Updates 2025

1. Adjustment of tax table and minimum wage as of January 1, 2025:

• In order to further reduce the tax burden on employees, the tax table will be adjusted by 2.5 index points as of January 1, 2025.
• Additionally, the minimum wage has increased by 2.6%. As a result, the minimum wage for unqualified workers will rise to €2,637.79, and the minimum wage for qualified workers will rise to €3,165.35.
• The minimum wage for unqualified workers of €2,637.79 will be exempt from taxes through the granting of corresponding tax credits.

2. New Bonus for young employees: Art. 115 N° 13d L.I.R.

Employers can also grant young employees an annual bonus between €2,500 and €5,000, which is 75% tax-exempt. In order to benefit from this bonus, the following conditions must be met:

• The employee must be under 30 years of age on January 1 of the relevant tax year.
• The employee must have signed their first permanent employment contract with an employer based in Luxembourg.
• The employee’s annual gross income must not exceed €100,000.00.

3. Introduction of a Tax Credit for Overtime (CIHS) for Cross-Border Workers: Art. 154terdecies L.I.R.

A tax credit for overtime has been introduced for cross-border workers to compensate for income losses that may arise due to double taxation in their country of residence. The amount of the credit depends on the level of overtime compensation:

• Overtime compensation under €1,200: no credit.
• Overtime compensation between €1,200 and €4,000: a credit of 25% of the amount exceeding €1,200.
• Overtime compensation over €4,000: a maximum of €700 per year.

This benefit is available to employees residing in countries that have a double taxation agreement with Luxembourg and can be claimed through an income tax return in Luxembourg.

4. Participation Bonus (Prime participative): Art. 115 N° 13a L.I.R.

The conditions for the participation bonus have been adjusted as follows:

• The 50% tax exemption for the participation bonus can now be applied to 30% of the gross annual salary. In previous years, this was 25% of the gross annual salary.
• The total amount of the eligible bonus granted cannot exceed 7.5% of the previous year’s profit of the paying company. In the previous year, this was 5% of the previous year’s profit.

5. Impatriate Regime: Art. 115 N° 13b L.I.R.

This measure aims to attract highly qualified professionals from abroad to work in Luxembourg, thereby strengthening the country’s competitiveness.

Under the previous regulation, compensations provided by an employer to cover certain relocation costs for an employee moving to Luxembourg could benefit from a full or partial/limited tax exemption, depending on the type of costs. However, this regulation came with complex requirements.

Starting from the 2025 tax year, the procedure has been simplified. Eligible employees, who have their tax residence or habitual residence in Luxembourg, will now benefit from a 50% tax exemption on their annual gross salary. The exemption applies to annual gross salaries up to €400,000.

6. Additional Information Regarding the Framework Agreement on Telework:

Before July 1, 2024, telework applications could be submitted retroactively up to 12 months.

Starting from July 1, 2024, telework applications may only be submitted retroactively for up to 3 months. This applies if the employee is insured under the Luxembourg social security system.

Please regularly check your applications for accuracy and make any necessary adjustments.