Implementation of the tax measures agreed at the tripartite meeting

On June 29, 2023, the Chamber of Deputies passed the law implementing the tax measures agreed at the March 2023 tripartite meeting.

All employees and pensioners will now benefit from tax relief. This measure is the fruit of action by the OGBL, which did not give up at tripartite level before obtaining improvements in favor of the purchasing power of employees, pensioners and their families.

In 2022, only the OGBL remained true to its commitments, refusing to sign a “tripartite” agreement that manipulated the index by introducing a delay of at least 12 months between the payment of two index tranches, and provided absolutely nothing to combat the explosion in prices.

After months of lobbying, the OGBL finally achieved a new tripartite agreement to be negotiated and concluded in September 2022, providing for both the restoration of the normal operation of the index and the introduction of measures to combat inflation, particularly in energy prices.

A third tripartite agreement, signed on March 7, 2023, then consolidated the September agreement, even strengthening it on several points, with:

• normal operation of the index guaranteed until at least the end of 2024
• maintenance of the energy price cap until the end of 2024
• housing-related measures (increase in the “bëllegen Akt” and the ceiling on mortgage interest deductions)
• the introduction of a tax credit equivalent to 84 euros/month for REVIS and severely disabled income beneficiaries.

Furthermore, the latest tripartite negotiations have resulted in an initial adjustment of the tax scale to inflation, which will take place in two stages. It should be noted that there had been no adjustment of the scale to inflation since the 2017 tax reform.

Conjoncture tax credit (Crédit d’impôt conjoncture – CIC) and tax scale adjustment

• In 2023, taxpayers will first receive a tax credit equivalent to the impact of two index tranches on their personal taxation. This credit will apply upon adoption of the tripartite law, with retroactive effect to January 1, 2023.
• From January 1, 2024, the tax scale will then be increased by 6.37%, equivalent to the impact of 2.5 index tranches on personal taxation.

This is an important first step towards putting an end to the phenomenon of cold progression. However, the OGBL maintains its demands for (1) an adjustment that takes into account all the increases incurred since 2017, and (2) the reintroduction of a mechanism for automatically adjusting the tax scale to inflation. These elements must be the subject of a comprehensive tax reform, the primary objective of which must be greater tax justice.

The CIC will apply from January 2023 to December 2023 inclusive. It will then be replaced by an adjustment to the tax scale from January 2024.

The amount of the CIC allocated to the taxpayer is calculated on the basis of the gross amount of his salary or pension. Gross monthly salary includes all emoluments and benefits. However, non-periodic and extraordinary income should not be included, unless it represents the counterpart of a reduction in ordinary remuneration. The CIC is not granted for gross monthly salaries and pensions of less than €1,125.

 

As application of the CIC is retroactive to January 1, 2023, the first salary (or pension) to which it applies will include the cumulated CIC amounts allocated for the past months since the start of 2023. Thereafter, the applicable CIC will be paid monthly until the end of 2023.

CO2 tax credit (CI-CO2)

The law passed on June 29, 2023 also introduces a CO2 tax credit (CI-CO2) which, from January 1, 2024, will compensate the lowest salaries for the cost of successive increases in the CO2 tax.

The CO2 tax credit is designed exclusively to support the lowest salaries. The amount of the CI-CO2 will be 144 € per year for all employees and pensioners earning less than 40,000 € per year. This amount is then degressive up to an annual income of 80,000 €. The CI-CO2 will be paid monthly.