The announced family allowance reform has been enacted by the law of 23 July 2016, which entered into force on 1 August 2016.
The main objectives of the reform are to achieve a better match between the needs of a family nowadays and the financial coverage provided by the State, while containing the budgetary costs involved. The main changes are summarised hereafter:
Who can benefit from family allowances?
As a reminder, the following are entitled to receive family allowances:
In the new law, the definition of “family members” has now been extended in order to be more in line with the current family unit in Luxembourg. Indeed, the following are now considered “family members” who are entitled to family allowances: children born in wedlock, children born out of wedlock, and adopted children of a person affiliated with the Luxembourg social security regime. This ensures an equal treatment of children, whether legitimate or natural.
The conditions have however become more restrictive for family members of persons registered with Luxembourg social security – typically, the situation of non-residents/cross-border workers – who benefit from Luxembourg family allowances because they work in Luxembourg and are mandatorily registered with Luxembourg social security. Indeed, these people will now be entitled to family allowances only in the case that the conditions are “predominantly” met each month. By “predominantly” it is meant that the individual should be registered with the Luxembourg social security system for at least half of each month plus one day. This new ratio implies that temporary workers may not benefit from family allowances for their children if they do not meet the above-mentioned criteria each month.
The entitlement to family allowances is now maintained until the age of 25, whereas previously the payment of family allowances was foreseen until the age of 27.
The requirements related to the studies have however been relaxed as any kind of secondary education now qualifies, i.e. general secondary education, vocational training, special education, apprenticeship training in Luxembourg or abroad, additional qualification/grade, without any further condition. Previously, it was required that the studies should lead to a high school diploma.
The previous law referred to the fact that the studies should be the primary activity of the student. The new law has now clarified this concept, as it provides that to be entitled to family allowances until the age of 25, the child must physically attend his/her studies in a secondary educational school foreseeing classes of at least 24 hours per week.
So far the level of allowances per dependent child has not been the same for each child, but rather has increased in line with the number of children so as to
benefit large families. In addition, a child bonus (“boni”) was paid
separately. The new law introduces the individualisation of the family
allowances, i.e. the boni is merged with the family allowance, and a unique
amount of family allowance is paid per child born as from 1 August 2016 (EUR
Child tax relief is still applicable however under limited conditions.
This allowance has been increased from EUR 185.60 to EUR 200, and will be paid until the age of 25 years old, instead of 27 before the reform.
The amount to be paid for the birth allowance remains unchanged. It is still EUR 1,740.09 to be paid in 3 parts (1/3 before birth, 1/3 at birth, 1/3 after birth). However the new law clarifies the payment process of this birth allowance, and the respective requirements/health check to be completed, to ensure the full payment of the birth allowance.
In the frame of, and to emphasise, the reform, the name of the public entity paying the family allowances has been modified. It is now called the Fund for Children’s Future “Caisse pour l’avenir des enfants” (or CAE) instead of the Luxembourg Family Fund for Children “Caisse Nationale des Prestations Familiales”(or CNPF). Other changes are expected in the near future, such as the reform of the parental leave benefits (congé parental).
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2021 KPMG Luxembourg, Société coopérative, a Luxembourg entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
For more detail about the structure of the KPMG global organization please visit https://home.kpmg/governance.