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Home-based working: today is the end of the amicable tax agreements

01/07/22

In brief

Asset Managers should ensure that their home-based working (HBW) processes are in place, compliant with the 21/769 CSSF Circular and ensure all tax consequences are investigated, cleared off and properly documented.

In detail

Personal taxes

The amicable tax agreements concluded between Luxembourg and Belgium, France and Germany end on 1 July 2022. There should not be any proratisation in 2022 for the days performed outside of Luxembourg.

The home-based working thresholds are currently set as follows:

  • 29 days for French residents

  • 34 days for Belgian residents

  • 19 days for German residents

Social Security

Social Security amnesty is extended until the end of 2022, meaning that the 25% threshold is frozen until 31 December 2022. Formalities related to the determination of the applicable legislation are requested as from the 1st January 2023.

Payroll

Depending on the situation, payroll obligations may arise in France and Belgium.

Permanent Establishment: a company risk

The criteria to recognise a Permanent Establishment may differ from one country to another. The number of days worked from home by your employees is an item to take into account.

Some relevant criteria for a Permanent Establishment risk assessment

  • Who works where? What are the responsibilities, duties and powers of employees eligible to work from home?

  • What activity may be undertaken when working from home? What restrictions are implemented regarding HBW activities?

  • Does the Luxembourg employer finance home-based working?

  • Does the employee use its own device or employer’s material to work from home?

  • Is HBW made compulsory to the employee or optional?

  • How often and how many employees work from home in a particular jurisdiction?

CSSF Circular 21/769 and ALFI guidelines do not deal with tax aspects!

What’s next?

What you need to do

  • Draft/review your HBW policy, notably by taking into account the Permanent Establishment risk;

  • Perform a Permanent Establishment risk assessment;

  • Apply for advanced tax clearance and/or unilateral/bilateral advance pricing agreement;

  • Define a profit allocation model.

As the rules are complex, multiple and apply to your company and your employees, we can assist you with your home-based working processes, your Permanent Establishment analysis and your personal taxes and Social Security concerns as well as your payroll reporting obligations.

Contact us

Sidonie Braud

Partner, Asset and Wealth Management Tax Leader, PwC Luxembourg

Tel: +352 49 48 48 5469

Michiel Roumieux

Partner, Personal Tax Leader, PwC Luxembourg

Tel: +352 49 48 48 3055

Murielle Filipucci

Tax Partner, Banking and Capital Markets, PwC Luxembourg

Tel: +352 49 48 48 3118

Valery Civilio

Tax Partner, PwC Luxembourg

Tel: +352 49 48 48 3109

Oliver Weber

Luxembourg AWM Leader, Partner, PwC Luxembourg

Tel: +352 49 48 48 3175

Julien Treffort

Partner, Personal Tax, PwC Luxembourg

Tel: +352 49 48 48 3349

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