Agefi Luxembourg - février 2026

Février 2026 15 AGEFI Luxembourg Économie By Julien L AMOTTE , Tax Partner, andCaroline G ALAND , SeniorManager, Deloitte Tax&Consulting S.à r.l. A lthough it didnot arrive as aChrist- mas gift, it was presented as aNew Year’s offering. On 6 January 2026, the Luxembourg government releaseddraft Bill No. 8676 on the simplification of the in- dividual tax system. This reform, whichhas been anticipated since 2013, is expected to take effect in 2028. Progress has been gradual, with the first stepbeing the introduction—during the 2017 tax re- form—of the option for taxpayers to elect individual taxation. An overviewof the changes TheLuxembourgindividualtaxationsystem haslongbeenstructuredarounddifferenttax classes, reflecting the underlying principle thattaxationshouldtakeintoaccounthouse- hold composition. A comprehensive reform is now on the horizon, providing for the re- peal of the three existing tax classes that cur- rently govern individual taxation: - Tax class 1, generally applicable to single taxpayers; - Tax class 1a, typically for widowers, pensioners, or single individuals benefiting from a child tax al- lowance; and - Tax class 2 , applicable tomarried couples and part- ners in civil partnerships. Asingle,unifiedtaxclasswillbeintroducedforalltax- payers and will become mandatory as from 2028. In practice,thismeansthatindividualswillbetaxedsep- arately under the same progressive tax scale, regard- lessoftheirpersonalcircumstancesorfamilysituation. Giventhissignificantshiftinphilosophy,atransitional regime lasting 25 years will be implemented to ease the move to the new system for taxpayers who cur- rentlybenefitfromtaxclass2.Theadoptionofasingle tax class and tax scale may indeed result in a higher tax burden for certain taxpayers compared with the current framework. Under theproposedreform, incomewill be allocated to the owner of the asset generating the revenue, un- less documentary evidence demonstrates otherwise. Thesameprinciplewillapplytothedeductionofcer- tainexpenses.However,thedraftbillprovidesspecific exceptions, such as allowing the deduction of contri- butions to a voluntary pension scheme made on be- half of a spouse or partner—for example, where that spouseorpartnerhastemporarilyceasedprofessional activity—as special expenses.Accordingly, in limited situations,householdcompositionwillcontinuetoin- fluence individual taxation. Childrenwillalsoremainrelevantfordeterminingthe ceilings applicable to certain tax deductions, and a new earlychildhoodallowanceof€5,400peryearwill be introduced for children under three years of age. The reformfurther aims toenhance fairness for sepa- rated parents: increased ceilings for the deductibility of interest and special expenses will be available to eachparent,correspondingtoa50%increaseperchild living alternatelywithbothparents. All changes couldbe summarized as follows: Achange of perspective The reform introduces a fundamental shift in ap- proach,placingtheemphasisontaxingindividualsas standalone taxpayers, without regard to household composition. Several arguments have been advanced to support this reform. In particular, the Luxembourg govern- mentreferstoastudysuggestingthatLuxembourgis amongthefewcountriesthatstillapplycollectivetax- ation (1) . However, caution is warranted before draw- ing such a conclusion solely fromthe existence of the mandatory joint filing for couples only. The same study (2) indicates that the majority of countries (3) take household composition and personal circum- stances—such as marital status, children and/or the existence of civil partnership—into