Clarifications On The Newly Introduced Profit Participating Incentive Scheme

In brief

On 11 February 2021, the Luxembourg tax authorities released Circular L.I.R. No. 115/12 ("Circular") on the profit participating incentive scheme introduced by the 2021 Budget Law of 19 December 2020. 

The new provisions of Article 115, number 13a of the Luxembourg Income Tax Law (LITL), applicable since 1 January 2021, allow for a 50% exemption on profit participating bonuses granted by employers to their employees to the extent certain conditions are met. 

This new tax incentive for individuals is in line with the government's Coalition Agreement of 3 December 2018, which also included the abolishment of the stock options regime, as well as the modernization of the current tax system for "impatriates." For further information on those topics, please read our Tax Alert of 28 November 2020 and our Tax Alert of 18 December 2020.