Since the start of the COVID-19 crisis in March 2020, many Luxembourg non-resident cross-border employees have worked from Home in Belgium, Germany or France.

To mitigate the risk that these employees would be taxed in their Home State during this exceptional COVID-19 situation, amicable tax agreements and social security reliefs were temporarily concluded between Luxembourg and Belgium, Germany and France. Please refer to our previous tax and social security alerts in this respect.

Personal Income tax

The Luxembourg tax authorities have now confirmed that these amicable tax agreements have been extended as follows:

• Belgium: on 7 December 2020, the amicable tax agreement of 19 May 2020 was extended for the 3^rd time by the competent authorities of Belgium and Luxembourg. The agreement now applies from 11 March 2020 until 31 March 2021.
• Germany: from 1 January 2021, in the absence of any objection from both Luxembourg and Germany, the amicable tax agreement of 3 April 2020 will be automatically extended for another month. This monthly automatic extension will continue until both parties officially renounce the agreement.
• France: on 7 December 2020, the competent authorities of France and Luxembourg extended the amicable tax agreement of 16 July 2020. The agreement now applies from 14 March 2020 until 31 March 2021.

As such, the above-mentioned non-resident cross-border employees working from home due to the COVID-19 crisis will continue to remain taxable in the Member State where they would have normally worked (i.e. Luxembourg) — on the basis that they  ‘opt-in’ for this taxation (please note that this is applicable only for German and Belgian residents).
 

Social security

As a reminder, from mid-March 2020, EU Member States shared the view that the increased homeworking due to the COVID-19 crisis would not be taken into account when determining the applicable social security legislation.

On 14 December 2020, Luxembourg, Germany, France and Belgium  decided to extend these social security measures until 30 June 2021. As such, cross-border employees will continue to be affiliated within the social security system of the Member State where they work (i.e. Luxembourg) until 30 June 2021.

This is good news for Luxembourg-based employers and Luxembourg cross-border workers living in Germany, France or Belgium.

For more information, please view:

Contacts