The key measures of Solidaritéitspak 3.0 were unanimously approved by Parliament, marking an important step in the implementation of this package of measures. These strategic measures, which are the result of an agreement between the government, the Union of Luxembourg Businesses (UEL) and the trade unions LCGB, CGFP and OGBL, are designed to provide tangible support to households in the country, given the persistent inflation currently characterising the economic context.
Among the measures adopted was the linear adjustment of the personal income tax rate to inflation, with compensation for two and a half index brackets from 2024. To compensate for the equivalent of two index brackets, the law also provides for the retroactive introduction of the trade tax credit from 1 January 2023. The trade tax credit will be paid monthly by the employer, after an initial payment covering the months already completed.
These measures will have significant effects on individual and family incomes. For example, a young unmarried person with no children and a gross monthly salary of €3,009.92 will benefit from a tax reduction of €245 in 2023 thanks to the new tax credit, an amount that will increase to €285 in 2024 following the adjustment of the tax rate schedule. For a gross annual salary of €60,000, the benefit will be €525 in 2023 and €705 in 2024.
A family with one child, where one parent earns 3,750 euros gross per month and the other 3,000 euros gross, will gain 620 euros in 2023 and 645 euros in 2024.
A single parent household with a gross annual income of 50,000 euros will receive 450 euros in 2023 and 755 euros in 2024.
In addition to these legislative tax measures, draft Grand-Ducal Regulations have been submitted to the regulatory procedure to raise the ceilings on debit interest in relation to mortgage loans, another measure taken as part of the solidarity package.
Once adopted, these changes will enable a couple with two children and a mortgage loan to benefit from an increase in the deductibility of mortgage interest of 2,460 euros this year and 2,580 euros the following year. The ceiling for deductible interest will increase from four times €2,000 to four times €3,000.
The above-mentioned draft law also includes a retroactive increase to 75% from 1 January 2023 of the exemption level for net rental income from social housing, thus providing additional support for low-income households. It also provides for the introduction of a tax credit to complement the specific tax credits for the self-employed, employees and pensioners, in order to provide social compensation for the carbon tax.
Welcoming the adoption of these measures, Finance Minister Yuriko Backes said: “I am delighted that Parliament has unanimously adopted the key measures of Solidaritéitspak 3.0. This agreement is proof of our determination to support the Luxembourg economy and to provide tangible support to households. These strategic tax measures are the result of a constructive dialogue with the social partners and will help offset the rise in the cost of living and reduce the burden on households. They illustrate the government’s proactive and supportive approach to crisis management.”
Press release by the Ministry of Finance