Employers who hire a job seeker may be entitled to receive tax relief.
Applications for this aid must be submitted to the National Employment Agency (Agence pour le développement de l'emploi – ADEM).
Who is concerned
This financial aid is available to:
- commercial, industrial, mining and craft businesses;
- businesses generating their profits from agricultural and forestry activities;
- liberal professions.
The following are not eligible for this financial aid:
- temporary work agencies;
- private households.
Eligible job seekers
For the employer to be entitled to tax relief, the job seeker hired must:
- be unemployed;
- be registered with ADEM for at least the last 6 months;
- be assigned by ADEM's placement service.
The tax relief can also be granted in the case of:
- an internal redeployment of the salaried worker;
- the recruitment of a worker who is benefiting from an external redeployment decision (in this case, the worker does not need to have been registered with ADEM for 6 months);
- the recruitment of a job seeker during or following his or her placement in an employment programme* (employment initiation contract, employment reintegration contract);
* In this case, the placement periods in the employment programme before hiring will be taken into account in the compulsory registration period of 6 months with ADEM.
The tax relief is not granted to employers who:
- hire an unemployed person who is eligible for financial aid for disabled workers;
- hire an unemployed person to replace employees that have been granted early retirement for job creation (préretraite solidarité);
- place an unemployed person within the framework of an employment programme.
The employment contract offered to the worker must be:
- a permanent contract (contrat à durée indéterminée - CDI); or
- a temporary contract (contrat à durée déterminée - CDD) of a minimum of 18 months; or
- a temporary contract with a view to replacing a salaried worker who is on parental leave (congé parental, this must be specified in the contract).
The contract must be for at least 16 hours per week.
How to proceed
The employer must submit a request for tax relief for hiring an unemployed person to ADEM.
The request must be accompanied by a copy of the employment contract.
At the beginning of the financial year following the employment of the job seeker (and for each subsequent financial year), ADEM shall issue a "certificate confirming the placement and continuation of the job" (certificat attestant le placement et la continuation de l'emploi).
The aid measures an employer can receive for the integration and professional training of job seekers can not be cumulated with the tax relief.
Examples of aid measures that can not be cumulated:
- re-employment support;
- financial aid with respect to the hiring of long-term unemployed persons;
- support for the re-employment of older unemployed people;
- financial aids related to professionalisation training;
- financial aids related to employment reintegration contracts, etc.
In order to receive the tax relief, employers must include the following documents with their tax return to be submitted to the Luxembourg Inland Revenue (Administration des contributions directes - ACD):
- the certificate issued by ADEM;
- appendix number 805, "Tax credit for hiring unemployed persons" (Bonification d'impôt en cas d'embauche de chômeurs), duly completed.
Duration of aid
The tax relief may be awarded for a maximum duration of 12 months, provided that the employment contract is maintained throughout this period.
In the event of termination of the contract, the employer shall cease to be entitled to the tax relief as of the month of such termination.
The tax relief is deducted from the income tax due with respect to the fiscal year in which the remuneration was paid.
Should the level of tax be too low, the unused tax relief can be deducted from the tax payable in respect of the next 10 fiscal years.
Amount of aid
The monthly tax relief shall amount to 10 % of the gross monthly remuneration which is deductible as an operating expense.