This blog is regularly updated based on the latest announcements. Last update: 11am on 8 April 2020.
Highlights from this blog
- The days that Belgian, French and German residents work from home due to Covid-19 will not count towards the 24-day tax threshold for the Belgians, the 29-day threshold for the French or the 19-day threshold for the Germans. The days will be taxed in Luxembourg.
- It has been confirmed that working at home in another country will not affect your social security status: those covered by the Luxembourg system will still be covered regardless of number of days worked at home during the outbreak.
- Parents have been awarded special leave to look after children who have the virus, or whose schools or crèches have closed. This leave will not count towards the usual “leave for family reasons” threshold calculations.
- French, Belgian, and German cross-border workers require a certificate, signed by their employer, to cross the Luxembourg border.
- The deadline to submit individual tax returns has been extended to 30 June 2020.
As COVID-19 strengthens its foothold in Europe, many EU member states, including Luxembourg, have announced new measures to limit the impact of the virus across the continent. Employers have also been swift to act to ensure the safety of their employees, first by relaying state communications to their people, and more recently by making difficult internal decisions on appropriate measures to take.
Coronavirus developments in Luxembourg
When it comes to Luxembourg firms, two main preventative measures have been reported. First, we saw companies asking individuals returning or in contact with people who have been in impacted countries to self-isolate. The companies asked employees to work from home until further notice.
Luxembourg’s workforce is atypical—200,000 employees cross the border from Belgium, France and Germany every day. This adds a layer of complexity for employers and employees alike, and a request for employees to stay or work from home raises tricky questions around taxation. In this context, many of our clients have been in touch to seek guidance.
Below you’ll find a summary of key considerations for the taxation of cross-border workers employed by a Luxembourg employer. Please note that this does not touch upon Luxembourg labor law.
1. Existing thresholds
The number of days that cross-border employees can work from home without being taxed by their home country are found in the Double Tax Treaties. Luxembourg has signed separate treaties with Germany, Belgium and France so the numbers differ depending on where a person lives. German residents can work 19 days outside of Luxembourg without being taxed in their home country, Belgians can work 24 days, and French residents 29. When these limits are exceeded, the Germany, Belgium, and France authorities can usually step in and tax the individuals concerned. In this case, they can recoup tax on every single day that the individual worked outside Luxembourg, and not only the days exceeding the thresholds.
The Belgian, French, German and Luxembourg governments have announced that, in the case of a “force majeure” like Coronavirus, working from home days do not count towards the 24-day (Belgium), 29-day (France) or 19-day (German) threshold. This means that, from 14 March, the presence of a worker at home in Belgium or in France, including for remote working, will not be taken into account in the calculation of the 24 or 29 or 19 days respectively. This measure will apply until a new order is issued.