The American Chamber of Commerce in Luxembourg (AMCHAM) and the British Chamber of Commerce for Luxembourg (BCC) held their traditional joint “Personal Tax Lunch” in the Salon Panoramique at DoubleTree by Hilton hotel in Luxembourg-Dommeldange on Monday 14 November 2022.
Paul Schonenberg, Chairman and CEO of AMCHAM, and Jonathan Norman, Chair of the BCC Tax Group, introduced this joint event and welcomed back guest speaker Laura Foulds, Managing Director at Analie Tax & Consulting, for her annual in-person personal tax update (after a couple of COVID-19-related virtual editions). Laura provided attendees with an update on changes in Luxembourg regarding personal tax this year as well as expected changes for 2023 and provided feedback on commonly asked questions around filing taxes in Luxembourg.
Laura has over 20 years of experience working in expatriate personal taxation initially with the “Big Four” in the United Kingdom (UK), the United States (US) and Luxembourg and, since 2013, with her own company, Analie Sarl. Analie provides UK, US and Luxembourg personal tax compliance assistance and advisory services. Laura is a specialist in expatriate taxation and provides advice on specific personal tax areas and cross border personal tax considerations to employers and employees and helps individuals optimise their tax position.
Laura’s personal tax presentation was divided as follows: tax basics, tax changes and “hot topics”, as well as tax updates in the UK and the US. She began by presenting the different types of residency for tax purposes (resident, non-resident and part-year resident) and pointed out that it is not always beneficial to elect to be taxed as a resident (in the case of non-residents or part-year residents) or to be taxed jointly (in the case of married couples). She also outlined the eight main categories of income, as well as common deductions/credits (update: the single parent tax credit is being increased and eligibility criteria are changing), before addressing tax return deadlines and associated changes this year. For instance, the filing deadline has been officially extended from 31 March to 31 December for all individual tax returns, corporate, municipal business tax and net wealth tax returns – a change which Laura described as “welcome news”.
She also discussed tax office assessments and appeals in case of a disagreement (an often lengthy process) and presented the three main reasons why individuals find they owe more money than expected after filing their tax returns:
– joint taxation: tax class 2 is the default for resident taxpayers who are married but if both individuals are working, then withholding in payroll is typically lower but the amount owed is often higher in the end;
– foreign income: this increases the tax rate on one’s Luxembourg income;
– other sources of income, i.e. income that has not been taxed at the source.
Elaborating on the subject of tax changes in Luxembourg, Laura noted that various teleworking agreements had been introduced for cross-border workers in Luxembourg during the COVID-19 pandemic, but these came to an end at the end of June 2022. This year also saw the introduction of the personal tax energy credit and a new e-filing option (although this remains limited). One of the most significant changes is the reduction of the standard VAT rate from 17% to 16%.
Laura went on to present three hot topics related to personal tax:
– cryptocurrency, which she described as a “tax minefield” (since tax cannot keep up with the speed at which cryptocurrency moves). Laura recalled that this is an asset rather than a currency and every transaction should be reported;
– setting up a business and all the related necessary documentation and registrations;
– non-resident payroll (i.e. Luxembourg’s adjustment payroll).
Finally, Laura presented some of the major updates to personal tax in the UK and the US, namely the new UK-Luxembourg tax treaty (yet to come into force), which foresees changes to the employment article and the pension article. In the US, one big change is the Biden administration’s student loan forgiveness plan. Moreover, the US will repay late filing penalties from 2019 and 2020 – although cashing the cheques for these repayments could prove difficult without a US bank account.
Laura’s insightful presentation was followed by a Q&A session, whilst guests continued to enjoy their three-course lunch served with wine, water and later coffee with dessert.
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As you may know, the current tax treaty between the United Kingdom and Luxembourg was signed in London in May 1967 (before the UK joined the EEC) and was amended several times over the years. A new UK-Luxembourg tax treaty was concluded in June 2022 (after the UK left the EU) and will enter into force in 2024. The main reasons for an overhaul of the existing tax treaty include the UK’s withdrawal of the European Union (Brexit) and the evolution of tax standards put forward by the OECD and the BEPS project in recent years.
The British Chamber of Commerce are the media partner for the STEP Benelux Conference 2024 - "Family wealth: Navigating global change and new paradigms" where leading speakers from the Benelux countries will discuss the new challenges facing wealth management and estate planning. This will take place from 14-15 March at DoubleTree by Hilton Amsterdam Central Station. Register before 23 January 2024 to benefit from the Early Bird Discount!