The last couple of years have generated a lot of uncertainty regarding the tax and social security thresholds applicable to our cross-border colleagues, depending on their country of residence. While some of those thresholds have been temporarily suspended for more than a year, neighboring countries were and are reviewing their applicable tax threshold, respectively how to withhold taxes, and the social security one is being reviewed at Europe level.
Here is an overview of where we stand beginning of this new year.
SOCIAL SECURITY – applicable to all 3 neighboring countries
Until 30th June 2023, cross-borders employees can work remotely from their home country more than 25% of their time, while remaining affiliated to the Luxembourg social security.
During this first semester 2023, the Administrative Commission from the European Union will continue to work on this topic with Luxembourg’s neighboring countries.
TAX
Germany: nothing has changed, the tolerance threshold for days worked outside of Luxembourg without triggering a taxation in Germany remains at 19 days per calendar year. When exceeding that threshold, all days, from the 1st day, performed outside of Luxembourg, including for teleworking, are taxable in Germany.
Belgium: the tolerance threshold for days worked outside of Luxembourg without triggering a taxation in Belgium has recently been increased, with backdated effect as from July 2022, from 24 to 34 days per calendar year. When exceeding that threshold, all days, from the 1st day, performed outside of Luxembourg, including for teleworking, are taxable in Belgium.
France: the tolerance threshold for days worked outside of Luxembourg without triggering a taxation in France has been increased, with effect as from 1st January 2023, from 29 to 34 days per calendar year. When exceeding that threshold, all days, from the 1st day, performed outside of Luxembourg, including for teleworking, are taxable in France.
In addition, employers no longer have to coordinate and operate the withholding of French taxes from their employees’ salaries on a monthly basis. Going forward, as for German and Belgian residents, the part of the remuneration taxable in the country of residence, is to be tax exempted in Luxembourg via payroll, which employers can operate on an annual basis, when the calendar year is closed. Warning! It appears however that the French government has the intention of introducing an annual based obligation to withhold French income tax if the threshold is exceeded – which would as a result not significantly reduce the operational and cost burden for Luxembourgish employers. We will update you if this is confirmed.