EUROMOD country report :Luxembourg : 2020-2023

Table of Contents

• 1. Basic Information 6
• 1.1 Basic information about the tax-benefit system 6
• About the minimum (social) wage 8
• 1.2 Social Benefits 8
•  Scope and scale 17
• 1.3 Social contributions 20
•  Scope and scale 21
• 1.4 Taxes 22
•  Scope and scale 23
• 2. Simulation of taxes, social insurance contributions and benefits in EUROMOD 25
• 2.1 Scope of simulation 25
• 2.2 Main policy changes 28
• 2.3 Order of simulation and interdependence 29
•  Order of simulation in 2020-2023 29
• 2.4 Policy extensions 30
• 2.5 Benefits 30
• 2.5.1 Child benefit (Allocations familiales) (bfauc_lu) 30
•  Definitions 30
•  Eligibility conditions 30
•  Income test 30
•  Benefit amount 31
• 2.5.2 Tax bonus for children (Boni pour enfant) (bch00_lu) 31
•  Definitions 31
•  Eligibility conditions 31
•  Income test 31
•  Benefit amount 31
• 2.5.3 Maternity leave benefit (Congé de maternité) (bmact_lu) 32
•  Definitions 32
•  Eligibility conditions 32
•  Income test 32
•  Benefit amount 32
• 2.5.4 Paternity leave allowance (Congé de paternité) (bpact_lu) 32
•  Definitions 32
•  Eligibility conditions 33
•  Income test 33
•  Benefit amount 33
• 2.5.5 Parental leave benefit (Congé parental) (bfapl_lu) 33
•  Definitions 33
•  Eligibility conditions 34
•  Income test 34
•  Benefit amount 34
• 2.5.6 Higher education grant and/or loan (Bourse et/ou prêt d’études pour enseignement supérieur) (bedsim_lu) 35
•  Definitions 35
•  Eligibility conditions 35
•  Income test 35
•  Benefit amount 35
• 2.5.7 New school year allowance (Allocation de rentrée scolaire) (bched01_lu) 36
•  Definitions 36
•  Eligibility conditions 36
•  Income test 36
•  Benefit amount 36
• 2.5.8 Social assistance (Revenu Minimum Garanti & Revenu d’inclusion sociale) (bsacm_lu) 36
•  Definitions 36
•  Eligibility conditions 37
•  Income test 37
•  Benefit amount 38
• 2.5.9 Rent allowance (Subvention de loyer), since 2016 (bho_lu) 39
•  Definitions 39
•  Eligibility conditions 39
•  Income test 39
•  Benefit amount 39
• 2.5.10 Expensive life allowance (Allocation de vie chère) (bsaht_lu) 41
•  Definitions 41
•  Eligibility conditions 41
•  Income test 41
•  Benefit amount 41
• 2.5.11 Energy bonus (Prime énergie) (bsaht_lu) 42
•  Definitions 42
•  Eligibility conditions 42
•  Income test 42
•  Benefit amount 42
• 2.5.12 Unemployment benefit (Indemnité de chômage) (bunss_lu) 43
•  Definitions 43
•  Eligibility conditions 43
•  Income test 43
•  Benefit amount 43
• 2.6 Social insurance contributions 45
• 2.6.1 Employee social contributions (tscee_s) 45
• *MW+30% for pensioners 46
• 2.6.2 Employer social contributions (tscer_s) 47
• 2.6.3 Self-employed social contributions (tscse_s) 49
• 2.6.4 Social contributions on social assistance (tsceebeot_s) 50
• 2.6.5 Credited social contributions (tscct_s) 50
• 2.6.6 Credited social contributions for social assistance (tscctsi_s) 51
• 2.7 Direct taxes 51
• 2.7.1 Tax unit 51
• Reform in 2018 53
• Exemptions 53
• 2.7.2 Tax allowances 54
• 2.7.3 Tax base 56
• 2.7.4 Tax schedule 57
• 2.7.5 Tax credits 58
• 2.8 (Social) Minimum Wage 62
• 2022 → 2023 28
• 2021 → 2022 28
• 2020 → 2021 28
• 2019 → 2020 28
• Policies 28
• The new social assistance REVIS replaces the RMG in order to improve social inclusion and act against child poverty and supporting single-parent families 28
• . 28
• Benefits 28
• Because of COVID-19, the threshold for income tested for the rent allowance is modified to permit to more households to be eligible. 28
• For the same reason, a partial unemployment scheme for cases of force majeure has been set up, supported by the state up to 80% of the employees' wages, which cannot be less than the Social Minimum Wage for unskilled employees. 28
• The amount of the expensive life allowance is doubled due to COVID-19 crisis (only during 2020). 28
• For the employer social contributions for accident, the number of risk classes is reduced from 22 to 17 and the uniform rate is replaced by a rate which varies depending on a bonus-penalty factor 28
• Social insurance contributions 28
• 2022 → 2023 29
• 2021 → 2022 29
• 2020 → 2021 29
• 2019 → 2020 29
• Tax credit for lone parent is increased by more than 65%. 29
• Introduction of a tax credit for energy, concerning employees, pensioners and the self-employed, until March 2023. 29
• Direct taxes 29
• 3. Data 63
• 3.1 General description 63
