Mortgage restrictions

Starting 1 January 2021, banks will be subject to new limits on issuing real estate loans to individuals.

Three new ratios are to be introduced for real estate loans granted to individuals:

•     a limit of 80% for the ratio between the amount of the loan and the value (price) of the object for loans in general, including those for rental investment;
•     a limit of 90% for buyers who are/were already owners, but who wish to acquire a new principal residence;
•     a limit of 100%, i.e. a loan that can cover the entire value of the property, for people who are buying a home for the first time in order to live in it themselves (first-time buyers).

The ratios are designed to help avoid excessive household indebtedness that could become a systemic risk. Average household debt is 180% of their annual income in Luxembourg, compared to 120% in neighbouring countries.

There will be a transitional phase for the new regime running until the end of February, and covering loans already in discussion.

Brexit impact on business and citizens

The agreement between the EU and UK will be provisionally applied from 1 January 2021, which means the UK will leave the union’s single market and customs union and withdraw from all EU policies and international agreements. British nationals and their family members who fall within the scope of the Withdrawal Agreement will retain the same rights as EU citizens in terms of their right to residence in Luxembourg. The guichet.public.lu portal has forms and FAQs that tackle most questions arising from this change.

New registrations & fuel tax

Luxembourg will update the emissions tax for new car registrations from 1 January 2021. The Automobile Club and the Consumers' Union estimated the annual surcharge for the owners concerned will be between €450 and €750.

Starting 2021, consumers will pay roughly 5 cents more per litre of diesel and petrol as part of the progressive carbon tax. In 2021, the tax is applied at a rate of €20 per tonne of CO₂, increasing by €5 respectively in 2022 and 2023. It is expected to reduce greenhouse gas emissions by 6% in 2021 and 11% in 2023. Revenues generated will be channelled into supporting low-income households through initiatives such as the cost-of-living allowance.

Minimum wage increase

The unskilled minimum wage will increase to €2,200 gross per month, compared to €2,141 at present, while the skilled minimum wage will be revalued to €2,642 euros gross per month (+€72).

In addition, the tax credit for employees, pensioners, self-employed and unemployed will be increased by €96 as of 1 January 1, 2021, and the cost-of-living allowance will be revalued by 10%.

Partial unemployment and layoffs

Short-time working schemes designed to curb layoffs during the health crisis will also see its rules of application changed. Previously, they were pegged on a full-time equivalent, but starting 1 January, it will be calculated on the number of hours actually worked.