account, whether through collective taxation, optional joint taxation, or targeted tax reliefs, as illustrated in the table above. Taxationshould,aboveall,reflectthetaxpayer’sability to pay. Fully disregarding household composition would therefore be difficult to reconcile withthisoverarchingprinciple,whichlies attheheartofprogressiveincometaxsys- tems. It is nevertheless reassuring that the reformisnotpurelydoctrinal,aspersonal circumstances will continue to be re- flected—albeit to amore limitedextent— withintheindividualtaxationframework. The reformby numbers Nevertheless, although the reform is pre- sented as beneficial for most taxpayers, it appearsthattheprimarybeneficiarieswill be single individuals, namely those cur- rently taxed under tax class 1. The afore- mentioned OECD study had already highlighted that, in Luxembourg, the in- come tax burden for single taxpayers, when compared with married couples (particularly those with children), was among the least favorable relative to the countries included in the study. The table below illustrates the expected tax savings (-)orincrease(+)resultingfromthereform,depending on the current applicable taxclass and for annual tax- able income ranging from€ 50,000 to € 200,000. As illustrated above, the impact of the reformon tax- payers currently subject to tax class 2 is far fromuni- form.Thetabledemonstratesthattheoutcomevaries significantly depending on the second earner’s con- tribution to household income (ranging from 0% to 50%).While the transition to individual taxationmay prove advantageous for spouses or partners with comparable earnings, the opposite holds true for sin- gle-earner households, or where the second earner contributes less than 25%of total taxable income. It could be argued that spouses and partners who might otherwise face a higher tax burden under the reformwill, in practice, remain unaffecteddue to the 25-year transitional regime. From this perspective, the reform could be viewed as, at worst, neutral and potentially even beneficial. However, such a conclusion would be overly simplistic. The deci- sion between opting for individual taxation and re- lying on the transitional regime may carry significant long-termfinancial implications in cer- tain circumstances, including: - Irrevocability of the individual taxation option. Spouses or partners with currently balanced income levels may elect individual taxation as from 2028. Compared with the existing system, they could achieve annual tax savings estimated at between 8% and33%fortaxableincomerangingfrom€100,000to €200,000.However,thisoptionisirrevocable.Should onepartnersubsequentlyreceiveasignificantpromo- tion, experience a substantial salary increase, or tem- porarilyceaseprofessionalactivity—forexampledue to illness or childcare—the household could ulti- mately face a higher tax burden than under the cur- rent framework, without the possibility of reverting to the transitional regime. - Potential loss of the transitional regime in an inter- nationalcontext.Conversely,spousesorpartnerswho choose to remain within the 25-year transitional regimemay forfeit this benefit if they relocate abroad for several years at the request of their employer or to pursuean international career opportunity. Thedraft billdoesnotcurrentlyprovideformechanismsallow- ing taxpayers to retainaccess to the regime in specific situations, such as returning to Luxembourg follow- ing a foreign assignment. Thisunderscorestheimportanceforhouseholdscur- rently benefiting from tax class 2 to carefully assess their circumstances before electing individual taxa- tion. In particular, consideration