Luxembourg Tax Alert 2020-16
Luxembourg Tax Alert 2020-16
Cross-border workers and taxation: Luxembourg and France publish two new agreements on 29-day threshold on 16 July 2020
The Luxembourg and French tax authorities have concluded two new agreements that provide greater clarity regarding the taxation of French residents working in Luxembourg. The agreements relate to the 29-day threshold for working days spent outside Luxembourg, outlined in the existing double tax treaty. Further details on this threshold can be found here.
The French and Luxembourg authorities have signed two separate agreements:
- The first gives clearer guidance on calculating the 29-day threshold
- The second classifies the COVID-19 pandemic as a ‘force majeure’ that is, as such, exempt from the 29-day threshold calculations
The guidelines for calculating the 29-day threshold can be summarized as follows:
- Exclude from calculations: days-off, weekends, public holidays when the employee is not required to work, sick days, and cases of “force majeure” beyond the control of the employer and the worker (including days working from home due to the COVID-19 pandemic)
- Consider as one full day in calculations: any part of a day worked outside Luxembourg (including for professional training)
- Specific cases:
- Part-time employment: the 29-day threshold is reduced proportionally based on the work schedule outlined in the employment contract
- The 29-day threshold is to be considered as an overall threshold of 29 days per calendar year, including in cases where several activities are performed under different employment contracts during the same year
- Statutory sickness and maternity allowances are taxable in the state that pays the allowance
- Compensation for overtime is taxed in the state where the overtime is performed
The burden of proof, in any case, lays with the taxpayer. In order to demonstrate their physical presence in Luxembourg, French residents can provide documents including the following: an employment contract or employer's certificate referring to the place where the position is actually exercised, attendance lists for meetings or trainings, documents relating to time worked such as time-sheets or recordings, documents relating to travel such as train or plane tickets, invoices for accommodation expenses like accommodation or car rental, or proof of meal expenses like receipts or credit card account statements.
We hope you have enjoyed reading this alert. If you have any questions regarding cross-border taxation, our team of tax advisory experts is available to help.
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