On 12 March 2025, the Luxembourg Tax Administration released three new circulars detailing updates to tax credits for employees, pensioners, and self-employed individuals. These updates aim to clarify the application of existing credits and incorporate the recently introduced CO2 tax credits effective from the 2024 tax year.
1. Circular L.I.R. 154quater/1 – Employees
Employers are now required to calculate both the standard tax credit for employees (CIS) and the new CO2 tax credit for employees (CI-CO2 salarié) with each payroll allocation. These credits are applicable only if the annual gross salary remains below EUR 80,000. Employers must regularise the amounts at year-end. From 2025, the maximum CI-CO2 salarié is EUR 192/year, while the CIS is capped at EUR 600/year.
2. Circular L.I.R. 154quinquies/1 – Pensioners
This circular outlines how pension institutions should apply the standard pensioner credit (CIP) and the new CO2 tax credit for pensioners (CI-CO2 pensionné). Similar to employees, eligibility ceases beyond EUR 80,000 gross annual pension income. The CI-CO2 pensionné is limited to EUR 192/year from 2025, with the CIP capped at EUR 600/year.
3. Circular L.I.R. 152ter/1, 154quater/2, 154quinquies/2 – Annual assessment procedures
This joint circular explains how these tax credits should be handled during annual tax assessments, especially in cases involving multiple income types (e.g. employment, self-employment, pensions). The circular clarifies that credits cannot be combined across categories and provides detailed examples for calculating monthly averages and regularisations.
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