Circular L.I.R. N° 95/2 Of May 21, 2013, Concerning The Tax Regime Applicable To Impatriate Workers

The Circular, issued by the Luxembourg tax authorities on May 21st 2013, provides specific tax provisions exempting, at the level of the employers, part of the expenses borne by them in relation with the impatriation of high skilled workers to Luxembourg i.e.:

Employees working abroad for an international group and assigned to a Luxembourg company of the same group ("Assignment"); Employees hired abroad by a Luxembourg company ("Recruitment"). The Circular applies retroactively as from January 1st 2013 and eases the conditions posed by circular L.I.R n°95/2 of December 30th 2010 ("2010 Circular") in an effort to promote the relocation of foreign workers to Luxembourg. The Circular replaces the 2010 Circular.

General conditions

As provided by the 2010 Circular, the Circular also requires that the employee becomes a Luxembourg tax resident and has not been subject to income tax in Luxembourg in the 5 years preceding the starting date of employment in Luxembourg. The Circular requires in addition that the employee was not living less than 150km from the Luxembourg border.

The employee's annual remuneration should at least amount to EUR 50,000 (EUR 112,000 under the 2010 Circular).

The employer must employ in the medium term 20 full-time employees and the number of impatriates cannot exceed 30% of the total full-time working force (10% under the 2010 Circular).

Conditions in case of Assignment

The assigned employee must have 5 years' experience in a similar activity or have been employed within the same group for 5 years.

A contractual arrangement must exist between the employee and the home company as well as a secondment contract.

The employee must be granted a right of return to the home company.

Conditions in case of Recruitment

The employee must be highly specialized in a sector for which there are recruitment difficulties in Luxembourg.

Eligible expenses and tax treatment

The Circular applies to the amount of expenses that exceed those that the impatriate would have borne had he...