Key changes coming to Luxembourg in 2025

The year 2025 ushers in several changes in Luxembourg, with new laws set to impact income, mobility, and society as a whole. Below is an overview of the key developments, as summarised by our colleagues from RTL Infos.

Income and purchasing power

✅ Wage indexation: Initially planned for the end of 2024, the next wage indexation has been postponed to 2025. According to the National Institute of Statistics and Economic Studies (STATEC), the pay rise is expected in the first quarter, provided inflation does not decrease significantly, as it did in November.

The wage indexation will also lead to an automatic increase in healthcare costs and adjustments to social thresholds, including the minimum pension and family allowances.

✅ Minimum wage increase: Starting 1 January, the minimum social wage for unskilled workers will rise from €2,570.93 to €2,637.79 gross. Skilled workers will see their minimum wage increase to €3,165.35 gross. These amounts will be further adjusted when the wage indexation takes effect in the first quarter. Additionally, the government has extended this increase to benefits such as the income for the severely disabled and the Social Inclusion Income (REVIS).

✅ Tax relief on minimum wage: Workers earning the minimum social wage for unskilled roles will not have to pay income tax, a measure confirmed by the Ministry of Finance during the summer.

✅ Pension adjustments: The government announced that pensions will increase by 1.6% starting 1 January 2025.

✅ Adjustment to the tax scale: With the adjustment to the tax scale in 2025, income tax will decrease by an average of 6.3%.

✅ Support for single parents: As part of the tax scale adjustment, the government has introduced measures benefiting single parents. Those in tax class 1a will see an increase in tax relief, with some eligible for tax-free income up to €50,000 gross per year.

✅ Introduction of a "young employee" bonus: Starting in 2025, employers will be able to offer a "young employee" bonus to workers under the age of 30 who are starting their first permanent contract. The bonus will be 75% tax-free, with the following limits based on gross annual pay:

• €5,000 for salaries of €50,000 or less
• €3,750 for salaries up to €75,000
• €2,500 for salaries up to €100,000

✅ Increase in cost-of-living allowance: To address rising living costs, the government has decided to increase the cost-of-living allowance by 10%. The allowance will be paid automatically to recipients of the inclusion allowance, with the following adjustments for 2025:

• A one-person household (maximum gross income of €2,710) will receive €1,817, up from €1,652
• A two-person household (maximum gross income of €4,065) will receive €2,272, up from €2,065
• A four-person household (maximum gross income of €5,692) will receive €3,182, up from €2,891

✅ Tripling of the energy allowance: The energy allowance has been significantly increased, tripling its value. Additionally, the allowance will now be gradually reduced above its ceiling, making it more accessible to those with slightly higher incomes. The new energy allowance amounts for 2025 are as follows:

• A one-person household (maximum gross income of €3,388) will receive €600, up from €200
• A two-person household (maximum gross income of €5,082) will receive €750, up from €250
• A four-person household (maximum gross income of €7,115) will receive €1,050, up from €350

✅ Tax relief for impatriates: To attract foreign talent, particularly to major international corporations, Luxembourg is offering a 50% tax exemption for (resident) employees seconded from abroad. The exemption applies to salaries starting at €75,000 per year, with a cap at €400,000.

✅ Increase in tobacco taxes: As part of the 2025 budget, excise duties on tobacco will rise by 5.5%. This increase will raise the price of the cheapest pack of 20 cigarettes by €0.30, bringing the cost to €5.50. A pack of 25 cigarettes will cost around €8.

✅ Reduction in corporation tax: Corporation tax will decrease by 1% starting 1 January 2025, a move aimed at "enhancing the competitiveness of Luxembourg's businesses and strengthening the economy."

Housing

✅ Extension of exceptional aid: Several government measures introduced to support the property sector in 2024 will be extended into the first half of 2025. This includes an increased tax credit on notarial acts ("Bëllegen Akt") and capital gains tax relief. These measures will remain in effect until 1 July 2025.

✅ Full state contribution for preventive archaeological excavations: In response to Luxembourg's construction crisis, the State will now cover 100% of the cost of preventive archaeological excavations, up from the previous 50% contribution. This change takes effect on 1 January 2025.

Energy

✅ Electricity price cap maintained with price increases: The government has extended its electricity price cap, reducing the potential price increase to 30%, compared to 60% without state intervention. The cap will apply to customers with an annual consumption of less than 25,000 kWh. From 1 January 2025 until 31 December 2025, the price reduction will be applied automatically to all eligible customers. This will result in savings of approximately €110 annually for a flat (with an annual consumption of 1,500 kWh) and €300 for a house (with an annual consumption of 4,000 kWh).

✅ Changes to electricity network pricing structure:A new pricing structure for the electricity network will be implemented for both households and businesses. "Reference power levels" will be assigned to all consumers, and if these levels are exceeded at certain times of the day, the excess energy used will be billed at a higher price. This change could lead to higher electricity bills during peak consumption periods.

✅ Increase in CO2 tax on petroleum products: In 2025, the CO2 tax on petroleum products will rise by €5, reaching €40 per tonne. This increase will double the amount introduced when the tax was first launched in 2021, and a similar rise is expected in 2026. At the pump, this translates to an additional tax of just over €0.10 per litre of petrol and €0.12 per litre of diesel.

✅ Increase in CO2 tax credit: The CO2 tax credit will increase to €192 for the year 2025, up from €168 in 2024. The credit remains degressive, depending on income.