should be given to expected income trajectories, aswell as toone’s stage of career, for example, whether at an early profes- sional stage or approaching retirement, as these fac- torsmaymateriallyinfluencethelong-termoutcome of such a decision. Although the draft bill is only at the outset of the leg- islativeprocess and the reformisnot expected to take effect before 2028, it is essential to monitor its devel- opment closely. Doing so will enable taxpayers to properlyevaluateandanticipatethechoicestheymay face, in light of the potentially significant impact on their personal financial situation. 1) One of the five out of 38 countries, see OECD (2024), Taxing Wages 2024: Tax and gender through the lens of the Second Earner,AnnexTable2.A.1,p.66,OECDPublishing,Paris. 2) See same Annex Table. See also. « Trois idées fausses (ou presque) à propos du projet de déconjugalisation de l’impôt sur le revenu » , Michel-Edouard Ruben, Est-il venu le temps de fis- calement rompre ?, Réflexions sur lemaintien de l’imposition collective et éclairage sur les écarts de revenus au sein des couples, IDEA, 2025, p.83 3)10countrieshaveinfact jointfilingsifwealsoconsidertheop- tiontodosoand29countriesimpactthetaxreliefswiththecom- positionofthehousehold. 2028 Individual tax reform: Aphilosophical change with concrete tax impacts ȱȱ Currently ȱ As ȱ from ȱ 2028 ȱ Tax ȱ classes ȱȱ 1, ȱ 1a, ȱ 2 ȱ Unique ȱ tax ȱ class ȱ (with ȱ transition ȱ period ȱ until ȱ 2052 ȱ for ȱ current ȱ tax ȱ class ȱ 2) ȱ Joint ȱ taxation ȱ based ȱ on ȱ partnership ȱ Request ȱ via ȱ joint ȱ tax ȱ return ȱ N+1 ȱ Unchanged ȱ but ȱ upon ȱ request ȱ Tax ȱ allowance ȱ for ȱ children ȱ not ȱ being ȱ part ȱ of ȱ the ȱ household ȱ € ȱ 5,424 ȱ € ȱ 5,928 ȱ Extraordinary ȱ charges ȱ Normal ȱ charge ȱ computed ȱ on ȱ the ȱ taxable ȱ income ȱ up ȱ to ȱ € ȱ 60,000 ȱ Normal ȱ charge ȱ computed ȱ on ȱ the ȱ taxable ȱ income ȱ up ȱ to ȱ € ȱ 105,000 ȱ Single ȱ parent ȱ tax ȱ credit ȱ (CIM) ȱ € ȱ 3,504 ȱȱ € ȱ 4,008 ȱ Tax ȱ allowance ȱ for ȱ children ȱ under ȱ 3 ȱ years ȱ old ȱ non Ȭ applicable ȱȱ € ȱ 5,400 ȱ Special ȱ expenses ȱ deduction ȱ ceiling ȱ € ȱ 672 ȱ € ȱ 900 ȱ Home ȱ savings ȱ scheme ȱ deduction ȱ ceiling ȱ € ȱ 1,344/€ ȱ 672 ȱ € ȱ 1,500/€ ȱ 900 ȱ Tax ȱ allowance ȱ for ȱ household ȱ employees ȱ childcare, ȱ home ȱ assistance ȱ of ȱ disabled ȱ individuals ȱ € ȱ 5,400 ȱ € ȱ 6,000 ȱ Widowers ȱ and ȱ divorced ȱ taxpayers ȱȱ Application ȱ of ȱ tax ȱ class ȱ 2 ȱ three ȱ years ȱ following ȱ the ȱ year ȱ of ȱ the ȱ event ȱ Application ȱ of ȱ the ȱ transitory ȱ regime ȱ five ȱ years ȱ following ȱ the ȱ year ȱ of ȱ the ȱ event ȱ Country ȱ Tax ȱ unit ȱ Tax ȱ relief ȱ Country ȱ Tax ȱ unit ȱ Tax ȱ relief ȱ Austria ȱ ȱȱ Mixed ȱ Japan ȱ ȱȱ Mixed ȱ B elgium ȱ ȱȱ Household ȱ K orea ȱ ȱȱ Mixed ȱ Canada ȱ ȱȱ Mixed ȱ L atvia ȱ ȱȱ Mixed ȱ Chile ȱ ȱȱ Mixed ȱ L uxembourg ȱ Joint ȱ Mixed ȱ Colombia ȱ ȱȱ Mixed ȱ Netherlands ȱ ȱȱ Mixed ȱ Costa ȱ Rica ȱ ȱȱ Mixed ȱ Norway ȱ ȱȱ Mixed ȱ C z echia ȱ ȱȱ Mixed ȱ P oland ȱ Joint ȱ Household ȱ D enmar k ȱ ȱȱ Mixed ȱ P ortugal ȱ O ptional ȱ Mixed ȱ Estonia ȱ ȱȱ Mixed ȱ Slova k ȱ Republic ȱ ȱȱ Mixed ȱ F rance ȱ Joint ȱ Mixed ȱ Slovenia ȱ ȱȱ Mixed ȱ G ermany ȱ O ptional ȱ Household ȱ Spain ȱ O ptional ȱ Mixed ȱ G reece ȱ * ȱ Individual ȱ Swit z erland ȱ Joint ȱ Household ȱ Iceland ȱ ȱȱ Mixed ȱ U K ȱ ȱȱ Mixed ȱ Ireland ȱ O ptional ȱ Mixed ȱ USA ȱ O ptional ȱ Household ȱ Italy ȱ ȱȱ Mixed ȱ ȱȱ ȱȱ ȱȱ ȱ ȱȱ Tax ȱ class ȱ 2 ȱ ȱȱ Tax ȱ class ȱ 1 ȱ Tax ȱ class ȱ 1a ȱ 50 % ȱ 7 5 % ȱ 1 00 % ȱ 50 , 000 ȱ Ȭ 33.1 0 % ȱ Ȭ 1.2 0 % ȱ Ȭ 1 00 % ȱ Ȭ 38.9 0 % ȱ +1 0 3.6% ȱ 7 5 , 000 ȱ Ȭ 13.8 0 % ȱ Ȭ 0 .2 0 % ȱ Ȭ 5 9% ȱ +2.3% ȱ +1 0 4.1% ȱ 1 00 , 000 ȱ Ȭ 8.8 0 % ȱ Ȭ 0 .1 0 % ȱ Ȭ 33.1 0 % ȱ Ȭ 0 .1 0 % ȱ +66.3% ȱ 12 5 , 000 ȱ Ȭ 6.4 0 % ȱ Ȭ 0 .1 0 % ȱ Ȭ 19.4 0 % ȱ Ȭ 7.4 0 % ȱ +41% ȱ 1 50 , 000 ȱ Ȭ 5 .1 0 % ȱ Ȭ 0 .1 0 % ȱ Ȭ 13.8 0 % ȱ Ȭ 9.6 0 % ȱ +3 0 % ȱ 17 5 , 000 ȱ Ȭ 4.1 0 % ȱ Ȭ 0 .1 0 % ȱ Ȭ 1 0 .8 0 % ȱ Ȭ 9.4 0 % ȱ +24.3% ȱ 2 00 , 000 ȱ Ȭ 3. 