Teleworking and cross-border workers

Principles resulting from double tax treaties

Non-resident taxpayers, residing in a first State, who are working for an employer resident in the second contracting State and who are exercising a portion of their working-time in their country of residence become taxable in their country of residence on the salary portion in relation with the worked days.

However, Luxembourg has concluded bilateral agreements with Germany, Belgium and France enabling these non-resident employees to remain fully taxable in Luxembourg if they are working outside of Luxembourg under a threshold of working days specific to each country (see table below).

Exceptions to the above rules in the case of home-based working due to COVID-19

Luxembourg has agreed so far with the same border countries not to include the days worked in the country of residence due to the COVID-19 constraints in the calculation of the threshold and to maintain, in consequence, the full taxation of the salary in Luxembourg under the condition that a split situation was not already existing before the COVID crisis.

There is no such agreement on a tolerance threshold nor exceptions due to COVID with the other countries so that the taxation of the salary in relation with the days worked in the country of residence apply from the first working day there. In this case, the related salary should be exempted in the payroll in Luxembourg and the employer should ensure about their taxation in the country of residence (check of an eventual withholding tax there or not).

You will find hereunder a table summarising these rules (recent changes in bold):

Taxation

Outside of COVID-19 period:

The days worked outside of Luxembourg exceeding the annual threshold hereunder become in principle taxable in the country of residence on the relating salary portion.

EXCEPTION during COVID-19 crisis:

The days worked from home due to COVID-19 constraints do not enter into the calculation of the above threshold: taxation remains fully in Luxembourg in this case up to:

^{(*) as announced by the intergovernmental commission between France and Luxembourg on 19th October 2021.}

The French tax law states that the portion of salary that would become taxable in France should be subject to a withholding tax in France. It means that the employer has to set up a payroll there.

The agreement dated 20 October, 2020 has been declared a general application. It applies to all the employees falling under the labour law code with some exceptions (public or assimilated status, posted workers abroad, transport sector, sales representatives, working in an employer’s hub, punctual work on mobile phone or laptops).

What are the main big principles

1 - Characteristics of voluntary and regular teleworking

Teleworking is mutually agreed by the employees and the employer.

Teleworking is considered as regular if it represents a minimum of 10% of the annual employee’s working time on average and if it has not been implemented to face unforeseen circumstances like  COVID-19. The provisions shown below do not apply, as long as we remain in the current pandemic period where teleworking is imposed to guarantee health and safety at work.

In the case of regular teleworking outside of this COVID period, the parties will have to agree in writing on the teleworking conditions, mainly the place of telework, days and hours in the week or how to determine them, the refund to the employee of a monthly lump sum cost for communication, the conditions of going back to the former work on site.

2 - Role of the staff delegation

The staff delegation will be informed of the number of teleworkers and of their evolution.

In the case of specific regimes or exclusions linked to certain sectors or companies, the employer at minimum, informs and consults the staff delegation to determine the specific teleworking conditions or exclusions and the relating modalities (via collective agreement or subordinate agreement).

3 - Equal treatment

The employer has to ensure the same employment conditions, working time, same access to promotions and  company information, training entitlements as well as the same work and private life balance.

4 - The obligation for the employer to provide the necessary work equipment to telework and to ensure the data protection rules, inform the employees of the health and safety standard at work that employees will have to apply. 

5 - The employer has to bear the cost directly linked to regular teleworking (in particular communication costs). This can be a monthly lump sum.