Society

✅ End of the pension reform debate: The Ministry of Social Security will continue a series of consultations with trade unions, employers, and various economic bodies until spring 2025. A questionnaire will also be distributed to gather additional public input during 2025. After the consultation phase, three expert groups will analyse the results from stakeholders and the public. The findings will be presented in a final report in spring 2025, which will set the stage for future discussions on pension reform. The bill to be introduced later will define the key aspects of the reform.

✅ LuxTrust token deactivated: After 31 December 2024, the physical LuxTrust token will be replaced by a mobile application.

✅ Mobile phones banned from Luxembourg schools: In 2025, mobile phones will be banned in Luxembourg's primary schools. At the secondary school level, while mobile phones will not be outright banned on school grounds, students will be required to keep their phones out of sight during lessons.

Read also: One week in: European School Kirchberg sees positive response to smartphone ban

✅ University tuition fees to double: Starting in the 2025/2026 winter semester (September 2025), tuition fees at the University of Luxembourg will increase from €200 to €400.

✅ Simplified reimbursement process for hearing aids: The National Health Fund (CNS) has agreed to streamline the reimbursement process for hearing aids, ensuring a quicker and more efficient procedure for those in need.

✅ Protection of Luxembourg products: By 1 December 2025, all EU member states must implement a system to protect geographical indications for craft and industrial products (these differ from agricultural products and wine). Luxembourg does not currently have such a system, but after investigating the matter, the government determined that the benefits of such a measure were "low". The country has consequently requested an exemption.

✅ Postponement of single-use packaging ban: The government has delayed the introduction of legislation banning single-use packaging for takeaway and delivery meal services. Originally set to take effect on 1 January 2025, the measure will now be postponed until 1 January 2027.

Mobility

✅ Progress on A3 widening project: Launched three years ago, construction on the third lane of the A3 motorway, between Croix de Gasperich and the border, is progressing. The first section, from the capital to Aire de Berchem, is expected to open either late in 2024 or early in 2025, depending on weather conditions.

© Domingos Oliveira / RTL

✅ Ongoing roadworks on A4 and A6 motorways: Roadwork on the A6 motorway, which is particularly inconvenient for cross-border workers from Belgium, will continue through 2025 and into 2026. Similarly, work will continue on the Pontpierre interchange on the A4.

The A6 motorway bridge over the railway line is under construction until 2026. / © Domingos Oliveira / RTL

✅ Tram line extended to Findel Airport: Luxtram is working to extend tram line 1 to Findel Airport. This new section of the line is expected to begin service in spring 2025, following the recent extension to Stade de Luxembourg.

✅ New tram lines under construction: Luxtram is set to begin work on new tram lines in Luxembourg City in 2025. The K2A line, which will connect Kirchberg, is scheduled for completion in the first half of the year, while the Cloche d'Or storage centre will be served by a new line in the second half. Additional projects are planned for subsequent years. The proposed Luxembourg City–Esch-sur-Alzette high-speed tram is still in development, with a bill expected to be introduced by 2026 at the latest.

✅ Wi-Fi on trams: By the end of 2025, Luxtram plans to equip its trams with Wi-Fi.

✅ Train fare increase for cross-border workers from France: From 1 January 2025, fares for trains travelling from France to Luxembourg will rise. The French National Railway Company (SNCF) announced a 3% fare increase, affecting the monthly Thionville–Luxembourg City pass, which will increase from €44.40 to €45.70 for workers over 26. The monthly season ticket from Metz will also increase, recalculated at €100.90, up from €98.

✅ Benefit in kind for company electric cars extended: The government has decided to extend the "favourable rate" for calculating the benefit in kind for 100% electric company cars until 31 December 2026. This measure benefits companies, as two-thirds of all electric vehicles are currently registered by them.

✅ A31 widening project, public inquiry expected: According to the latest available timetable for the A31 motorway widening project, a state-led public inquiry is scheduled for 2025. The inquiry is a crucial step for the French government to declare the project in the public interest, with conclusions expected later in the year.

Cross-border workers

✅ Uncertainty surrounding unemployment benefits for cross-border workers in France: An agreement had been reached to significantly reduce unemployment benefits for cross-border workers living in France, but the French Labour Minister has since backed down on this measure, which likely would not have passed a court challenge. The French government's decision remains unclear, as the Prime Minister's team was ousted from office on 4 December. It is uncertain whether the measure will be fully abandoned or if an agreement will be reached between France and Luxembourg to compensate cross-border workers for unemployment costs.

✅ Tax increase for cross-border workers in France: The favourable tax arrangements under the new Franco-Luxembourg tax treaty may be ending. Unless the Minister for the Economy authorises a further delay, cross-border workers with mixed incomes in France and Luxembourg could face a tax increase for income earned in 2024, which will be declared in the spring of 2025.

✅ New overtime credit for private sector cross-border workers: A new overtime credit will be introduced, particularly benefiting cross-border workers in the private sector. The maximum credit amount will be €700.

Read also: Tax, unemployment, teleworking, traffic: Challenges mount for Luxembourg's cross-border workers

✅ Retirement age rises in Belgium: Cross-border workers who have worked in Belgium should be aware that, starting in 2025, the statutory retirement age will rise from 65 to 66 for workers born between 1 January 1960 and 31 December 1963.