Brexit - New Year - New Provisions in Tax, Social Security and Immigration

Individual taxes

For individual taxes, this is and continues to be governed by the Double Tax Agreement between the UK and Luxembourg. Therefore the TCA does not have an impact in this respect.

Social Security

Globally speaking, the social security coordination rules outlined in the TCA are similar to those included in Regulation (EC) 883/2004 e.g. aggregation of periods, coordination of healthcare and benefits, determination of applicable legislation. Coordination of child benefits is however excluded under the TCA. 

With respect to child benefits, this means that:

• a British citizen living and working in Luxembourg on 31 December 2020 will continue to receive child benefits for children under the same conditions as before;

• a British citizen posted to Luxembourg as of 1 January 2021 will be subject to rules provided for third country nationals. There will be no rights to child benefits in the absence of an affiliation with the Luxembourg social security system.

From 1 Jan 2021, the previous EU social security coordination rules will be replaced by the TCA Protocol. EU social security coordination provisions continue to apply to the persons covered by the Withdrawal Agreement, for example, to cross-border situations that started prior to 1 Jan 2021 and which remained unchanged. 

The TCA ensures individuals who move between the UK and the EU after 1 January 2021 have access to reciprocal healthcare cover and that cross-border workers and their employers are only liable to pay social security contributions in one state at a time. Generally, this will be in the country where work is undertaken. However, there are also provisions governing multi-state workers and detached workers posted for up to 24 months. According to the Protocol, it should be possible to obtain a certificate confirming the country of liability for multi-state workers and detached workers.

Luxembourg has just confirmed that it agrees to apply the ‘detached worker’ rules as outlined in the TCA. What this means is as follows:

• UK workers who are sent by their employer to work temporarily in Luxembourg will remain liable to only pay social security contributions in the UK for the period of work in Luxembourg;

• If a Luxembourg employee is sent by their employer to work temporarily in the UK from Luxembourg, they will remain liable to only pay contributions in Luxembourg.

These rules are aligned to the ‘detached worker’ rules in the EU Regulations covering postings up to 24 months, such that similar conditions must be met.

The Protocol also covers multi-state workers. Again, the rules are aligned to the existing rules for multi-state workers in the EU Regulations. 

An exceptions clause is notably absent from the Protocol. Under the EU Regulations, this clause could be used to override the other Articles, provided the competent authorities in the home and host locations both agreed to do so. This was most commonly used to enable A1 certificates to be extended beyond 24 months for detached workers. It appears that this will not be an option for new moves commencing from 1 January 2021.

Arrangements that started prior to 31 December 2020 and continued beyond 1 January 2021 are expected to be grandfathered and will continue to be covered under the previous EU coordination rules.

What are the new immigration provisions defined in the TCA applicable on 1 January, 2021?

This agreement does not include any provisions on immigration except to the temporary movement of natural persons for business purposes. It does not cover the right to enter, work or reside of EU citizens in the UK or of UK nationals in the EU.

However, it reaffirms that those who were, or had already been, in a cross-border situation between the EU and the UK before 1 January, 2021 remain covered under the Withdrawal Agreement providing continuity of the right to work and reside as before the end of the transition period.

In Luxembourg, it only implies to request an updated residence permit before 30 June, 2021 (refer to our previous Flash News: https://www.pwc.lu/en/newsletter/2020/brexit-uk-nationals-working-in-luxembourg.html.)

UK nationals who were cross-border workers working in Luxembourg for a Luxembourgish employer before 31 December 2020, can request a certificate that proves that they fall under the Withdrawal Agreement, enabling them to continue to work in Luxembourg.

However, this certificate is not mandatory but could be useful in their home country.

Temporary movement of natural persons between the UK and the EU: business trips

• As per the TCA, UK nationals are granted short term visa-free visits up to 90 days within any 180-day period and vice versa for EU citizens of all EU Member States coming on business trips. It is conditioned to reciprocity without discrimination between EU nationals. 

• However, if UK nationals are coming to work in Luxembourg for less than 3 months and the performed activity is not one of the allowed activities for business trips defined in the Luxembourg law, they will have to request a work permit.

Long term stay

• Concerning long-term stay, UK nationals intending to stay in an EU Member State for periods exceeding 90 days for any purpose are required to follow the conditions for entry and stay for third country nationals set under EU law and the national laws of the Member States. On the other hand, EU citizens intending to move to the UK will need to comply with the applicable immigration conditions set by the UK government.

Besides the TCA, and due to the on-going Covid pandemic in the UK, you will find below useful information for UK nationals who intend to travel to Luxembourg.

Temporary Covid restrictions until 31 march, 2021 (can be extended)

Since 1^st January, 2021, UK nationals have been subject to restrictions on non-essential travel to the EU (except UK nationals who fall under the Withdrawal Agreement). The UK is currently not part of the list of the exempted countries.

For those who enter in the exception list (mainly people travelling for urgent and duly justified family reasons, short-term visits by people whose life partner resides in Luxembourg, students coming for their study and highly qualified workers, etc...) will still be able to travel to Luxembourg.

Some of the above-mentioned categories of persons must have a specific certificate issued in advance by the Luxembourg authorities. This request must be submitted by e-mail to the Passport, Visa and Legalisation Office (service.visas@mae.etat.lu) of the Ministry of Foreign and European Affairs, or to the Embassy of the Grand Duchy of Luxembourg in London (londres.amb@mae.etat.lu).

Passengers returning to Luxembourg must meet the following conditions:

• be in possession of a negative PCR test that is less than 48 hours old;
• be in possession of a negative PCR test dating between 48 and 72 hours. These people have to undergo a new PCR test at Luxembourg airport and have to put themselves in self-quarantine until the test result is obtained.

Some antigenic tests are also accepted under the same conditions.