2021 draft budget: main tax measures

The 2021 draft budget was presented by the Luxembourg government on 14 October 2020. While it contains no major tax reforms, there are a handful of tax measures included in the draft bill. These are as follows.


Tax card process

As from 2022, a dedicated platform will be used to replace the usual submission by the employees of their tax cards to their employers. Further, under certain circumstances, the tax authorities may also issue tax cards with extended validity to taxpayers.

Abolition of the current stock option and warrant plans

According to the Bill, all stock option and warrant plans will be abolished from 1 January 2021. As a compensation, the draft bill introduces a new regime: employers will have the possibility to pay a participative premium to their employees which is deductible from the taxable income of the employer and benefits from a 50% exemption for the employee, subject to several conditions to be met:

  • the total amount of the participation premiums must not exceed 5% of the profit the company made the previous year;
  • the participation premium must not exceed 25% of the beneficiary’s annual remuneration (excluding bonuses);
  • All employers wishing to pay these participation premiums will have to submit a detailed communication to the tax authorities.

Amendments to the current regime for impatriates

The draft bill introduces a 50% exempt impatriation premium which cannot exceed 30% of the beneficiary’s annual renumeration (excluding bonuses). The regime has a 9-year duration limit. The basic salary to benefit from this regime is increased from €50,000 to €100,000. The new rules will be brought into force at the start of the 2021 tax year.