The current pandemic has advanced the propagation of remote working on a global scale, and it looks like this work mode is here to stay. Considering that around 46% (1) of Luxembourg’s workforce lives in a neighbouring state, this entails that some remote work is performed in a jurisdiction different to the employer’s. While this may help reduce traffic jams and be good for the environment, there is – (as always -) a tax point to be considered.
What are the rules?
In a pre-Covid19 world, you were only allowed to work remotely (in a jurisdiction which is not Luxembourg) for a specific number of days before triggering any tax consequences.
According to the law, if you (physically) worked exclusively in Luxembourg, you got taxed exclusively in Luxembourg on the entirety of your income. If you performed your work from your residence country or a third-party country, not exceeding a certain number of days (see table below), you still got taxed on your entire income exclusively in Luxembourg. However, once this limit was exceeded, you were taxed on a pro-rata basis (2).
Covid-19 has flipped our lives upside down. In order to avoid people meeting in the office and crowded public transport, Luxembourg has agreed with its three neighbouring states not to count remote-working days for a certain period. The pre-Covid 19 limit as well as the duration of the validity of the agreement not to count these days can be summarized as follows:
|Maximum number of days for remote working pre-Covid 19||Covid-19 agreements|
|France||29 days||Days not counted until 30 June 2021|
|Belgium||24 days||Days not counted until 30 June 2021|
|Germany||19 days||Days not counted until the agreement is revoked by either country|
For calculation purposes even if you only work remotely in the morning and arrive in the office in the afternoon, this should count as a full day of remote working.
Example for French tax residents
To give an example: your (tax) residency is in France, yet you work as an employee in Luxembourg. A “regular” year has around 220 working days (net of weekends, public holidays and vacation days).
Depending on where you physically carry out your work duties, your tax situation may change. The below table tries to broadly summarize different situations which may arise:
|Where is the work carried out, and for how many days?||Jurisdiction of taxation|
|Luxembourg – 200 days||France – 20 days||100% Luxembourg|
|Luxembourg – 200 days||Third-country – 20 days(*)||100% Luxembourg|
|Luxembourg – 200 days||France – 10 days||100% Luxembourg|
|Third-country – 10 days(*)|
|Luxembourg – 180 days||France – 40 days||Luxembourg – 180 days, pro rata|
|France – 40 days, pro rata|
|Luxembourg – 180 days||Third-country – 40 days||Luxembourg – 180 days, pro rata|
|France – 40 days, pro rata|
|Luxembourg – 180 days||France – 20 days||Luxembourg – 180 days, pro rata|
|Third-country – 20 days||France – 40 days, pro rata|
(*) – depending on what country the third-country is, tax-rules in relation with such country also need to be considered from the perspective of (i) Luxembourg and (ii) the residence country (in the above example, France).
Could I work remotely from the Maldives?
You may have seen ads to work remotely from somewhere more exotic than Luxembourg, e.g. on the Maldives or somewhere else near a beach. If your employer is fine with that you can, work remotely from paradise but, you will need to count your days of work when the current agreements (not to count remote-working days) are not applicable anymore. Once this happens, and if you still fancy working remotely from a beach – there’s always the Upper-Sûre Lake (Stauséi).