NEW TAX REGIME FOR IMPATRIATES Monday, June 3, 2013

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Early 2011, we informed you about the issuance of a circular (2) by the direct tax administration (ADC) introducing a favorable tax regime for highly skilled and specialized workers moving to Luxembourg: http://www.ifgroup.lu/en/news/archive/newsletter-expatriates.

On 21 May 2013, the ADC issued a new circular which replaces the circular of 2010 and facilitates the conditions of application of this tax regime (2) .

This circular is part of the strategy aiming to improve the competitiveness of the country and to attract foreign experts to Luxembourg, in order to satisfy a need for skilled and specialized labor.

The companies willing to develop innovative and sustainable products, technology or services have often to hire highly qualified staff on the international market. To encourage them coming to Luxembourg, employers are required to pay for all or part of their installation costs.

The circular aims to provide a tax framework for the expenses in connection with the recruitment of these employees on the international market, called now impatriates (3) .


ENTRANCE INTO FORCE OF THE CIRCULAR OF 2013

The new circular is applicable to employees who established or will establish themselves in Luxembourg as from 1 January 2013.


CONDITIONS OF APPLICATION OF THE TAX REGIME TO IMPATRIATES

The circular of 2013 reduces significantly the conditions of application of the tax regime to impatriates. The table below summarizes the changes.



4) Excluding any additional benefits in kind or in cash.

TAX EXEMPTION

The expenses borne by the employer are tax deductible for the company and do not constitute taxable employment income in the hands of the employee .

The tax exemptions foreseen by the circular of 2013 remain unchanged from the circular of 2010:



5) Provided that their amount is reasonable.

DURATION OF THE REGIME AND ANNUAL REPORTING

The new circular took over the fact that the employee concerned can benefit from the regime for a maximum of five years following the beginning of employment in Luxembourg.

The old circular foresaw the obligation to file a written request to the competent withholding tax office in order to obtain the recognition of the status of a highly skilled and specialized worker. The new circular does not foresee the obligation to file such a request anymore.

The annual reporting obligation is maintained. No later than 31 January of each year, the employer has to provide the withholding tax office with a list of the employees for whom the regime of the circular has been applied.


IF Advisory is at your disposal for any assistance in relation with the implementation of this new circular.


CONTACTS

Janique Bultot
+352 47 68 47- 445
Janique.Bultot@ifgroup.lu

Louise Lauwerier
+352 47 68 47- 475
Louise.Lauwerier@ifgroup.lu

121, avenue de la Faïencerie
L-1511 Luxembourg


IF Group is not responsible for any errors, omissions or for results obtained from the use of this document, which is issued for information purposes only.