Global Daily Tax News, Luxembourg Confirms PIT Overhaul Only From 2028, (Jul 9, 2025)

The Luxembourg Government has confirmed a slower timetable for the replacement of the nation's tax class system.

When discussing the plans previously, the Government had been targeting the repeal of the current tax classes (1, 1a, and 2) from 2026. However, Finance Minister Gilles Roth, speaking before the Chamber of Deputies' Finance Committee on July 1, confirmed that legislation will be tabled in parliament only from next year and the changes would become effective from January 1, 2028.

The minister confirmed that the existing tax classes will be amalgamated into a single "R" bracket, which will be loosely based on the current 1a tax class – the class for single taxpayers with dependents.

Couples already married or in a civil partnership who benefit from tax advantages linked to tax class 2 will be able to continue to benefit from them for a transition period of 20 years. Alternatively, they may instead make a one-time, irrevocable election to be taxed under the new system. The minister told lawmakers the Government is considering the development of a tool that would advise couples on the potential tax impact of changing regimes.

The minister said that those on low incomes will benefit significantly from the change, with tax liability expected to fall from EUR5,572 to EUR3,071 for a single person with a gross annual income of EUR50,000.

During the meeting, opposition lawmakers raised concerns about the fiscal cost of the measures, estimated at between EUR800m and EUR900m per year. Roth said these costs would be "partly offset by the application of index bands" and noted the reform will also increase the purchasing power of taxpayers.