Taxation of international executives
Are there special residency considerations for short-term assignments?
If the individual is considered as resident in both countries/territories, the individual remains resident in the country/territory where they have their family and economic links (i.e. center of vital interests). There is no specific consideration for short-term assignments in Luxembourg.
Are there special payroll considerations for short-term assignments?
No. In presence of an economic employer in Luxembourg, Luxembourg workdays are taxable there from Day 1.
The Luxembourg government has transposed in the Luxembourg Tax Law of a section of the EU Directive in respect of the automatic exchange of information on salaries, pensions and directors’ fees.
Therefore, Luxembourg employers had to report prior end of February 2019 the information related to calendar year 2018 salaries to the Luxembourg tax authorities.
Each year on 30 June, the EU Member State of residence of the employees will be automatically provided information on this income (i.e. salaries, pensions and directors’ fees), and will be able to tax this income based on the applicable tax treaty provisions.
In addition, any individual holding a financial account (e.g. bank account, unit in investment vehicles, custodial account or a certain life insurance contract) with a Luxembourg Financial Institution might be subject as at 30 June each year to automatic exchange of information to the Luxembourg tax authorities which will exchange at a later stage with the authorities in the residence state. The information to be exchanged includes financial information such as the account balance or value owned on the financial account and any payments paid or credited to such financial account during the year concerned.
What income will be taxed during short-term assignments?
The taxation depends on the double taxation treaty provisions between Luxembourg and the other contracting country/territory.
For more information, please see section Economic Employer Approach.
If there is no double taxation treaty between Luxembourg and the other contracting country/territory, the individual would be taxable in Luxembourg on their salaried income as of the first day of professional activity performed (or put to use/value) in Luxembourg. Providing the short-term assignee is a non-Luxembourg resident, they would be taxable only on Luxembourg-sourced income.
Are there any additional considerations that should be considered before initiating a short-term assignment in Luxembourg?
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