Social security and tax news - PwC Luxembourg

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Social security and tax news 4 November 2016

In brief You’ll find below some important information regarding:  The possible indexing of salaries on 1 December 2016;  New steps to be taken with respect to A1 forms;  Changes to the rules governing how attachments of wages are computed;  Changes to the parental leave scheme to make it both more flexible and more rewarding.

In detail Indexation of salaries

Salaries will probably be indexed, i.e. increased by 2.5% across the board, on 1 December 2016 (except for seconded employees whose salary would exceed the minimum salary which applies to the sector). We will get back in touch during the month of November to confirm; this will depend on how inflation progresses in October and November. Asking for a renewal of form A1

For employees covered by the Luxembourg social security system and working abroad temporarily or regularly, their employers are required to apply beforehand for a specific form (form A1 for the European Union) confirming the applicable social security legislation while working abroad. Where initial applications or renewal applications are made for form A1 with respect to employees who work both in Luxembourg and in their country of residence, the Centre Commun de la Sécurité Sociale (CCSS) tends to refuse to issue form A1 if no prior request relating to applicable legislation has been made in the country of residence. The proportion of work declared in and outside Luxembourg will determine the social security scheme the employee will be covered by (the Luxembourg one or that of their country of residence). We are here to assist you in taking those steps. Attachment of wages: changes to the ranges to determine the withheld amount

From 1 December 2016, there will be changes to the regulation governing the attachment of wages. While wages are still split into five ranges for the purpose of defining the attachable portion, new thresholds have been defined with a wider initial tranche that is not attachable.

PwC Flash News The thresholds listed below apply to the net payable salary: Monthly thresholds prior to 1 December 2016

Tranches

New thresholds from 1 December 2016

Attachable portion

1

Up to €550

Up to €722

Nonattachable

2

From more than €550 to €850

From more than €722 to €1,115

10 %

3

From more than €850 to €1,050

From more than €1,115 to €1,378

20 %

4



25 %

5

Over €1,750

Over €2,296

No limit

In practice, with a net monthly salary of €2,455, the amount which can be recovered is calculated as follows: 1st tranche:

722 x 0% =

€0

tranche:

(1,115 – 722) x 10% =

€39.30

3rd tranche:

(1,378 – 1 115) x 20% =

€52.60

(2,296 – 1 378) x 25% = 2,455 – 2,297

€229.50 €159.00

2nd 4th

tranche: 5th tranche:

The amount that will be recovered is €480.40. Parental leave

The bill amending the rules governing parental leave has just passed and the law should enter into force on 1 December 2016. Several options are available and they offer greater flexibility

Maximum working hours

1 employer

Working hours from 20 to 40 h/week

- Full-time, 4 or 6month parental leave


- Part-time, 8 or 12month parental leave

- Part-time, 8 or 12month parental leave

Working hours from 10 to 20 h/week


Apprenticeship

- Full-time, 4 or 6-month parental leave

- Staggered 80% parental leave, for a maximum period of 20 months - Staggered 4-month parental leave for a maximum period of 20 months

Several employers

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Full-time, 4 or 6-month parental leave

Non applicable

2

PwC Flash News Example: An employee that works full-time who decides to take a staggered 80% parental leave during 20 months might benefit from a one day-off per week. The employer and employee must mutually agree on the new durations that can be staggered and on the part-time parental leave option. The employer has a fifteen-day period during which they can turn down the employee's request. They must do so in a letter sent by registered mail with acknowledgement of receipt and must invite the employee to an interview within fifteen days of notifying him/her in order to make an alternative proposal. If they do not come to an agreement, the parent is entitled to a full-time parental leave. The law also provides for circumstances in which the employer can ask the employees to postpone their parental leave. The employee may not be dismissed from the moment s/he notifies the employer of his/her parental leave request until s/he is back from parental leave. Time limit For the first period of parental leave, which must be taken immediately after maternity leave, the request must be posted to the employer by registered mail two months before maternity leave starts. For the second period of parental leave, which must be taken before the child's sixth birthday or before the child's twelfth birthday in the event of an adoption, the employee must send the request to their employer four months before they would like their parental leave to start. New parental leave indemnity The replacement income will vary according to the base average monthly salary for the purpose of calculating pension contributions in the twelve-month period prior to the start of parental leave. It will be subject to taxes and social security contributions (except for the contributions relating to cash sickness benefits and occupational accidents) and will range from €1,922.96 to €3,204.93, on a pro rata basis. Parents who have sent their request for parental leave for a period starting after the law enters into force will be entitled to the new compensation if they send a related request to the Caisse pour l’Avenir des Enfants. Family allowance

For who? Resident

- To have a legal domicile with continuous and effective residence in Luxembourg.

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Non resident

- To work in Luxembourg and to be registered with the Luxembourg social security scheme(CCSS); - To reside in a UE country member or in a country having a bilateral agreement with Luxembourg for social security.

3

PwC Flash News Which system? Old system

New system

- Children born before 1 August 2016 and - Parents working or living in Luxembourg before 1 August 2016 - Children until 27 years old in case of higher education

- Children born after 1st August 2016 - Parents starting working or living in Luxembourg after 1st August 2016 - Children until 25 years old in case of higher education

- For 1 child: €265 - For 2 children: €594.48 - For 3 children: €1,033.38 - For 4 children: €1,472.08…

- Unique monthly allowance : 265 € per child - Supplement: From 6 to 12 years old: 20 € More than 12 years old: 50 €

Example: a family with 3 children (5, 7 et 13 years old) €1,033.38 1 x €20 (supplement for child of 7 years old) 1 x €50 ( supplement for child of 13 years old)

Example: a family with 3 children (5, 7 et 13 years old) 3 x €265 = €795 1 x €20 (supplement for child of 7 years old) 1 x €50 ( supplement for child of 13 years old)

Total: €1,103.38

Total: €865

Moreover, without any request, a back to school allocation is fixed at €115 for a child older than 6 years old and €235 for a child older than 12 years old Bill about the increase of the minimum social salary

A bill was enacted on 14 October 2016 in order to increase the minimum social salary of 1.4% from January 2017. The minimum social salary for non-qualified employees should then amount to €1,949.88 per month at current index, an increase of €27 per month or €324 per year.

Let’s talk ……………………………………………………………………………………………………………………………… Vinciane Istace

Partner

+352 49 48 48 2112

[email protected]

Nelly Mazzarol

Director

+352 49 48 48 2171

[email protected]

Céline Nardi

Senior Advisor

+352 49 48 48 3766

[email protected]

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