UEL / News

Brochure: Cross-border teleworking: what are the applicable tax rules?

15.02.2023

What will the implications be for you as an employer if you have cross-border employees who are teleworking, and how will they be taxed?
Go down for tax news regarding Luxembourg employers having employees being French residents and performing teleworking.

We invite you to consult our brochure which summarizes the different tax rules applicable to your teleworking border employees (including in the context of the Covid-19 health crisis) as well as the tax consequences that may result for you as an employer.

This brochure aims to help you better understand the possible tax obligations that may arise for you by answering the most frequently asked questions such as:

  • What are the tolerance thresholds applicable with each border country?
  • What are the specificities of the Covid period and how to apply the tolerance thresholds for 2022?
  • In which cases is there a risk of recognition of a permanent establishment for your company?
  • What are the supporting documents to be kept by employers?
Document prepared by UEL with the support of the Chamber of Commerce, in collaboration with the ABBL, the ACA, the Chamber of Commerce, the Chambre des Métiers (Chamber of Craft Trades), the clc, la Fédération des Artisans, the FEDIL and Horesca. 
This document is intended merely for information purposes and does not purport claim to be exhaustive. The information contained in this document is general in nature and is not intended to address the specific situation of a particular individual or company. This information cannot and should not be used as the basis for decision-making without seeking the prior advice of a professional and without a detailed analysis of each situation. 
Cross-border teleworking: what are the applicable tax rules? - Update 15.02.2023
FRENCH FOCUS
The French Budget Bill for 2023 amends the reporting obligations of foreign employers in respect of an activity carried out occasionnaly in France (for example through teleworking) by their French cross-border employees who remain covered under the Luxembourg social security regime. Prior to this mechanism, Luxembourg employers previously had to pay the French withholding tax monthly as soon as their cross-border employees were performing an activity carried out outside of Luxembourg and which exceeded the annual tax tolerance threshold.
As from 1 January 2023, the French government has replaced this withholding tax mechanism by a direct withholding of the French personal income tax from the employee’s personal bank account by the French tax authorities (i.e. “l’acompte contemporain”) in order to simplify the reporting obligations of Luxembourg employers which had to fulfill the conditions mentioned above.
According to the practical guides published by the French government, this mechanism of the direct withholding of the French personal income tax from the employee’s personal bank account by the French tax authorities (i.e. “l’acompte contemporain”) creates the following specific obligations, as from 1 January 2023:
  • On the employers’ side:
Luxembourg employers will have to declare annually the salaries paid to the concerned resident employees who are taxable in France according to French tax rules.
  • On the employees’ side:
The employees residing in France and receiving remunerations paid by a Luxembourg employer in respect of an activity carried out in France will have to pay taxes on their income from Luxembourg source (including for their teleworking activity). This tax will be paid by way of direct withholding of the French personal income tax from the employee’s personal bank account by the French tax authorities (i.e. “l’acompte contemporain”).
The French government has published detailed practical guides to enable Luxembourg employers to better understand and fulfill their new obligations.
For more information, please consult the following links:
  • Employers’ side:
https://www.impots.gouv.fr/actualite/amenagement-du-prelevement-la-source-pour-certains-employeurs-etablis-hors-de-france-0
  • Employees’ side :
https://www.impots.gouv.fr/actualite/amenagement-du-prelevement-la-source-pour-certains-employeurs-etablis-hors-de-france-1