2011 tax measures relating to the financial
and economic crisis
After many debates, opinions and amendments, the draft law n° 6166 which introduces new tax measures relating to the financial and economic crisis has been voted on
December 2, 2010. The law should be published in the Memorial in the next few days. The measures adopted will come into effect on January 1st, 2011.
Tax measures for individuals
- Introduction of a new tax rate and increase of the marginal tax rate: henceforth, the marginal rate will be brought to 39% in excess of an annual taxable income of
€ 41,793 for taxpayers in tax class 1, € 33,978 for taxpayers in tax class 1a and
€ 83,586 for taxpayers in tax class 2.
- Increase of the unemployment fund contribution from 2.5% to 4% (6% for a taxable income exceeding € 150,000 for taxpayers in tax class 1 and 1a and € 300,000 for taxpayers in tax class 2).
- Crisis contribution of 0.8% applicable to professional/replacement income as well as to income from personal assets (after application of a monthly allowance corresponding to the non-qualified minimum social wage for employees and to ¾ of the non-qualified minimum social wage for independent individuals).
This contribution will be calculated and collected by the Centre Commun de la Sécurité Sociale for the professional/ replacement income and by the tax authority (Administration des contributions directes) for the income from personal assets.
This contribution is, in principle, applicable for 2011 and 2012. Nevertheless, the effective application of this measure for 2012 will be rediscussed on the basis of the evaluation of the economic and social situation and the situation of the public finances.
- Adjustment of the deductibility threshold related to alimonies paid to the ex-spouse
(€ 24,000 instead of € 23,400).
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The Government has renounced the following measures which were foreseen in the initial draft law :
- The measure aiming at reducing by half the lump sum deduction for commuting expenses for employees and independent individuals has been cancelled: the tax deduction from € 395 to € 2,970 depending on the distance between the domicile and the place of work is maintained.
- The allowance for the tax benefit related to the registration and transcription duties for the acquisition of real estate (“Bëllegen Akt”) is maintained at the current conditions (i.e. each homebuyer will continue to benefit from a tax credit of € 20,000 for the acquisition of real estate located in Luxembourg and used as the taxpayer’s main and personal residence): the conditions of income initially considered to benefit from this entitlement have been cancelled.
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Tax measures for corporations
- Increase of unemployment fund contribution at the expense of companies subject to corporate income tax of 4% to 5% (the effective tax rate increases from 28.59% to 28.80% for companies established in the municipality of Luxembourg).
- Limitation of the tax deductibility of leaving allowances to € 300,000. In case the allowance is split over several years, the total amount will be taken into consideration. If the accounting year of the enterprise does not correspond to the calendar year, this measure will only be applicable to the allowances granted after December 31st, 2010.
- Introduction of a minimum tax of € 1,500 (€ 1,575 taking into account the unemployment fund contribution) for companies liable to corporate income tax, exempt from any business license and owning financial assets, transferable securities and cash at bank exceeding 90% of their balance sheet total (holding companies/soparfi).
- Improvement of the tax provisions concerning the special depreciation for companies realizing investments in the environmental protection and energy savings domains: the depreciation basis is increased from 60% to 80%.
- Increase of the tax relief for investments:
· Tax relief for additional investments: the rate increases from 12% to 13%;
· Tax relief for overall investments: the rate increases from 6% to 7% for investments not exceeding € 150,000 and from 2% to 3% for investments exceeding € 150,000.
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