Since 1 January 2019, certain employees are entitled to claim a social minimum wage tax credit (Crédit d’impôt salaire social minimum - CISSM).
Eligible employees can benefit from the CISSM in different ways, depending on their situation.
Employed taxpayers are eligible for the CISSM.
The CISSM can be granted to employees who:
The tax credit is calculated on the basis of the employee's gross monthly salary when they work full-time for an entire month. If that is not the case, the tax credit is calculated on the basis of a theoretical gross monthly salary – i.e. the salary that the worker would have earned if they had worked full-time for an entire month under the same salary conditions.
The employer must file their declaration of withholding tax on salaries and subsidised tax credits (form 950) by the deadline.
If the worker has a tax card, their social minimum wage tax credit (CISSM) will be handled by their employer.
Each month, the employer determines the amount of CISSM to which their employee is entitled. To do so, they determine the income tax to withhold on the employee's salary, based on their tax card. The employer then deducts the CISSM from that amount. The tax withheld on the employee's salary corresponds to the amount thus obtained.
If the tax withheld is less than the tax credit, the employer refunds the surplus tax credit to the employee (negative tax).
If the employee is taxed on a flat-rate basis, the CISSM is deducted by the Joint Social Security Centre (Centre commun de la sécurité sociale - CCSS), based on the employee's employment contract.
This is the case for persons who are employed by a private individual:
There are no formalities for the private employer to complete to pay the CISSM to such persons.
For employees whose salary or replacement income is taxable in Luxembourg – sick pay, maternity-leave allowance or parental-leave allowance – but not subject to tax withholdings at source on the basis of a tax card, the CISSM is deducted by the Luxembourg Inland Revenue (Administration des contributions directes - ACD).
The tax credit is deducted after the tax year has elapsed (year n+1), at the employee's request.
The social minimum wage tax credit (CISSM) is calculated on the basis of the employee's gross monthly salary when they work full time for the entire month.
If the employee does not work full time for an entire month, the CISSM is calculated on the basis of a theoretical gross monthly salary – i.e. the salary that the employee would have earned if they had worked full-time for an entire month under the same salary conditions.
The maximum amount of the CISSM is EUR 70 per month.
If the CISSM is calculated based on a theoretical salary, the amount is calculated pro rata based on the ratio between the number of hours of work effectively remunerated in the month and the number of hours of work that would have been remunerated if the worker had worked full time for the entire month.
If the gross monthly salary, whether actual or theoretical, is less than EUR 1,800 or greater than EUR 3,600, the CISSM is not granted.
If the CISSM is deducted by the employer and the tax to be withheld is ultimately less than the tax credit, the employer will refund the surplus tax credit to the worker.
Moreover, the declaration of withholding tax that the employer is required to file with the revenue office must include the amount of the tax withheld and the amount of the tax credit. The balance of the tax withheld is to be paid to the revenue office.