Parliament Votes on Tax Reform: What Is Being Decided and Why It Matters

Luxembourg’s Parliament is expected to vote later in 2026 on a major reform of the personal income tax system. The decisions taken during this legislative process will shape how individuals are taxed in the coming years, although the changes will not take effect immediately.

We explain what the reform involves, what Parliament will vote on in 2026, and what residents should realistically expect.

Why Tax Reform Is Being Proposed

Luxembourg’s current income tax system is based on three tax classes, which apply different tax rates depending on marital status and household situation. Over time, this structure has been criticised by the government and advisory bodies for being complex and increasingly misaligned with modern household and employment patterns.

The government has therefore proposed a structural reform with the stated objectives of:

• Simplifying the tax system
• Reducing disparities between different household types
• Increasing purchasing power, particularly for low- and middle-income earners

To implement this, a draft law has been submitted to the Chamber of Deputies, initiating the parliamentary process.

The Core Proposal: A Single Tax Scale

The central element of the reform is the introduction of a single personal income tax scale that would apply to all individual taxpayers.

Current structure

• Class 1: Singles
• Class 1a: Certain single parents and older residents
• Class 2: Married couples and registered partners

Tax liability currently depends not only on income, but also on household composition.

Proposed structure

• One unified tax scale for all individuals
• Higher tax-free income thresholds
• Targeted tax credits and allowances instead of tax-class-based advantages

The government has indicated that this new structure is intended to apply regardless of marital status, with social policy objectives addressed through credits rather than tax classes.

What Parliament Will Decide in 2026

During 2026, Members of Parliament will debate and vote on several key aspects of the reform.

1. Adoption of the Reform Law

The main bill introducing the single tax scale has been formally tabled and assigned to parliamentary committees. MPs will review:

• The structure of the new tax brackets
• The level of tax-free income
• The estimated cost to public finances

A final vote is expected before the end of 2026.

2. Transitional Arrangements

To avoid abrupt changes, the proposal includes transitional measures. These are intended to ensure that taxpayers who currently benefit from the existing system are not immediately disadvantaged.

Parliament will decide:

• The length of the transition period
• Whether taxpayers can temporarily remain under the old system if it is more favourable

These provisions are a central part of the parliamentary debate.

3. Related Credits and Allowances

Alongside the new tax scale, Parliament will also vote on accompanying measures, including:

• Child-related tax credits
• Adjustments for single parents
• Changes to deductions linked to pensions and long-term savings

These measures are designed to maintain social support within the new structure.

Timeline for Implementation

Even if Parliament approves the reform in 2026, the changes will not apply immediately.

• 2026–2027: Legislative adoption, administrative preparation, and publication of guidance
• Planned application date: 1 January 2028

This transition period is intended to allow both taxpayers and tax authorities to prepare.

Expected Impact on Taxpayers

According to government projections:

• Singles and single-income households are likely to see reduced tax pressure
• Middle-income earners may benefit from higher tax-free thresholds
• Families will rely more on explicit credits rather than tax-class advantages
• High-income households are not expected to see significant structural changes

Final outcomes will depend on the details adopted by Parliament.

Why This Matters for Residents

Income tax affects:

• Monthly net income
• Household budgeting
• Decisions related to work, marriage, and childcare
• Long-term financial planning

The 2026 parliamentary votes will determine the framework for these factors from 2028 onward.

The parliamentary votes on tax reform in 2026 represent a structural decision about how Luxembourg taxes individual income. While the reform is gradual and includes long transition periods, it marks a shift away from household-based tax classes toward a more individualised system.

For residents, the key point is that the rules decided in 2026 will shape personal taxation for many years, even though practical effects will only be felt later.

Official Government & Parliamentary Sources

• Luxembourg Government – Presentation of the tax reform packagehttps://gouvernement.lu/fr/actualites/toutes_actualites/communiques/2026/01-janvier/06-presentation…
• Chamber of Deputies – Legislative dossier (Bill introducing the single tax scale)https://www.chd.lu/fr/dossier/8676
• Luxembourg Government – Overview of changes affecting residents in 2026https://gouvernement.lu/fr/actualites/toutes_actualites/articles/2025/12-decembre/nouveautes-2026.h…