50 % ȱ Ȭ 0 .1 0 % ȱ Ȭ 8.8 0 % ȱ Ȭ 8.2 0 % ȱ +21.2% ȱ ȱ *Note:Forthecolumn“Taxunit”,“Joint”referstocountrieswherecouplesareassessed jointly. For the column “Tax reliefs”, “Mixed” indicates that at least some reliefs are computedatthehousehold levelorareonlyattributedtooneofthetwomembersofthe couple;and“Household”indicatesthatallreliefsarecomputedjointlyatthehousehold level.Thisclassificationoftaxsystems focusesonhowpersonal incometaxesarecom- puted.InGreece,couplesfiletheirreturnsjointlybuttherespectivespouses’taxliabilities arecomputedon individualearnings.Source:OECDTable2.A.1 By Nessym Jules TIR, Avocat/Partner, Global Compliance & Investigations, Wolff & Partners SCS,Attorneys at law I n our last articles inAgefi, we dis- cussed the importance of com- pliance as an effective operational instrument in the implementation of EuropeanEnvironmental, Social, andGovernance (“ESG”) regula- tions. However, mattersmay have regressed last year through the revisiting of the various rele- vant European texts. Indeed, on December 16, 2025, the so-called “Content”Directivewas adop- tedwith themajor objective of reviewing environmental rules, whilemaintaining the competitiveness of European companies facing exacerbated glo- bal competition. (1) Firstly, the “Content” Directive aims to enshrine the amendmentstotheEuropeanCorporateSustainabil- ityReportingDirective (“ CSRD ”) and theCorporate SustainabilityDueDiligenceDirective (“ CSDDD ”). As a reminder, the CSRD aims to provide a frame- work for non-financial reporting at the European levelbyaligningcorporatedisclosurestandardswith the objectives of the European Green Deal and the SustainableFinanceDisclosureRegulation(“ SFDR ”), the green taxonomy and the European duty of vigi- lance. The initial stated goal was for a large number ofcompaniestofollowmandatoryEuropeansustain- ability reporting standards and to disclose detailed information on their ESG risks, opportunities and materialimpacts.ThisCSRDintroducedthecon- cept of double materiality, i.e. all ESG criteria (climatechange,biodiversity,socialissues,gov- ernance, etc.) are subject to a financial materi- ality analysis. This analysis takes into account (i) the positive andnegative impactsof sustainability issueson the company’s financial performance, and (ii) the significance of the impact,which takes into account the company’s positive and negative impacts on its economic, social and natural environment. EuropeanSustain- ability Reporting Standards (“ ESRS ”) helpguide the report- ing methodology for all compa- nies and harmonise disclosures to make themmore transparent and comparable. The new package significantly reduces the number ofcompaniessubjecttotheCSRDthankstotheadop- tion in the plenary of the European Parliament of the compromise reached in the trilogue finalising the agreement of the co-legislators. Ontheoperationallevel,thenewrequirementsintro- duce a newscopewith anobligation limited to com- panieswithaturnoverofmorethan€450millionand employing less than 1000 employees, a reporting requirement from2029 for groupswith parent com- panies from third countries if the turnover in the EU exceeds€450millionand€200millionforsubsidiaries and branches, and a single wave of reporting from 2028 which translates, for wave 1 companies, into a continuation of reporting in 