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News in tax matters
Warrants / stock options regime
Regarding the tax regime for warrant plans / stock options, the tax circular L.I.R. n°104/2 of November 29, 2017 should disappear by the end of the year 2020 which will lead to the abolition of the regime as it currently exists.
To enable Luxembourg to always remain attractive for enticing new talents and to ensure tax equity, a new regime will be implemented, a "Participatory premium".
From 01.01.2021, employers will have the possibility to grant a participatory premium, which aims at involving and rewarding the employees who have participated in the good results of the company by redistributing them a part.
Employers will grant this premium under the following conditions:
- At the discretion of the employer, for the amount and choice of employees concerned ;
- Based on the positive result of the business with a maximum of 5% of the profit of the previous year ;
- The amount of the bonus must not exceed 25% of the gross amount of the fixed annual remuneration (without benefits in kind) ;
- The premium will be deductible as an operating expense by the employer ;
- The premium will be tax exempt up to 50%.
Adaptation of the current regime for impatriates
The current regime provided for in Circular L.I.R. n°95/2 of January 27, 2014 will have a legal basis from January 1, 2021 and will be subject to some adjustments.
Provided that the conditions are met, it will be possible to allocate an expatriation premium which will be tax exempted up to 50%, for an amount not exceeding 30% of the annual remuneration of the impatriate.
The impatriate will be able to benefit from this preferential regime for up to 8 years, provided that all the conditions are met.
Further details will follow as soon as this new regime is implemented.
Digitalisation and administrative simplification: the electronic tax card
Regarding withholding tax on wages and salaries, the government wants the progressive introduction of multi-year electronic tax cards, which means that they will be valid for several years, this format will lead to administrative simplification and a reduction in the costs associated with the management of employees’ tax cards.
In 2021 a secure IT platform will be created in this respect, allowing employers to access their employees' tax cards.
From 2022, employees will no longer need to send their paper tax card to their employer.
Exceptional measures COVID-19
Extension of partial unemployment until June 2021
The Minister of the Economy announced in a statement on November 13, 2020 an extension of the aid measure for six additional months, in order to avoid dismissals and allow employers to retain their staff.
Under the same conditions, partial unemployment will be extended from December 31, 2020 to June 30, 2021.
Sickness and regularisation of discrepancies: CNS indemnity certificate
From mid-November, the CNS initiated the sending of certificates to employers, mentioning the amount of indemnity paid by the CNS to employees during the period from April 1, 2020 to June 30, 2020.
As a reminder, during the period from 04/2020 to 06/2020, any sickness or accident at work (not including absence due to leave for family reasons) must not have been paid by the employer but be covered by the CNS.
Due to a different method of calculation between the CNS indemnity and the continuation of salary by the employer, differences in salary have been noted.
If the employee should have received an amount higher than the indemnity paid by the CNS, a mandatory adjustment is requested from the employer who will have to pay the difference to the employee.
For more information about these news in tax matters and the exceptional measures due to COVID-19 and how Grant Thornton can help, please contact our experts at the following email address: HRpayroll@lu.gt.com.