On May 8, 2012, the Prime Minister Jean-Claude Juncker presented to the Chamber of Representatives the annual “State of the Nation” speech regarding the economic, social and financial country’s situation.
Hereafter a selection of the main measures contemplated by the Luxembourg Government. Additionals news will be published when more information (e.g draft bills) is available on the proposed measures.
- Although investments remain at a satisfactory level (1.800 EUR million estimated for 2012), they will be reduced (125 EUR million less than initially planned): some constructions projects will not be achieved including by example road infrastructures.
- However, large amounts will continue to be invested in research and development sector and in the IT and broadband sector. In new technologies, Luxembourg is well underway, with 1000 new jobs created. Sector growth will continue despite the programmed modification of the VAT regime applicable to electronic commerce as from 2015 (see below). Investment in data centers and networks will continue. The satellite industry will do its part in this development.
- The 0,8% crisis contribution, which entered into force on January 1, 2011 applied on professional and replacement income as well as to all categories of non-professional income taxable in Luxembourg. This contribution was repealed with effect January 1, 2012. The Prime Minister has confirmed that this crisis contribution will not be reintroduced for 2013, cutting off definitively the rumours.
- Maximal individual tax rate could be increased to 42,7%. Currently, the maximum tax rate of 38% is applicable to taxable income between EUR 39,885 and EUR 41,793 and 39% to taxable income exceeding EUR 41,793.
- The surcharge for the employment fund (the so-called “solidarity tax”) added to the income tax rates will be increased by 2% as from January 1, 2013. Currently, the surcharge rate for individuals is 4% for income not exceeding EUR 150,000 (EUR 300,000 for couples taxed jointly) and 6 % for income above .This solidarity tax could be applied to the municipalities as well.
- Application of a specific tax for vacant accommodation. If certain municipalities have already the possibility to tax the vacant accommodation, they rarely use this opportunity. In order to establish the rules and the criterias of the application of that specific tax, a vademecum will be communicated to the municipalities.
- VAT remains unchanged during this legislative period but modifications are planned for 2015. Currently, VAT for electronically supplied services is charged and paid in the provider’s country: Luxembourg is very attractive with its 15% standard rate. As from January 1, 2015, VAT will be charged in the Member State where the customer has his residence.
- The Government plans to finalize a pension reform.
- Increase of the minimal social wage as of January 1, 2013.
- No taxation or reduction in family allowances but increase of family participation in certain services (“chèques-services” by example).