Law Tax reform 2017 individual tax measures. Communication 3 October Deloitte Touche Tohmatsu Limited

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1 Law Tax reform 2017 individual tax measures Communication 3 October 2017

2 Taxation of non-resident married taxpayer Art 157bis, 157ter, 24 4 Belgium-Luxembourg convention As of January 2018 Basis Exception : assimilation resident taxpayer All nonresidents For Belgian non-residents All other non-residents Tax class 1 Even if both spouses working in Luxembourg 50% Professional income of the household taxable in Luxembourg Tax class 2 Tax rate on tax card calculated on global income Tax return mandatory 90% Worldwide income taxable in Luxembourg at the taxpayer level working in Luxembourg Maximum 50 days flexibility for salary* Or < EUR Net income non taxable in Luxembourg Tax class 2 Tax rate on tax card calculated on global income Tax return mandatory * These days may be taxable in the resident country based on double tax treaty 2

3 Joint vs separate taxation - Imposition Individuelle Resident taxpayers and Non-resident taxpayers if conditions for assimilations are met Income for 2018 Joint taxation Standard Separate taxation Option 1 Option 2 Option 3 Joint taxation Pure separate taxation Separate -Reallocation 50/50 Separate free reallocation Tax class 2 Tax rate based on global household income Tax class 1 for each taxpayer Taxation on worldwide income Tax class 1 for each taxpayer Common tax rate calculated on global household income Tax class 1 for each taxpayer Common tax rate calculated on global household income Choice to make : For tax card 2018 before 31 October 2017 For tax return on income 2018 before 31 March 2019 See practical modalities 3

4 Joint vs separate taxation - Imposition individuelle Practical modalities HOW CAN I MAKE MY CHOICE? Resident married taxpayers - Joint application required Guichet.lu (recommended) Non-resident married taxpayers - Joint application required + request to be assimilated as resident (art. 157ter L.I.R or art Lux-BE convention) New 2018 tax card January February 2018 if choice communicated before 31/10/2017 *letter received by non-resident taxpayer from the tax authorities may propose an applicable tax rate 4

5 Joint vs separate taxation - Imposition individuelle Practical modalities WHAT IF I DO NOT REPLY BEFORE 31/10/2017? IMPACT ON TAX CARD ONLY For married taxpayers resident For married taxpayers non-resident Standard system Standard system Tax class 2 Joint taxation mandatory and taxed on worldwide income Tax class 1 Taxed individually on Luxembourg income only 5

6 Joint vs separate taxation - Imposition individuelle Practical modalities WHEN DO I HAVE TO APPLY FOR SEPARATE TAXATION / ASSIMILATION FOR THE TAX YEAR 2018? 03/10/2017 First day to apply for separate taxation for the tax year /12/2018 Tax year /12/ /03/2019 Last day to apply for separate taxation for tax year choice made is irrevocable for tax year concerned 6

7 Joint vs separate taxation - Imposition individuelle Practical modalities BENEFITS OF SEPARATE TAXATION For married taxpayers resident For married taxpayers non-resident Ability to decide freely for separate taxation or not More accurate tax rate on tax card No tax prepayments Only responsible for your own liability Ability to decide freely for separate taxation or not More accurate tax rate on tax card No tax prepayments If only one spouse is working in Luxembourg, he/she will be able to apply deduction as a resident in the tax return 7

8 Deloitte Website Tax reform 2017 individual tax highlights For more information about the Tax reform 2017 please visit our website : 8

9 Contact details Tax GES & Private Wealth Tax - GES Pierre-Jean Estagerie Partner Phone: pjestagerie@deloitte.lu Marleen Vandenput Directeur Phone: mavandenput@deloitte.lu Tax - GES Xavier Martinez-Aldariz Directeur Phone: xmartinezaldariz@deloitte.lu 9

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