A boost for the end of the year, a boost for the minimum social wage, and an incentive to work more to earn more by retirement. Luxembourg's MPs voted on two bills related to income on Wednesday 28 October.
The government has chosen to readjust the minimum social wage tax credit. A legacy of the 2019 Bettel government, this mechanism, which allows for an increase in workers' net wages, will be revised in two stages.
On 1 January 2027, when the minimum social wage is revised to €2,876 per month for the unqualified minimum social wage and €3,451 per month for the qualified minimum social wage, workers will also benefit from a tax credit that increases from €81 to €179 per month.
They will then have to wait until 1 July 2027 for this same tax credit to increase to €200 per month.
The effect of the tax credit will be progressive and will also apply to workers paid slightly above the minimum wage, up to approximately €3,600 gross per month.
The law used for the minimum wage also includes a support component for all workers and retirees, both residents and cross-border commuters. A competitiveness tax credit will be applied retroactively from 1 June 2026 to 31 December 2026.
As agreed by three parties in June, the tax credit will increase salaries and pensions by a few euros. The payment, normally made monthly, can now be made in a single lump sum on your payslip. Our colleagues at RTL Infos have created an estimate based on different income levels:
| Gross salary | Estimated monthly earnings | Estimated gains over 7 months |
| < €1,125 per month | €0 (the tax credit does not apply) | 0€ |
| €2,000 per month | €3.33 | €23.31 |
| €2,500 per month | €6.46 | €45.22 |
| €3,000 per month | €10.16 | €71.12 |
| €3,500 per month | €13.86 | €97.02 |
| €4,000 per month | €17.56 | €122.92 |
| €4,500 per month | €21.26 | €148.82 |
| €4,600 to €9,500 per month | €22 | €154 |
| €9,800 per month | €23.42 | €163.94 |
| €9,925 to €14,175 per month | €24 | €168 |
| €14,500 per month | €25.37 | €177.59 |
| > €14,916 per month | €27.13 | €189.91 |
In 2027, this competitiveness tax credit will disappear entirely, as it will be directly integrated into the tax brackets, which will be adjusted by the equivalent of an index (2.5%). Next, the brackets themselves will be replaced by a single tax class that will include single people, single parents, and couples. This new tax class was approved by MPs on Wednesday afternoon.
MPs also approved one of the new features brought about by the pension reform: the allowance for staying in work beyond retirement age.
The scheme will encourage people eligible for early retirement to extend their working lives until age 65. In return, they will benefit from a significant tax reduction, thanks to a deduction of up to €750 per month (and therefore €9,000 per year) on their taxable income.
The government has chosen to maximise the effect for workers at the end of their careers: if they are eligible and apply for it, the tax reduction will be retroactive to 1 January 2026.
