of the options), excluding the options. School fees are tax exempt without any cap. Tel: +352 45145 3368 Your average tax rate is 31.94% and your marginal tax rate is 54.17%.This marginal tax rate means that your immediate additional income will be taxed at this rate. The currency is the euro (EUR). This election has to be made at the latest by 31 March of the tax year following the tax year concerned. For more detail about our structure please visit https://home.kpmg/governance. Member firms of the KPMG network of independent firms are affiliated with KPMG International. The minimum flat-rate amount is EUR540 for non-travel related expenses (incurred for an employment income unless the taxpayer can prove they had incurred higher professional expenses). An extra-professional abatement of EUR4,500 is granted to couples, who are jointly taxed, where they both receive income from a salaried/independent occupation. The employee’s mandatory social security contributions are in principle considered as tax deductible from the Luxembourg individual income tax standpoint. This year-end or Christmas bonus ( prime de fin d’année/jaarpremie) should be incorporated into your contract if you’ve been quoted an annual salary. Given the territoriality of tax , only companies that have a sufficiently strong attachment with Luxembourg have unlimited tax liability . In such case, the individual is deemed to be a resident taxpayer in Luxembourg retrospectively to 1 October in year N. Reimbursements of foreign and/or home country/jurisdiction taxes, Expatriation premiums for working in Luxembourg. Participants will Inheritance and gift tax are based on graduated rates according to the degree of family relationship of the respective individuals. Get a forecast of your Luxembourg income tax before you file your return, and see how investing for the long term can help you save in the short term. Luxembourg has a broad network of income tax treaties (double taxation treaties), some of which cover wealth taxes. The following items (called special expenses), which are not related to income of a particular source, are deductible within certain conditions and limitations, from total taxable income. Another new tax reform that went into effect on 1 January 2021 applies to highly-skilled workers who are recruited from abroad. DTTL and each of its member firms are legally separate and independent entities. If yes, what is the de minimus number of days? All earned income is attributable to local sources. Luxembourg income tax liability is based on the individual's personal situation (e.g. Corporate Taxation sections 8. and 9., respectively. If an individual arrives on 1 October in year N and is still staying in the country/jurisdiction on 2 April in year N + 1, the 6-month' stay will be deemed met. 16 percent capped at EUR3,000 per month) where the employee shares housing with their spouse or partner who does not perform any professional activity. If the option is not exercised, the individual has to report the interest income in their annual tax return, and the interest will be subject to the upper progressive income tax rates. Certain premiums paid for life, sickness, accident and civil liability insurance plus interest expenses on loans and bank facilities limited to EUR672 per member of the taxpayerâs household per year (such as, spouse/partner, minor or dependent children). 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