Tax credit payments are being delayed

Workers and pensioners in Luxembourg are still awaiting the financial support promised by the government and the social partners as part of the so-called ‘resilience package’ from June 2026. This package of measures was agreed during tripartite negotiations with the aim of offsetting the rising cost of living. In addition to fuel tax rebates and subsidies for electricity and gas, the agreement provided for a direct increase in net incomes and pensions.

The main support measure is the Competitiveness Tax Credit (CIC), which was previously applied for one year in 2023 to mitigate the effects of inflation. Under the new arrangements, the scheme is to be reintroduced for the last seven months of 2026, with retrospective effect from 1 June to 31 December. However, the credit does not currently appear on employees’ payslips. The relevant bill is still under discussion in the Chamber of Deputies and requires formal approval before actual payments can begin.

The CIC mechanism is calculated on the basis of monthly gross salary and is structurally designed to mimic the effect of indexing the tax scale, rather than a direct increase in salary. Payments increase progressively: the higher the basic income, the greater the credit amount. A similar approach will be applied to pension accruals. For example, for a salary of €2,500 per month, the expected increase will be €6.46, whilst incomes above €14,916 will provide the maximum compensation of €27.13 per month. The total increase over seven months for the highest-earning groups will amount to almost €190.

Under the current version of the bill, the total amount accumulated over the entire period may be paid out in a single instalment at the end of 2026. Calculations will take into account only basic salary and standard allowances, excluding bonuses or irregular income. Self-employed professionals will also be eligible for this credit following the declaration of their annual profits. From 2027, the temporary CIC scheme will be discontinued, as its economic impact will be incorporated directly into the standard tax scale, which will be adjusted once by a factor of 2.5 per cent.