Karl Horsburgh: Claim deductions on any justifiable business expense
Photo: Olivier Minaire
Employee benefits: In today’s economic climate, employee benefits are under pressure and non-existent for the self-employed… right?
In these cost conscious times, your company may not be pampering you with the perks you have come to expect. Luxury hotels and business luncheons of champagne and caviar--these are the fringe benefits worthy of a seasoned executive, right?
Instead, you might find yourself working in a mid-sized office with luncheon vouchers as your only gratuity. While there are definitely companies that offer incredible employee benefits, many of the old-guard banks, brokerages and their ilk are tightening their belts. Still, you may be getting more than you think.
“Luxembourg has so much regulation and power of the syndicates and union bodies, little can be done to change policy; and this is good news for the employee,” says Darren Robinson of Badenoch & Clark, a local employment agency.
In addition, Luxembourg has compulsory indexation; so if you are working locally your salary has been increasing at around one to two and a half percent a year, in line with inflation.
The government also mandates 25 paid vacation days, in addition to 10 public holidays. Collective agreements in banks give employees over 30 days off, plus public holidays. That’s a lot of vacation time compared with other countries. In the United States, for example, employers are not required to give their workers any days off.
“It’s all relative,” says Robinson. “We meet almost 100 people every month who are employed, but are looking for jobs. If they haven’t worked abroad, they sometimes don’t recognize that Luxembourg is a very employee-friendly country.”
Lack of creativity
That said, he concedes there is a lack of creativity in the way benefits are meted out to staff. “Commuting is getting longer,” he says. “A lot of our candidates are asking if companies have start and finish time flexibility. They are also asking for work-from-home options.”
He hopes that in the coming years, employers will consider ways to strike a balance in the workplace without compromising clients or teamwork.
For Robinson, the issue of benefits is not at all about money. “Salary is never a driver for people who leave jobs, unless they are incredibly underpaid,” he says. “People don’t leave companies, they leave managers.”
“I try to hire students, spouses, mothers with children and those in a transitional period of life,” he says. The flexible hours and commitment are ideal for people who are working to augment their income, and yet there are also career opportunities for those who want more.
The CEO of the Berlitz Corporation, Mark Harris, started out as a teacher in Korea before making his way up the ladder to the top. Sosna, himself, began as a school director in Germany. When the work became routine, he proposed opening a school in Luxembourg and that led to his current position.
“We’re the biggest education company in the world,” he says. “You can always transfer to another country or move into management.”
Berlitz also offers an array of educational opportunities for employees and their children: language instruction, basic computing skills, and even a free tax advice seminar.
If you are self-employed, there are a few benefits in Luxembourg’s tax code that might qualify as perks. Karl Horsburgh, of International Audit Services, has a lot to say about lowering your tax obligation.
“You can claim as a deduction anything you can justify as a business expense,” he says. “But you better be prepared to back it up.”
One huge deduction might come in the way of a studio or office at home. If your business takes up more than 25% of the space in your house, you can claim 10% of everything in the house--electricity, water, even landscaping.
And you can claim 100% of the redecorating for your workspace. However, when you sell the house, the gain is taxed at 25%.
At this point, Horsburgh would encourage you to take advantage of the tax-free capital gains allowance of €50,000 per spouse. But remember, you only get this allowance every 10 years.
“The biggest problem for independent workers,” says Horsburg, “is lack of organisation. You don't get your VAT back if you can’t show a bill. From the beginning, adopt a logical filing scheme for your receipts. You should get a separate checking account and bankcard for your work. Pay for everything work-related by card, so you have a digital record.”
“When you get your monthly statement, file the receipts with it. This saves your accountant time and eventually saves you money--he’s billing you by the hour, so make it easy on him. Or, better yet, file your return as best you can, then pay a high-level accountant for an hour of his time. Ask him to go through it with you. The next year, copy what you did the previous year.”
Whether you’re part of the corporate community or going it alone these days, it seems the frosting on the cake may be only as sweet as you make it.