In a newsletter dated 26 August 2022The Administration des Contributions Directes has clarified the tax treaties concluded by Luxembourg with Germany, Belgium and France concerning the tax tolerance thresholds granted to cross-border workers.
The Administration des Contributions Directes specifies first of all that, for the calculation of the 19-day tolerance threshold, " the days on which the employee is physically present in the State of residence and/or in a third State to perform his or her job should be taken into account. Any fraction of a day counts as a full day, so that days on which the employee is only partially present in his State of residence and/or in a third State are fully taken into account for the calculation of the 19 days. ”.
For part-time employment contracts, the Administration des Contributions Directes specifies that "where an employee who is a resident of one of the Contracting States carries out his activity in the other Contracting State under a part-time contract, the 19-day threshold shall not be reduced proportionately The same is true for an employee who is a resident of one of the countries with which there is an agreement and who is only working in the other country that is a party to the agreement for part of the year.
If the threshold is exceeded, the Luxembourg Inland Revenue points out that “the country of residence takes back the right to tax the remuneration received by virtue of paid employment starting on the first day and up to the total time when the employee is actually present in his/her country of residence and/or a third-party country to carry out this job” For the remuneration received due to illness or maternity, paid in accordance with social security legislation in one of the countries, the country that is the source of this remuneration is entitled to tax it.
The Luxembourg Inland Revenue explains that, when calculating the 24-day tolerance threshold[1], « “days when the employee is physically present in the country of his/her residence and in a third-party country to carry out his/her job should be taken into account. Any part of a day counts as a full day such that the days when the employee is only partly working in his/her country of residence and/or in a third-party country are fully taken into account when calculating the 24 days” ”.
For part-time contracts, the newsletter explains that “ “when an employee who is a resident of one of the countries with which there is an agreement is working in the other country that is a party to the agreement within the framework of a part-time contract, the threshold of 24 days is not proportionally reduced” The same is true for an employee who is a resident of one of the countries with which there is an agreement and who is only working in the other country that is a party to the agreement for part of the year.
However, according to the Belgian tax circular AGFisc 22/2015 (CI.700.520) of 1st On 1 July 2015, the tolerance threshold of 24 days is to be prorated for taxpayers working under a part-time contract or working only part of the year.
In addition, if the threshold is exceeded, the Direct Tax Administration reminds us that " the country of residence takes back the right to tax the remuneration received by virtue of paid employment starting on the first day and up to the total time when the employee is actually present in his/her country of residence and/or a third-party country to carry out this job For the remuneration received due to illness or maternity, paid in accordance with social security legislation in one of the countries, the country that is the source of this remuneration is entitled to tax it.
The Luxembourg Inland Revenue clarifies the fact that, when calculating the 29-day tolerance threshold, days when the employee is physically present in the country of his/her residence and in a third-party country to carry out his/her job should be taken into account. Any part of a day counts as a full day such that the days when the employee is only partly working in his/her country of residence and/or in a third-party country are fully taken into account when calculating the 29 days ”.
For part-time contracts, it is explained that “when an employee who is a resident of one of the countries with which there is an agreement is working in the other country that is a party to the agreement within the framework of a part-time contract, the threshold of 29 days is reduced proportionally The same is true for an employee who is a resident of one of the countries with which there is an agreement and who is only working in the other country that is a party to the agreement for part of the year.
If the threshold is exceeded, the Luxembourg Inland Revenue points out that the country of residence takes back the right to tax the remuneration received by virtue of paid employment starting on the first day and up to the total time when the employee is actually present in his/her country of residence and/or a third-party country to carry out this job For the remuneration received due to illness or maternity, paid in accordance with social security legislation in one of the countries, the country that is the source of this remuneration is entitled to tax it.
In light of the above, it is not impossible that differences in the way the provisions of the agreements are interpreted, which should be taken into consideration, continue to cause disagreement between the tax authorities in the countries that are parties in these agreements.
[1] This threshold will rise to 34 days a year, to be applied retroactively as of 1 Jst January 2022 once the provisions of the Amendment to the Agreement between the Grand Duchy of Luxembourg and the Kingdom of Belgium in order to avoid double taxation and to resolve certain questions on income and wealth tax have been voted for by the Belgian Parliament.
