The number of cross border employees in Luxembourg is one of the highest in Europe. Indeed, 46% of the 458.00 employees in Luxembourg are cross border commuters (half of them from France).
Exceptional measures were implemented during the COVID-19 pandemic. Among them, special bilateral agreements were signed between Luxembourg and Belgium, France and Germany on the taxation and social security rules for cross-border employees. These agreements allowed all cross-border employees to work from their country of residence without any limitation nor tax implication.
From 1 July 2022, the exceptional COVID-19 measures were lifted with a number of consequences for cross-border employees.
In terms of tax law, former bilateral tax agreements will become applicable once again, imposing limitations of the number of days cross-border employees can work from home as per their country of residence.
These thresholds are:
If these thresholds are exceeded during the year, the cross-border worker will become taxable in their country of residence for the entirety of days worked outside of Luxembourg.
In terms of social security, the European Union set up a transitional period of 6 months starting on 1 July 2022 and ending on 31 December 2022. During this transitional period, a tolerance will be applied, allowing cross-border workers to continue to telework from home, without challenging their social security affiliation if the 25% threshold is exceeded. It will not be the case anymore from 1 January 2023.
As a consequence, a majority of companies are thinking of integrating the notion of Luxembourg resident and non-resident in their home working policy. The tolerance thresholds established with border countries also seem to be the limit that some employers think to impose because of the tax rules in force.
Magali Micheletti, Partner from Auren Luxembourg