In depth
At this stage, the Bill has only introduced one of the tax measures of this Agreement, i.e. the ceiling for the tax credit for registration fees (also known as the Bëllegen Akt) relating to the acquisition of building plots and buildings housing will be increased from EUR 20,000 to EUR 30,000 per individual and from EUR 40,000 to 60,000 per couple as indicated under the Bill.
The other measures adopted under the Agreement should be presented to the Parliament in another bill of law.
As highlighted by the government in a press release dated 7 March 2023, the year 2022 was marked by a high surge in energy prices and consumer prices in general.
Earlier this year, the national institute of economic studies and statistics (STATEC) warned the policy makers of a risk of inflationary shock if no political decision was taken to reverse the trend before 2024.2 In reaction, the government and social partners agreed upon a set of anti-inflation measures captured under the Agreement.
The Agreement extends the previous package of measures agreed under the Solidaritéispak 2.0 on 22 September 20233 relating to energy tax relief, and provides new measures such as an index compensation for companies, adjustment of the personal income tax scales and housing tax incentives.
Overview of the package of measures set forth under the Agreement
Housing
- As indicated above, according to the Bill the ceiling for the tax credit for registration fees (Bëllegen Akt), when purchasing real estate property (i.e. building plots and buildings housing) will be increased from EUR 20,000 to EUR 30,000 per individual and from EUR 40,000 to 60,000 per couple as indicated under the Bill. The practical aspects of the changes are detailed in a communication released by the indirect tax authorities4 on 13 March 2023. This change will apply retroactively to all and any notarial deeds signed as from 7 March 2023 (date of the Agreement).
- The ceiling for interest on real estate loans will be increased from EUR 2,000 to EUR 3,000, retroactively from 1 January 2023, to the extent the individual occupies or intends to occupy the premises.
- Tax exemptions for net rental income on housing that is subject to social rental management will be increased from 50% to 75% as from tax year 2023.
Indexation compensation for employers and adjustment of tax scale for individuals
Employees / individuals:
- Adaptation of the personal income tax schedule will be increased by 6.37%, the equivalent of 2.5 index tranches.
- Taxpayers will receive a tax credit equivalent to the impact of two index tranches on their personal taxation. This credit shall apply retroactively to 1 January 2023.
Employers:
As a third indexation on employees' salary shall be applicable in 2023, the Agreement provides compensation for employers (up to EUR 60 million per month).
Energy relief
Under the Agreement, it was further agreed that some of the following measures, which were introduced under the Solidaritéispak 2.0, are extended until 31 December 2024:
- Gas price cap, limiting increases to 15%
- Subsidy on publicly accessible charging stations
- Subsidy for customers connected to a district heating network
- Subsidy on the price of diesel used as fuel, liquefied petroleum gas and wood pellets
- Stabilization of the electricity price
- Energy bonus for recipients of the cost-of-living allowance
- Tax credits to offset the cost of CO2 for low wages.
The Agreement also provides the following:
- The threshold at which income from the operation of a photovoltaic installation becomes taxable has been raised from 10 to 30 kilowatts peak.
- The aid scheme introduced in the Law of 15 July 2022 for companies particularly affected by the rise of energy cost caused by Russia's invasion of Ukraine has been extended until 31 December 2023.
The package of measures introduced by the government under the Agreement is estimated at EUR 500 million in total. For further information and to discuss what this developments might mean for you, please get in touch with your usual Baker McKenzie contact.
1 The Tripartite Agreement (Solidaritéitspak 3.0) concluded between the government, the Union des Entreprises Luxembourgeoises (UEL) and several trade unions (LCBG, CGFP and OGBL) on 7 March 2023.
2 STATEC forecast for 2023 and 2024, published on 8 February 2023.
3 Solidaritéispak 2.0 concluded between the government, the Union des Entreprises Luxembourgeoises (UEL) and several trade unions (LCBG, CGFP and OGBL) on 28 September 2022.
4 Administration de l'enregistrement, des domaines et de la TVA.