2026-27 and then an application of the simplified ESRS from 2028. Member States will be able to exempt certain listed companieswith less than1,000employees, and from 2026, companies with less than 1,000 employees can refuse excessive requests for information, together with a review clause allowing for a possible review of the thresholds by April 2031, with a simplified regime option anda value chain cap, i.e. a capon the informationthatcanberequestedfromentitiesinthe value chain on the basis of the future voluntary reporting standard. With regard to the CSDDD, the original objective of theDirectiverequiredcompaniestoidentify,mitigate andreportontheimpactoftheiractivitiesandsupply chains on human rights and the environment. The Directive is based on the principles of liability, due diligence, transparency and redress, with redress being for damage caused by a company’s activities, includingtheprovisionofredresstopersonsaffected by human rights violations or human or environ- mental damage. Regarding the new features concerning the CSDDD, thedateofapplicationisnowpostponedtoJuly2029. Among the changes we can note, a new scope that will concern companies employing more than 5000 employees and achieving more than €1.5 billion in turnover that will have to carry out due diligence on thenegativeimpacts,anintegratedreviewclausecon- cerning the scope, the abolition of civil liability har- monised at EU level, the transition from exhaustive mappingtoa“risk-based”approachfocusedonhigh- impact links,with the reformno longerproviding for a climate transitionplan. The CSRD and the CSDDD are not the only texts to have been amended at the end of last year. The European regulation against deforestation and forest degradation (“ EUDR ”) also sees the date of its entry intoforcepostponedandsimplificationsadopted.The initial objective of this European regulation was to apply to all products imported into the European Union or exported outside the EU by requiring the companies concerned to implement due diligence measurestoensuretheabsenceofdeforestationinthe production process of 7 commodities thatmay come fromdeforestedareas(cocoa,coffee,oilpalm,rubber, soybeans, timber, and livestock). Products imported or exported from the EU must complywiththezerodeforestationstandard,comply with the legislation of the country of production and be subject to aduediligencedeclaration. The compli- ance plan will be broken down into 3 steps, namely (i)thecollectionofalldataallowingtheupstreamand downstreamtraceabilityoftheproduct,(ii)anassess- mentofthedeforestationrisk,and(iii)adeforestation riskmitigationplan. (2) On 17 December 2025, Parliament adopted targeted amendments to this text by changing the postpone- ment date. Indeed, all companies will have an addi- tional year to comply with the new EU rules to pre- vent deforestation, i.e. 30December 2026 and30 June 2027forsmalloperators–individualsandcompanies with less than 50 employees and an annual turnover of less than €10million in the products concerned. The recast of the regulation also aims to simplify the requirements for due diligence, as such micro and smallprimaryoperatorswillnowonlyhavetosubmit a single simplified declaration. In addition, printed products are removed from the scope of the regula- tion, as requestedbyParliament. (3) Thelegalandcomplianceteamswillhavetobeatten- tive to these various changes as part of the conduct of their regulatoryprojects. 1 )https://urls.fr/HcA5yb 2)NJTIR,ComplianceatthecrossroadsofESGissuesinEurope, AgefiLuxembourg,03/2024 3 )https://urls.fr/MXOkJc Impacts for the new EU ESG Regulatory Compliance Framework?