• 3.2 Data adjustment 64
• 3.3 Imputations and assumptions 64
• Time period 64
• Gross incomes 65
• Disaggregation of harmonized variables 65
• 3.4 Updating 65
• 4. Validation 66
• 4.1 Aggregate Validation 66
• 4.1.1 Components of disposable income 67
• 4.1.2 Validation of market incomes 68
• 4.1.3 Validation of taxes and social insurance contributions 68
• 4.1.4 Validation of benefits 69
• 4.2 Income distribution 69
• Income inequality 70
• Poverty rates 70
• 4.3 Summary 71
• References 73
• Annex 1. Uprating Factors 74
• Annex 2. Policy Effects in 2022-2023 78
• Annex 3. Validation Tables 80
• Annex 4. (COVID19) Wage Compensation/Short Time Working Scheme 80
• Statistical Annex 1. Validation tables 83
• Y14_CR_LU_validation.pdf 1
• 1. Basic Information 1
• 1.1 Basic information about the tax-benefit system 1
• About the minimum (social) wage 1
• 1.2 Social Benefits 1
•  Scope and scale 1
• 1.3 Social contributions 1
•  Scope and scale 1
• 1.4 Taxes 1
•  Scope and scale 1
• 2. Simulation of taxes, social insurance contributions and benefits in EUROMOD 1
• 2.1 Scope of simulation 1
• 2.2 Main policy changes 1
• 2.3 Order of simulation and interdependence 1
•  Order of simulation in 2020-2023 1
• 2.4 Policy extensions 1
• 2.5 Benefits 1
• 2.5.1 Child benefit (Allocations familiales) (bfauc_lu) 1
•  Definitions 1
•  Eligibility conditions 1
•  Income test 1
•  Benefit amount 1
• 2.5.2 Tax bonus for children (Boni pour enfant) (bch00_lu) 1
•  Definitions 1
•  Eligibility conditions 1
•  Income test 1
•  Benefit amount 1
• 2.5.3 Maternity leave benefit (Congé de maternité) (bmact_lu) 1
•  Definitions 1
•  Eligibility conditions 1
•  Income test 1
•  Benefit amount 1
• 2.5.4 Paternity leave allowance (Congé de paternité) (bpact_lu) 1
•  Definitions 1
•  Eligibility conditions 1
•  Income test 1
•  Benefit amount 1
• 2.5.5 Parental leave benefit (Congé parental) (bfapl_lu) 1
•  Definitions 1
•  Eligibility conditions 1
•  Income test 1
•  Benefit amount 1
• 2.5.6 Higher education grant and/or loan (Bourse et/ou prêt d’études pour enseignement supérieur) (bedsim_lu) 1
•  Definitions 1
•  Eligibility conditions 1
•  Income test 1
•  Benefit amount 1
• 2.5.7 New school year allowance (Allocation de rentrée scolaire) (bched01_lu) 1
•  Definitions 1
•  Eligibility conditions 1
•  Income test 1
•  Benefit amount 1
• 2.5.8 Social assistance (Revenu Minimum Garanti & Revenu d’inclusion sociale) (bsacm_lu) 1
•  Definitions 1
•  Eligibility conditions 1
•  Income test 1
•  Benefit amount 1
• 2.5.9 Rent allowance (Subvention de loyer), since 2016 (bho_lu) 1
•  Definitions 1
•  Eligibility conditions 1
•  Income test 1
•  Benefit amount 1
• 2.5.10 Expensive life allowance (Allocation de vie chère) (bsaht_lu) 1
•  Definitions 1
•  Eligibility conditions 1
•  Income test 1
•  Benefit amount 1
• 2.5.11 Energy bonus (Prime énergie) (bsaht_lu) 1
•  Definitions 1
•  Eligibility conditions 1
•  Income test 1
•  Benefit amount 1
• 2.5.12 Unemployment benefit (Indemnité de chômage) (bunss_lu) 1
•  Definitions 1
•  Eligibility conditions 1
•  Income test 1
•  Benefit amount 1
• 2.6 Social insurance contributions 1
• 2.6.1 Employee social contributions (tscee_s) 1
• *MW+30% for pensioners 1
• 2.6.2 Employer social contributions (tscer_s) 1
• 2.6.3 Self-employed social contributions (tscse_s) 1
• 2.6.4 Social contributions on social assistance (tsceebeot_s) 1
• 2.6.5 Credited social contributions (tscct_s) 1
• 2.6.6 Credited social contributions for social assistance (tscctsi_s) 1
• 2.7 Direct taxes 1
• 2.7.1 Tax unit 1
• Reform in 2018 1
• Exemptions 1
• 2.7.2 Tax allowances 1
• 2.7.3 Tax base 1
• 2.7.4 Tax schedule 1
• 2.7.5 Tax credits 1
• 2.8 (Social) Minimum Wage 1
• 3. Data 1
• 3.1 General description 1
• 3.2 Data adjustment 1
• 3.3 Imputations and assumptions 1
• Time period 1
• Gross incomes 1
• Disaggregation of harmonized variables 1
• 3.4 Updating 1
• 4. Validation 1
• 4.1 Aggregate Validation 1
• 4.1.1 Components of disposable income 1
• 4.1.2 Validation of market incomes 1
• 4.1.3 Validation of taxes and social insurance contributions 1
• 4.1.4 Validation of benefits 1
• 4.2 Income distribution 1
• Income inequality 1
• Poverty rates 1
• 4.3 Summary 1
• References 1
• Annex 1. Uprating Factors 1
• Annex 2. Policy Effects in 2022-2023 1
• Annex 3. Validation Tables 1
• Annex 4. (COVID19) Wage Compensation/Short Time Working Scheme 1