Tax reform 2018: some changes for married taxpayers

How the Tax Reform will be implemented?

The tax administration in Luxembourg recently explained the new adjustments on the tax reform applicable as from year 2018.

Who is concerned?

Married resident taxpayers

As of January 1, 2018, married residents are still collectively taxed in tax class 2.

However, they can individually request to be taxed as “single”. This request has to be made online on www.guichet.lu or via mail to the tax administration.

Married non-resident taxpayers

From 1 January 2018, non-resident married taxpayers are, by default, taxed in tax class 1.

However, on request, they will be able to be taxed collectively in tax class 2 by applying a rate determined by the tax administration on the basis of known household income, if one of the following conditions is met:

• More than 90% (50% for Belgians) of the taxpayer's income are from Luxembourg source
• The annual net non-Luxembourg income of the taxpayer is less than €13,000

Like resident married taxpayers, non-resident married taxpayers also have the option to opt for individual taxation upon request.

What choice is available to non-married residents?

As a result of the recent correspondence sent by the tax administration to each non-resident married taxpayer, the latter must make one of the following choices before 31 October 2017:

• Accept the rate proposed by the tax administration (if one of the conditions stated above is respected)
• To request a personalised rate to be defined by the tax administration based on probative documents and specify whether it wishes to be taxed collectively (if one of the conditions stated above) or individually
• Do not reply to the mail received with the result that tax class 1 has been applied as of 1 January 2018

Each taxpayer concerned by this reform may make his choice, either electronically (www.guichet.lu) or by post.

It should be noted that each taxpayer will have the possibility of modifying his choice until March 31, 2019, notably through his income tax return.

Taxpayers applying for class 2 collective taxation will have to file an income tax return in Luxembourg at the end of the year.

Example of impact that this choice can have?

• Married couple residing in Belgium
• Annual remuneration of the spouse exercising his professional activity in Luxembourg: €70,000
• Annual remuneration of the spouse exercising his professional activity in Belgium: €30,000
• Luxembourg tax 2017: €5,885
• Luxembourg tax 2018:

        - €9,000 (application of tax class 2 based on global income)

           - €14,430 (application of tax class 1)

Contact:

Our Payroll - Personal Tax department helps you to understand the impact of your choice.

You can contact us at +352 45 38 78 1 or at the following email address: reforme2018@lu.gt.com