You will find hereunder a summary of the rules applicable to the employees of a Luxembourg employer who are resident in the cross-border countries and who are regularly working from home due to COVID-19. What are the impacts in terms of social security and salary tax outside of the COVID period and what are the extended exceptions due to the pandemic?
You will also find below useful information about employers' obligations resulting from the agreement on teleworking when this becomes "regular" and occurs outside of the current COVID period.
Teleworking cross-border workers and their taxation
Non-resident taxpayers, residing in a first State, who are working for an employer resident in the second contracting State and who are exercising a portion of their working-time in their country of residence become taxable in their country of residence on the salary portion in relation with the worked days.
However, Luxembourg has concluded bilateral agreements with Germany, Belgium and France enabling these non-resident employees to remain fully taxable in Luxembourg if they are working outside of Luxembourg under a threshold of working days specific to each country (see table below).
Luxembourg has agreed so far with the same border countries not to include the days worked in the country of residence due to the COVID-19 constraints in the calculation of the threshold and to maintain, in consequence, the full taxation of the salary in Luxembourg under the condition that a split situation was not already existing before the COVID crisis.
There is no such agreement on a tolerance threshold nor exceptions due to COVID with the other countries so that the taxation of the salary in relation with the days worked in the country of residence apply from the first working day there. In this case, the related salary should be exempted in the payroll in Luxembourg and the employer should ensure about their taxation in the country of residence (check of an eventual withholding tax there or not).
You will find hereunder a table summarising these rules (recent changes in bold):
Outside of COVID-19 period:
The days worked outside of Luxembourg exceeding the annual threshold hereunder become in principle taxable in the country of residence on the relating salary portion.
|Country of residence||France||Belgium||Germany|
|Threshold 2021||29 days||24 days||19 days|
|Threshold 2022||29 days||
34 days (*)
EXCEPTION during COVID-19 crisis:
The days worked from home due to COVID-19 constraints do not enter into the calculation of the above threshold: taxation remains fully in Luxembourg in this case up to:
|Country of residence||France||Belgium||Germany|
|Expiry date for the exception to the application of the tax threshold due to the COVID-19||
31 December 2021
(*) Declaration of the Belgian and Luxemburgish Ministers at the end of August.
Teleworking cross-border workers and their social security
Residents from EU Member State A working for an employer established in another EU Member State B and who have exercised a substantial activity in their country of residence A (i.e. more than 25% of working time/remuneration) fall under the social security legislation of the country of residence A. Under these circumstances, the employer who is resident in the country B is compelled to contribute for the concerned employee in the country A.
Due to COVID and further to the common use of teleworking to limit the pandemic, the European authorities have recommended to the EU Member States to extend the suspension of the above rule again.
Outside of the COVID-19 period:
The social security of the country of residence becomes applicable if the non-resident employees exercise a substantial activity in their country of residence (more than 25% of the working time / remuneration).
The days worked from home due to the COVID-19 are not considered to apply the above threshold of 25%: the social security remains in Luxembourg.
|Expiry date for the exception to the application of the social security threshold due to the COVID-19||15 November 2021||31 December 2021||31 December 2021|
Today, home-based working has become a common way of working. In consequence, employers have to anticipate implementing a teleworking policy whereas the COVID exceptions to the tax and social security rules might end soon. The challenge is to design the limits and conditions to assess and measure the impacts for employers and their employees.
Collective agreement of teleworking: the employer’s obligations
The agreement dated 20 October, 2020 has been declared a general application. It applies to all the employees falling under the labour law code with some exceptions (public or assimilated status, posted workers abroad, transport sector, sales representatives, working in an employer’s hub, punctual work on mobile phone or laptops).
1 - Characteristics of voluntary and regular teleworking
Teleworking is mutually agreed by the employees and the employer.
Teleworking is considered as regular if it represents a minimum of 10% of the annual employee’s working time on average and if it has not been implemented to face unforeseen circumstances like COVID-19. The provisions shown below do not apply, as long as we remain in the current pandemic period where teleworking is imposed to guarantee health and safety at work.
In the case of regular teleworking outside of this COVID period, the parties will have to agree in writing on the teleworking conditions, mainly the place of telework, days and hours in the week or how to determine them, the refund to the employee of a monthly lump sum cost for communication, the conditions of going back to the former work on site.
2 - Role of the staff delegation
The staff delegation will be informed of the number of teleworkers and of their evolution.
In the case of specific regimes or exclusions linked to certain sectors or companies, the employer at minimum, informs and consults the staff delegation to determine the specific teleworking conditions or exclusions and the relating modalities (via collective agreement or subordinate agreement).
3 - Equal treatment
The employer has to ensure the same employment conditions, working time, same access to promotions and company information, training entitlements as well as the same work and private life balance.
4 - The obligation for the employer to provide the necessary work equipment to telework and to ensure the data protection rules, inform the employees of the health and safety standard at work that employees will have to apply.
5 - The employer has to bear the cost directly linked to regular teleworking (in particular communication costs). This can be a monthly lump sum.
Teleworking can offer many companies on the market some flexibility and attractiveness to talents while reducing the cost of office renting. However, employers should pay attention, amongst others, to the potential tax and social security impacts and to the rules to implement to comply with the law.
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