I. Social parameters
INDEXATION AND MINIMUM WAGE
A wage indexation comes into force from January 1st, 2017. Furthermore, the social minimum wage has also been raised.
Consequently, the social minimum wage comes to 1.998,59€ gross for unqualified workers and to 2.398,30€ gross for the qualified ones.
II. Tax reform
After a set of measures which were presented at the end of February 2016 and numerous comments during the whole year 2016, the tax reform has been published on December 27, 2016. This reform will bring many new advantages in 2017 but also many questions that have to be answered during the year.
1. TAX SCALE ADAPTATION
1.3 Tax credits and Impot d’Equilibrage Budgetaire Temporaire (IEBT)
The Luxembourgish government decided to help people with the lowest incomes.
_The employee tax credit (CIS) :
Incomes between €936 and €11.265 : from €300 to €600/year
Incomes between €11.266 and €40.000 : from €600/year
Incomes between €40.001€ and €79.999: from €600 to €0/year
_The single-parent tax credit (CIM) :
Incomes < €35.000 : €1.500/year
Incomes between €35.000 and €105.000 : from €1.500 to €750/year
The employee and the single-parent tax credits could be favorably or unfavorably adjusted during the year.
_Moreover, the “impôt d’équilibrage budgétaire temporaire” (IEBT) is abolished.
1.4 New tax structure
The tax rate schedule will be adapted:
The tax burden will be lighter for the low and middle incomes people. Indeed, the tax structure will be designed to tax much lesser those last ones.
2 new tax rates will impact the highest incomes. People earning more than €150.000 will be taxed with 41% whereas the ones earning more than €200.004 will be touched by a 42% tax rate.
2. THE 2017 TRANSITION YEAR
From January 1st, 2017, the married or partner taxpayers could opt for an individual taxation.
To this end, a common and definitive demand should be introduced at the latest by December 31st, 2017.
Furthermore, the non-resident taxpayers will be automatically set in class 1. To benefit from the class 2, they have to convey information concerning their domestic and foreign incomes to the administration at the latest by December 31st, 2017.
The tax administration will soon send to the non-resident taxpayers an explanatory letter. The answer letter should contain the choice they made.
In the class 2 option case, the non-Luxembourgish incomes will be exonerated in Luxembourg. The concerned people will have to correctly compute what is the best solution for them.
3. SUSTAINABLE TRANSPORT
To reduce its greenhouse gases, the Luxembourg government has adapted its tax policy. Soft mobility and less polluting engines will be fiscally advantaged. 100% electric cars as well as hydrogen ones bought from 2017 will allow owners to reduce their tax base of €5.000. Concerning new bikes or pedelecs purchases, they will allow a €300 reduction.
The benefit in kind computation for company cars is modified. It switches from a fixe 1,5% rate of the new car price to a percentage depending of the CO2 emissions and the engine car.
|CO2 emission categories||Gas||Diesel|
|0 - 50g/km||0.8%||1.0%|
|50 - 110 g/km||1.0%||1.2%|
|110 - 150 g/km||1.3%||1.5%|
4. MEAL VOUCHER
The tax reform will also influence the meal voucher. It was expected that the employee contribution will rise to €3,60 but the government changed its mind. The contribution will remain at €2,80 but the tax exoneration will be at a maximum of €8 (previously €5,6).
The purpose is to bring the meal voucher facial value to €10,80. However, no one is obligated to reach this facial value. The only goal is to match the meal voucher value to the market price an employee must pay to eat.
We are at your service for any further information you may need.
Keep in mind that the VO Consulting Afterworks taking place this thursday 19th January 2017 will be your opportunity to answer your questions.
Your Payroll Department