Luxembourg extends its cross-border tax and social security agreements with neighboring countries | Faegre Drinker Biddle & Reath LLP


Over the past fifteen months, many countries have introduced creative new approaches to deal with the economic realities of the COVID-19 pandemic. As employees continue to work remotely and employers consider whether employees should return to the workplace, some jurisdictions have put in place measures to meet the needs and interests of employers and employees in a business environment. constantly changing work. Luxembourg is an example of a country that has sought to develop solutions with its neighboring countries to ease the economic burden of the COVID-19 pandemic on workers.

Cross-border tax implications

At the start of the COVID-19 pandemic, Luxembourg authorities worked with their Belgian, French and German counterparts to develop measures to minimize the fiscal impact of the COVID-19 pandemic. The four European governments have recognized that telework will be necessary to accommodate many cross-border workers and have determined that the requirements of the applicable tax treaties should be relaxed in the COVID-19 world. These earlier tax treaties provided that cross-border workers could telework from their home country for up to a certain number of days (for example, 24 days for Belgian workers, 29 days for French workers and 19 days for German workers who work remotely from their home country for the benefit of their Luxembourg employers) without the related remuneration being taxed in their country of origin.

Due to the COVID-19 pandemic and the need to accommodate remote working, the Luxembourg government has agreed with its three neighbors that, the COVID-19 pandemic being a case of force majeure, on days when workers working remotely are not taken into account for the purposes of taxing remuneration in their country of origin. In other words, these new agreements avoid double taxation and prevent tax evasion with regard to taxes on income and on capital.

On June 11, 2011, the Luxembourg Ministry of Finance announced that its cross-border tax agreement with Belgium was extended until September 30, 2021. Likewise, on June 15, 2021, the Luxembourg Ministry of Finance announced that its agreement with France has also been extended until September 30, 2021. Luxembourg’s cross-border tax agreement with Germany is automatically renewed each month, unless one of the contracting states revokes the agreement at least one week before it expires. As such, the agreement is valid until further notice.

Cross-border implications for social security

In addition to double taxation issues, working from home in a neighboring country can affect workers’ social security status. To guard against this risk, during the first months of the COVID-19 pandemic, Luxembourg concluded amicable agreements with Belgium, France and Germany concerning the social security affiliation of cross-border commuters who work from home. Under the relevant agreements, the teleworking days of workers due to the COVID-19 crisis are not taken into account in determining the social security legislation applicable to frontier workers in these countries. As such, telework will not influence the social security status of workers in these four jurisdictions. Luxembourg’s social security affiliation agreements with Belgium, Germany and France were initially in force until December 31, 2020, but have since been extended.

On June 11, 2021, the Luxembourg Ministry of Social Security announced that Luxembourg and Belgium had agreed to extend until December 31, 2021 the amicable social security affiliation agreement for cross-border commuters who work from home. On June 15, 2021, the ministry also announced that Luxembourg and France agreed to extend their agreement until September 30, 2021, when the French Parliament voted to end the state of health emergency.

We continue to monitor workforce management issues in both US and non-US jurisdictions.

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