British, American Chambers Address Personal Tax Changes

On Wednesday 13 November 2024, the British Chamber of Commerce for Luxembourg (BCC) and the American Chamber of Commerce in Luxembourg (AMCHAM) jointly organised a personal tax luncheon at the DoubleTree by Hilton hotel in Luxembourg-Dommeldange.

Paul Schonenberg, AMCHAM Chairman, welcomed the circa 50 attendees and talked about the upcoming International Bazaar.

Jonathan Norman, from the BCC, introduced the guest speaker, Laura Foulds, Managing Director of Analie Tax & Consulting, and mentioned about the recent tax changes in the UK regarding non-domiciled.

She delivered a presentation addressing changes in Luxembourg personal tax during 2024 and expected changes for 2025, a briefing on important items to ensure individuals can best optimise their situation before the end of the year, practical guidance on how the changes effective of 1 January 2024 have impacted taxpayers and feedback on commonly asked questions around filing Luxembourg taxes.

She said that there are a lot of changes this year as a lot has been happening: the new government came in at the end of 2023 and had talked about implementing tax changes for 2024 and 2025. They proposed to reduce taxes and help low-income families, continuing with no inheritance and no wealth tax. However, it has come "in various shapes and forms".

The change that has affected everyone is the tax bands which have been broadened, with 4 increased in 2024 and 2.5 to be increased in 2025 (Class 1A is moving closer to Class 2). For low income groups, non-qualified minimum wage earners will be tax exempt; also CO2 credits are increasing.

For families, there is an increase to single parent tax credits, as well as an increase deduction for supporting children outside the household.

For younger workers, a bonus up to €2,500 to €5,000 is tax exempt (subject to conditions including for U30s in their first job, etc). Also, rental allowances up to €1,000/month will be tax exempt.

For employers, they can pay bonuses that are more tax efficient, including the bonus "pot" being increased from 5% to 7% of profit, and the allowable bonus increased from 25% to 30% of salary.

For the impatriate regime, this has been simplified with a 50% tax exemption on the first €400,000 of gross annual remuneration.

Concerning company cars, the calculation on benefit-in-in kind is changing from January 2025, with taxes increasing. There will be a flat fee the same for diesel and petrol cars, with a separate rate for electric vehicles. However, a car ordered in 2024 and delivered in 2025 is subject to the 2024 tax regime.

For cross-border workers, i.e. those living in France, Belgium and Germany, they are entitled to 34 days working from home before being taxed in their country of residence; for residents of other countries working in Luxembourg, bilateral tax agreements cover those scenarios.

For real estate, there have been many changes: there have been increased limits of mortgage interest in 2024 on first properties. Historically there used to be a €20,000 credit to go towards notary fees; this fee changed to €40,000 and has changed again. And regarding renting houses for social housing, there is a partial tax exemption on rental income. Capital Gains Tax has a reduced rate if sold by 31 December 2024, with short term gains on the holding period increased to five years.

She urged everyone to file their 2023 tax returns before the end of 2024 if not already done so.

She concluded by addressing some tax changes in the UK and the US, with a new tax treaty in force re the UK from 1 January 2024, covering dividends, government workers, capital gains, employment and pensions. Regarding the US, the President-elect has talked about ending Federal income tax, but it is unclear what will happen in this context.