On 26 February 2025, the Luxembourg Direct Tax Authorities issued a new Circular L.I.R. No. 154ter/1, replacing Circular L.I.R. No. 154ter/1 dated 24 May 2023, on single-parent tax credit ("CIM") provided for in Article 154ter of the Luxembourg income tax law (“LITL”).
As from the 2025 tax year, the formulas for the determination of the amount of the CIM have been adapted and the maximum amount of the CIM has been increased, while the conditions for granting the CIM remain unchanged.
Entitled taxpayers
Those eligible for the CIM are unmarried taxpayers who:
- are classified in tax class 1a;
- raise one or more children in their household for whom they receive a child tax reduction; and
- do not share a common residence with the other parent of the child.
The CIM expires when the taxpayer is no longer classified as single or does not meet the eligibility criteria.
Amount of the CIM
Since the 2017 tax year, the CIM has been determined based on the adjusted taxable income realised by the eligible taxpayer.
From the 2025 tax year, the CIM amounts to:
- EUR 3,504 per year if the taxpayer's adjusted taxable income is less than EUR 60,000;
- If the taxpayer's adjusted taxable income is between EUR 60,000 and EUR 105,000, the CIM is calculated with the following formula: CIM = [3,504 – (adjusted taxable income – 60.000) x 0.039]; and
- EUR 750 if the taxpayer's annual income is higher than EUR 105,000.
The CIM is reduced by 50% of the amount of maintenance payments (expenses for maintenance, care, education and vocational training, etc.) from which the child benefits, provided these payments exceed the annual amount of EUR 2,712.
If there are several children and each child receives maintenance payments, the lowest amount of the maintenance payments per child will be considered to determine, if necessary, the reduction of the tax credit. Orphan pensions are not taken into account for the reduction of the CIM.
When the taxpayer has not been subject to tax throughout the year, the maximum amount of the CIM is applied based on the complete months during which the taxpayer was subject to tax. However, the CIM does not depend on the number of children composing the taxpayer's household.
Finally, where the amount of the tax debt is less than the amount of the CIM, the amount of the CIM in excess of the tax debt is to be repaid to the taxpayer. Where there is no tax debt, the amount of the CIM must be returned to the taxpayer in full.
Procedure
Employees and pensioners subject to withholding tax based on a withholding tax form
The CIM is credited during the tax year by the employer or pension fund to taxpayers who are employees or pensioners and have a withholding tax form. The withholding tax form is marked “CIM” when the resident taxpayer has made a prior request to the tax authorities.
For employees and pensioners who are not subject to taxation by assessment and are therefore not required to file a tax return, the CIM may still be requested as part of the annual adjustment provided for in Article 145, par. 2, e) of the LITL. In this case, the crediting and, where applicable, the refund of the CIM is limited to the part of the CIM that has not been credited by the employer or the pension fund during the tax year.
Taxpayers liable to taxation by assessment and not subject to withholding tax
Taxpayers who are not employees or pensioners (e.g. self-employed workers) may request the CIM through their tax return and will therefore be granted in accordance with the provisions of the Article 154, par. 1, no. 2 of the LITL.
Taxpayers not subject to taxation by assessment nor to withholding tax
This category includes people whose taxable income does not exceed the income bracket exempted by the income tax tariff. However, these people can ask to be taxed by assessment and therefore benefit from the CIM.
Non-resident taxpayers
To benefit from the CIM, non-resident taxpayers must be treated as Luxembourg residents for tax purposes in accordance with the provisions of the Article 157ter of the LITL.
The Single Parent Tax Credit (CIM) is a measure aimed at unmarried taxpayers classified in tax class 1a who are raising one or more children. This credit reduces the tax burden for single parents, ensuring additional financial support for their households.
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