On Tuesday morning, Minister of Finance Pierre Gramegna, accompanied by senior officials from the General Inspectorate of Finance and representatives of the Treasury, was heard by MPs on the Finance Committee.
It was an opportunity for MPs from both the majority and the opposition to find out more about the key elements of the draft budget and first of all, of course, about the measure which, from 1 January, provides for flat-rate taxation of up to 20% on the property income of specialised investment funds. For Gramegna, this is much more than a small correction, stating that the opposition as well as people from the outside pushed the government to do something about specialised real estate investment funds.
Gramegna expressed bewilderment over the fact that this measure was now barely being commented on, pointing out that those affected would now have to pay a lump sum of 20% on the rents they will receive as well as 20% on capital gains. The minister compared this to the situation of private individuals because the latter could deduct the costs from the rents they receive while also benefitting from the accelerated depreciation rate, which is not possible in a fund. This meant, Gramegna explained, that the government had found a good solution, which does not put the structure of the fund industry into jeopardy.
The infamous stock options will be abolished next year. The government cannot do more than abolish them, according to Gramegna. On the other hand, he stressed the importance of remaining competitive as a start-up nation. Thus, an "impatriation" bonus will be introduced to attract expats to settle in Luxembourg. Companies will be able to grant expatriates a bonus of up to 30% of their salary. Finally, there is also the participative bonus, which a company making a profit will be able to grant to its employees for a value of up to 5%.
On Tuesday morning, the Finance Committee should have discussed the preparations for the orientation debate on the new tax reform. But this was no longer possible. The President of the Commission, Democratic Party MP André Bauler, said that the MPs had until Friday to think about the issues they wanted to raise in this context. The substance of the matter might not be addressed until January or February. A debate on a draft tax reform in plenary session cannot be expected before June 2021. It will probably be more likely for the autumn of 2021, added Bauler.
