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Luxembourg - Special considerations for short-term assignments

Special considerations for short-term assignments

Taxation of international executives

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For the purposes of this publication, a short-term assignment is defined as an assignment that lasts for less than 1 year.

Residency rules

Are there special residency considerations for short-term assignments?
 

If the individual is considered as resident in both countries/jurisdictions, the individual remains resident in the country/jurisdiction 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.

Payroll considerations

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 2020 the information related to calendar year 2019 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.

Taxable income

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/jurisdiction.

For more information, please see section Economic Employer Approach.

If there is no double taxation treaty between Luxembourg and the other contracting country/jurisdiction, 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.

Additional considerations

Are there any additional considerations that should be considered before initiating a short-term assignment in Luxembourg?

None.

Disclaimer

All information contained in this publication is summarized by KPMG Luxembourg, Société coopérative, the Luxembourg member firm affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity, based on the Luxembourg Income Tax Law of 4 December 1967 and subsequent amendments; Luxembourg law of 29 August 2008; Grand- Duchy regulation of 5 September 2008; the Luxembourg web site of Ministry of Foreign and European affairs, the Luxembourg website Guichet.lu and Ministère des Finances.

© 2021 KPMG Luxembourg, Société coopérative, a Luxembourg entity and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. For more detail about the structure of the KPMG global organization please visit https://home.kpmg/governance.

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