© François Aulner / RTL
On Wednesday, Finance Minister Gilles Roth unveiled the new tax relief package, benefiting single-parent households, individuals over 64, and widows in tax class 1A. It includes exemptions for low-income earners, attractive bonuses for expats, and reduced corporate taxes.
In 2025, tax relief will be extended to beneficiaries of tax class 1A, which includes single-parent households, individuals over 64, and widows. Additionally, those earning the non-qualified minimum wage will be exempt from tax and bonuses paid to expats will become more attractive tax-wise.
Among other provisions, corporate tax will see a reduction of 1%. Cross-border workers from Germany who work overtime will be eligible for a tax credit of up to €700 and a new exemption for bonuses received by individuals under 30 will be introduced.
These measures, previously announced and adopted by the Government Council on Wednesday morning, were presented by Minister Roth to the Parliamentary Finance Committee and subsequently to the press as part of the so-called "relief package."
The most significant relief will come from adjustments to the tax scale equivalent to four wage indexations, which took effect on 1 January 2024, an additional adjustment by 2.5 wage indexations in 2025, and an increase in the tax credit for single parents.
Examples provided by the tax administration illustrate that starting next year, individuals in tax class 1A and those with low incomes will see the most substantial proportional relief and in some cases also in absolute terms.
For instance, a person in tax class 1A earning €60,000 will retain €3,295 more net income annually. Similarly, lower-income earners in tax class 1 will benefit proportionally more in terms of relief percentages, while higher-income earners will retain more net income in absolute terms, akin to tax class 2.
Increasing competitiveness
Beginning in 2025, individuals earning the non-qualified minimum wage of €2,635.21 monthly will now be exempt from taxation, resulting in approximately €10.9 more net income per month for those in tax class 1.
A significant new provision allows bonuses for individuals under 30 to be 75% tax-free, capped based on income. This would, for instance, include a bonus of €5,000 given to someone earning less than €50,000 gross annually.
In terms of corporate tax, rates will decrease from 17% to 16% overall, with a further reduction to 14% for companies earning below €175,000 in taxable income. Municipal business taxes will continue to apply on top of these rates.
Another announced relief includes the complete exemption of interest on loans for primary residences, effective immediately.
The comprehensive tax package is projected to reduce state revenues by an estimated €500 million. Plans are also underway for a major tax reform introducing a single tax class by 2026.
