In light of the economic difficulties caused by Covid-19, the Budget Law 2021 focuses on tax measures limited in scope rather than on a tax reform. Included within the Budget Law are also a few tax measures for individual taxpayers. 

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Xavier Martinez: The new individual tax measures for 2021 are:

  1. The participation premium, which is, provided some conditions are met, 50% tax exempt. The amount to be distributed, which is deductible from a corporate tax standpoint, is limited to both 5 % of the employer’s operational profits of the previous year and to 25 % of the employee’s base remuneration of the year of payment
  2. Simplification of the impatriate tax regime, which can be now applied to companies having less than 20 employees, and extension from 4 to 8 years following the start of the activity in Luxembourg
  3. Gradual switch to digitalized tax cards as from 2022: employers will have to access a platform created by the Luxembourg authorities to manage the tax cards


Xavier Martinez

Xavier Martinez

Partner, Global Mobility and People Services
KPMG Luxembourg
+352 22 51 51 5345