CISSM and social parameters applicable on 1 January 2019

16/07/19

In brief

Beginning of January 2019, the government decided to provide a net salary increase of EUR 100 net per month to employees deriving low salaries. 

This measure has been implemented in three steps:

  • the increase of the social minimum wage of 1.1% that already took place on 1 January 2019;

  • a new tax credit for low salaries called "Tax Credit Social Minimum Wage" (CISSM) applicable in July back to 1 January 2019;

  • the third step has been voted and recently published in the Memorial on 12 July 2019 granting a new increase of the social minimum wage of 0.9% retroactively to 1 January 2019.

In detail

Tax Credit Social Minimum Wage (CISSM)

Retroactively to 1 January 2019, the law introduces a new tax credit for the employees deriving a gross monthly salary between EUR 1 500 and EUR 3 000. The employer has to refund this tax amount via payroll by the  end of  July at the latest as long as the employees have duly provided their 2019 tax card to their employer.

This tax credit amounts to EUR 70 per month for a gross monthly salary between EUR 1 500 and EUR 2 500 for a full time (on prorate for part time). It becomes degressive on the second range from EUR 2 500 to EUR 3 000 per month by applying the following formula:

70/500*(3,000 - gross salary for a full time equivalent).

The gross monthly salaries above EUR 3 000 and under EUR 1 500 have no entitlement to this tax credit.

An example for a full time gross monthly salary of EUR 2 700 in tax class 1 for single:

CISSM calculation : 70/500*(3,000-2,700)= 42

Gross monthly salary

2,700

Employee’s social contributions

-328.83

Withholding tax for single

-190.20

Salary tax credit

+50

CISSM

+42

Net salary

2,272.90

The gross monthly salary includes all the monthly benefits (i.e. company car, meal vouchers), exemptions (i.e. overtime, work on legal public holidays, Sundays and nights and their supplements),  and regular premiums. The non-periodic payments are not taken into account as long as they do not exceed EUR 3 000 over the tax year. When a non-periodic payment compensates a lower ordinary salary due to a mistake or a retroactive adjustment of the basic gross salary, it is systematically included in the gross monthly salary no matter the amount.

Under these conditions, the CISSM will vary all along the year depending on the amounts of non-periodic payments, the working time and  gross monthly salary variations. However, the CISSM is calculated on a monthly basis and there should not be any annual adjustment like the one applicable to  the current Salary Tax Credit (CIS).

This new tax credit will reduce the monthly withholding tax due and will be reported on the monthly withholding tax return similarly to the CIS.

Increase of the social minimum wage with retroactive effect to 1 January 2019

Please find hereunder a summary of the main social parameters applicable retroactively to 1 January 2019 due to the increase of the social minimum salaries of 0.9% following the publication in the Memorial on 12 July 2019.

Social minimum salaries

INDEX 814.40

EUR

EUR

Non-qualified worker

Hourly rate

Monthly Gross salary

For 18 year old and more

12.0795

2,089.75

From 17 till 18 year old : 80%

9.6636

1,671.80

From 16 till 17 year old : 75%

9.0596

1,567.31

Qualified worker

14.4954

2,507.70

Update of the social parameters

The retroactive increase of the social minimum wage results in a higher social security ceiling applicable for 2019.

Maximum basis for social contributions at current index 814.40 (except for dependence insurance not limited to any cap).

Monthly maximum in EUR

10,448.75

Annual maximum  in EUR

125,385

We also inform you that the Statec expects an automatic indexation of salaries by 2.5% for the fourth quarter 2019 or at the latest first quarter 2020 according to the current trend of inflation. This will also have an impact on the maximum contributable basis.

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Contact us

Vinciane Istace

Partner, PwC Luxembourg

Tel: +352 49 48 48 2112

Nelly Mazzarol-Denizon

Managing Director, PwC Luxembourg

Tel: +352 49 48 48 2171