Luxembourg

New tax measures as of 2024

The Luxembourg Parliament voted on 11 December 2024 to approve bill 8414 amending the Luxembourg tax legislation. The bill introduces several important measures for both individual and corporate taxpayers and aim to strengthen the purchasing power of Luxembourg residents and cross-border employees and the competitiveness of Luxembourg companies

The main measures for individuals are the following:

• Revamp of the impatriate tax regime
• New tax exemption for bonuses paid to employees under 30 years old;
• Revised ceilings for the profit sharing scheme;
• New adjustment of the tax scale to counter the indexation of salaries to inflation;
• More advantageous tax calculation formula for single parents, widows, and citizens over 64 years old;
• Increased single parent tax credit;
• Increased Minimum Social Wage Tax credit;
• Increased deduction for extraordinary expenses for dependents outside the household;
• Unskilled minimum social wage exempt from tax in all tax classes:
• Tax credit for overtime hours for cross-border workers.

These measures are designed to enhance Luxembourg's competitiveness and encourage the creation of high-value-added jobs. The anticipated tax revenue loss from these measures is expected to be balanced by increased tax revenues in the medium term.

Additionally, considering the continuous tension in relation to the Luxembourgish real estate, notably due to the high long-term interest rates that affect the borrowing capacity of households, the Law dated 22 May 2024 introduced new temporary measures in order to boost the housing market. These temporary measures were initially taken only for the tax year 2024. However, the following measures have been extended for an additional period of 6 months, i.e., until 1 July 2025.

These temporary measures are summarised below:

• Creation of a temporary tax credit (crédit d'impôt location) on registration and transcription fees of 20,000 euros (EUR) maximum per individual investor (EUR 40,000 per couple investor) under specific conditions for all property acquisitions intended for rent.
• The current tax credit (Bëllegen Akt) providing an allowance on registration and transcription fees of EUR 30,000 per individual purchaser (EUR 60,000 per couple purchaser) is increased to EUR 40,000 per individual purchaser (EUR 80,000 per couple purchaser) for the acquisition of a main residence in Luxembourg.
• Abattement construction special: Individual taxpayers who signed a deed 'VEFA' (i.e. off-plan purchase) between 1 January and 31 December 2024 for buildings intended for rent can benefit from an accelerated depreciation rate of 6% per year for the first six years following the building completion.
• Capital gains resulting from the sale of immovable property making part of the private wealth of the individual taxpayer will be subject to taxation at 1/4 of the marginal tax rate.
• Capital gains realised in 2024 by the individual taxpayer on the sale of building making part of the private wealth more than two years after their acquisition could be tax immunised upon request in case of total or partial reinvestment of the sale price.

Adjustments to personal income tax (PIT) brackets

For employees, the PIT brackets have been adjusted by an equivalent of four index tranches as of 2024, leading to a reduction of PIT as of 1 January 2024 (see the Taxes on personal income section).