How to Get More and Spend Less ?
Act Before December 31, 2021
Given the increasingly large margin that the tax authorities take in annual income (especially after Brexit), it is completely normal to think about ways to reduce this rate. In Luxembourg, as everywhere in Europe, the tax administration is used to ask for sums which often put you in some financial difficulty. We are therefore going in this article to offer completely legal tips that will allow you to reduce the amount of your tax at the end of the year 2021. For several of the methods that we are going to talk about here, you will have to apply them in your accounting before the next year.
Taxes Reducing, For Which Profiles ?
You must be a Luxembourg resident to be able to benefit from tax reductions. You must work in Luxembourg and collect your payments there. However, if you work outside Luxembourg (in France for example), you can ask to be assimilated. So, as an assimilated non-resident you will be subject to the Luxembourg tax regime.
About the Luxembourg Tax Credit
On your withholding tax form, the ETC (Employee Tax Credits) and PTC (Pensioners Tax Credits) are mentioned. Regarding the SPTC (Single Parent Tax Credit), it is only applied under some conditions and on request. You want to reduce your tax at the end of the year, knowing the following informations is essential.
About the Employee Tax Credit
Increased to 600 EUR until 2020 it is now evaluted to 696 EUR per year, i.e. a monthly tax of 58 EUR. However, it should be noted that this is decreasing or progressive, depending on the gross annual salary of the taxpayer.
| Nature of ETC | Gross salary in EUR/An | Tax in EUR |
| Progressive | 936 to 11,265 | 396 to 696 |
| Stable | 11,266 to 40,000 | 696 |
| Decreasing | 40,001 to 79,999 | 696 to 0 |
| No | More than de 80,000 | 0 |
About the Pensioner Tax Credit
For the PTC, the tax credit is exactly the same with ETC, it is the same calculation methods. It is the previous table as well as it’s ETC margins and the progressive and degressive nature that are to be considered in order to reduce your tax in 2021.
About the Single Parent Tax Credit
You must be unmarried and belong to tax class 1a, and also live with children. Under these conditions, each child can benefit from tax reducing. The SPTC amount is :
- 1,500 EUR on income below 35,000 EUR
- 1,500 to 750 EUR for income between 105,000 and 35,001 EUR.
- 750 EUR for income over 105,000 EUR.
How to reduce your taxes ?
Regardless of your professional status, there are some expenses that are deductible from taxes imposed by the state.
Deduct loan interest and insurance premiums
Regardless of the country in which you are in the European Community, this principle is applicable to all banks as well as to various credit institutions. The following are tax deductible from your income :
- interest on real estate, personal, consumer, bank card and current account loans.
- Premiums paid under a 10-year monthly life insurance contract are tax deductible.
- This is also the case with contributions to relief societies, as well as liability insurance in accordance with art 111 of the Income Tax Law (ITL).
In these cases, the deductible amount is increased to 672 EUR, both for the spouse and for the children.
However, in the event of a premium-Unique balance remaining due in the context of a mortgage, an additional increase is applicable, in particular for the acquisition or construction of a main residence.
Retirement Savings and Housing Savings
According to the terms of art. 111 Bis of the ITL, a sum increased to 3,200 EUR is deductible as premiums paid on retirement savings plans in the current fiscal year.
Contributions taken out under a housing contract can be deductible in two different ways.
- The annual deductible amount is 1,344 EUR for people aged 18 to 40.
- The annual deductible amount is 672 EUR for people over 40 years old.
Special Expenses and Extraordinary Charges
Donations and gifts are considered as special expenses. However, to be deductible, they must be greater than or equal to 120 EUR without exceeding 20% of taxable income.
The following costs are considered as extraordinary charges :
- Those related to the custody of a child
- Domestic expenses
The tax deductible charge is 7,200 EUR per year.
Interest on Real Estate Credit
The calculation is made from the date of occupation and 3 cases are possible.
- From the first year of occupation until the next 5th, an amount of 2,000 EUR is deductible.
- From the fifth to the tenth year the deductible amount is 1,500 EUR.
- The deductible amount is 1,000 EUR from the eleventh year.
It is important to note that the costs related to the purchase or construction of a primary residence are also deductible. These will include, among others :
- administrative fees
- notary fees
- costs related to the opening of the loan …
Sustainable Mobility Deduction
Available to the taxpayer every 5 years, this tax reduction only concerns gear that has been used as part of a private need. Plus, you can only benefit from it if you haven’t had access to it for the past five years. The deductible amounts are as follows :
• 5,000 EUR in the case of new, emission-free electric or hydrogen vehicles.
• 2,500 EUR in the case of new hybrid vehicles with rechargeable batteries, with an emission of less than 50 g.
• 300 EUR in the case of a bicycle or VAE (Electrically Assisted Bicycle).
Travel costs can also be added to these tax-deductible charges. This is a tax reduction on trips over 4 km. You will only have to consult your tax form to find out the amount. Whether you are a resident or a non-resident, it is possible to take advantage of it.
Deduct Annuities
• It is capped at 24,000 EUR per year per separated or divorced spouse
• It is possible to deduct a pension of 4,020 EUR per child, if they are not members of the taxed household. It should also be noted that this reduction is only obtained on request and on condition that the costs of maintaining and educating the child are fully borne by the applicant.
Tax Deductible Business Expenses (Obtaining Costs)
Are deductible from taxes, all expenses made by a taxpayer in order to keep his job, at a rate of 45 EUR per month, or 540 EUR / year. However, it may happen that the cost of obtaining is higher than the fixed price. In this case, the nature of the salaried position will be taken into account for the calculation of the allowance. All in all, the costs of obtaining it may relate to the following expenses :
– Moving expenses for professional reasons
– Expenses incurred as part of the follow-up to further training courses related to his profession.
– Costs related to the purchase of books whose use is within the scope of the profession.
– Expenses related to the purchase of professional clothing.
– Costs related to the purchase of instruments for exclusively professional use.
– Union or other professional dues.
The Case of Invalids and Handicapped People
An increase is foreseen for disabled or handicapped people, provided that their working capacity is reduced by more than 25%. So, depending on the levels of reduction in working capacity, we have :
| Obtaining fees increased in EUR | Reduced working capacity |
| 645 | 25 to 35 % |
| 675 | 35 to 45 % |
| 780 | 45 to 55 % |
| 825 | 55 to 65 % |
| 885 | 65 to 75 % |
| 930 | 75 to 80 % |
| 960 | 85 to 90 % |
| 1,020 | 95 to 100 % |
The deduction is increased to 1,515 EUR for all people with no vision or below 1/20. The same is true for people who are unable to move on their own and who need the assistance of others.
Luxembourg Tax Exemptions
According to the terms contained in Article 115 of the Luxembourg ITL, there is income which is literally exempt from tax. Knowing them will undoubtedly allow you to lower the final amount on your tax slip. Here they are:
- Wage supplements obtained for having worked on public holidays, on Sundays or at night.
- Wage supplements obtained for overtime.
- Meal vouchers.
- 50% of life annuities
- All life insurance
- Birth premiums and allowances
- Gifts offered by the employer to his employee, the conditions of which are governed by Article 115 No. 13 of the ITL.
- If they are not more than 500 EUR, the income generated during occasional services is not taxable.
- For income from speculation, these are only taxable if they exceed 500 EUR.
- Subsidies or advantages obtained as interest on mortgage loans are exempt up to a limit of 3,000 EUR. The same applies to the installment loan up to a limit of 500 EUR.
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