With the end of the exceptional measures implemented during the Covid-19 pandemic, a number of changes are in store that will impact cross-border workers.
In terms of tax law, bilateral tax agreements will become applicable once again, notably imposing thresholds on cross-border workers as per their country of residence. These thresholds are:
- 34 days per year for cross-border workers residing in Belgium;
- 29 days per year for cross-border workers residing in France (on 19 October 2021, the Luxembourg and French governments committed to increasing the above limit to 34 days as well, and to defining the future terms of this arrangement within six months. However, to date, there is no information on the finalisation of this project); and
- 19 days per year for cross-border workers residing in Germany.
If these thresholds are exceeded during the year, the cross-border worker will become taxable in their country of residence for the entirety of days worked outside of Luxembourg.
See our Newsflash of 22 June 2022 on the taxation of cross-border workers starting 1 July 2022 for more information.
The lifting of the exceptional Covid-19 measures also raises a number of social security queries. If a cross-border worker spends more than 25% of their working time in their country of residence over a 12-month period, they are required to be affiliated to that country's social security system, and must therefore be disenrolled from Luxembourg social security.
In principle, public authorities will impose formal legal requirements for determining which social security legislation will be applicable to given situations. These rules were lifted during the pandemic, but were, theoretically, to have been reinstated as of 1 July 2022.
Now, a six-month transition period has been established by the EU's Administrative Commission for the Coordination of Social Security Systems. Following this, the Luxembourg public authorities have just confirmed that the 25% threshold will not apply until after 31 December 2022. Cross-border workers can therefore continue to work from home without fear of having to switch social security systems even if they exceed the 25% threshold provided for in the EU legislation. As of this publication, the above tax thresholds will nonetheless become applicable as from 1 July 2022.
On 1 January 2023, the 25% threshold will theoretically become applicable once again – employers and their cross-border employees who work remotely will, in theory, have to comply with their legal obligation to declare carrying out business in two or more Member States (notably application for determination of the applicable legislation and A1 form). In the absence of clear guidelines and given the rise in remote working following the pandemic, this obligation is not without its challenges in practice.
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