01/07/22
In brief
Asset Managers should ensure that their home-based working (HBW) processes are in place, compliant with the 21/769 CSSF Circular and ensure all tax consequences are investigated, cleared off and properly documented.
In detail
Personal taxes
The amicable tax agreements concluded between Luxembourg and Belgium, France and Germany end on 1 July 2022. There should not be any proratisation in 2022 for the days performed outside of Luxembourg.
The home-based working thresholds are currently set as follows:
29 days for French residents
34 days for Belgian residents
19 days for German residents
Social Security
Social Security amnesty is extended until the end of 2022, meaning that the 25% threshold is frozen until 31 December 2022. Formalities related to the determination of the applicable legislation are requested as from the 1st January 2023.
Payroll
Depending on the situation, payroll obligations may arise in France and Belgium.
Permanent Establishment: a company risk
The criteria to recognise a Permanent Establishment may differ from one country to another. The number of days worked from home by your employees is an item to take into account.
Some relevant criteria for a Permanent Establishment risk assessment
Who works where? What are the responsibilities, duties and powers of employees eligible to work from home?
What activity may be undertaken when working from home? What restrictions are implemented regarding HBW activities?
Does the Luxembourg employer finance home-based working?
Does the employee use its own device or employer’s material to work from home?
Is HBW made compulsory to the employee or optional?
How often and how many employees work from home in a particular jurisdiction?
CSSF Circular 21/769 and ALFI guidelines do not deal with tax aspects!
What’s next?
What you need to do
Draft/review your HBW policy, notably by taking into account the Permanent Establishment risk;
Perform a Permanent Establishment risk assessment;
Apply for advanced tax clearance and/or unilateral/bilateral advance pricing agreement;
Define a profit allocation model.
As the rules are complex, multiple and apply to your company and your employees, we can assist you with your home-based working processes, your Permanent Establishment analysis and your personal taxes and Social Security concerns as well as your payroll reporting obligations.
Murielle Filipucci
Tax Partner, Global Banking & Capital Markets Tax Leader, PwC Luxembourg
Tel: +352 49 48 48 3118