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BUSINESS
PERSONAL FINANCE
Text by STEPHEN EVANS
Photography by MIKE ZENARI
THIS COULD SAVE YOU THOUSANDS There are many ways to cut your tax bill, including loan interest, life insurance, pensions, even charitable giving. If you want to benefit to the full, you have to act by the end of the year. So what are the options?
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ompleting a tax declaration form next year could enable you to claim back hundreds or even thousands of euros that have been deducted directly from your salary. It is possible that you may not know about this, as not everyone has to declare. You don’t need to if your household has one earner with gross annual income under €100,000. And households with more than one earner with total gross income under €36,000 don’t have to either. For many people, some of the things you need to do to benefit to the full are an investment rather than a tax decision. “If you are only staying in Luxembourg for a few years, you may not want to bother,” said Laura Foulds, managing director of Analie Tax and Consulting. “Some high earners decide that saving several hundred euros might not be a major priority. But if you are planning to stay long term it makes more sense,” she added.
REDUCING TAXABLE INCOME You are taxed on your income after you have paid your social security and received a reduction for traveling to work (up to €2,574 per year depending how far you commute). It is this taxable income that you can reduce by taking the following steps. Many types of interest can be deducted if the loan is from a lender based in the EU. This includes interest from personal loans, including consumer items, and investments, such as for purWinter 2016
chases of cars, land or shares. You can also write off interest on bank accounts, credit cards and so on. For all these, the maximum amount deductible is €336. You add a further €336 if you are married or in a civil partnership and for each child you have. So a family of five can write off up to €1,680 in interest. Interest related to the purchase, construction, renovation and redecoration of your home can be taken into account. Luxembourg tax law converts this payment into a rental value, and it is this which is deductible. Your housing loan provider will give you a certificate with the figure.
INSURANCE Policies to cover death, accidents, invalidity or illness are deductible. This includes policies taken out to cover housing loans and also savings plans for children. Contracts must be fixed for at least 10 years. The maximum you can claim back is €672 multiplied by the number of people in your family; that is by four if you have a spouse or civil partner and two children. Special life insurance products that help you save for retirement (known as “111bis”) can be written off. Again, the contract has to be fixed for at least 10 years and proceeds cannot be received before early retirement age. “For this product you sign up until you reach the age of 60. At that age, you will be able to get a lump sum for half the capital and a life monthly annuity for the other half,” noted Aude-Marie Breden, personal tax manager with Mazars, a financial consultancy. The amount you can put into this scheme (and thus written-off) increases with age: from €1,500 per year until the age of 40, by 45 €2,100 can be invested and from 55 the maximum policy is €3,200.
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