As a general rule, employment income is taxable in the employee’s country of residence, unless the employment is exercised in another country. For cross-border commuters (i.e. employees residing in France, Germany or Belgium and commuting to Luxembourg to carry out employment-related activities), this means that their employment income is taxable in Luxembourg (and not in their country of residence). Depending on the employee’s country of residence (France, Germany or Belgium), different tax thresholds will apply under which income from employment should remain taxable in Luxembourg despite activities being physically exercised elsewhere (either in the employee’s country of residence or in any third country).
Thus, taxation in the employee’s country of residence should not occur where the number of days worked outside of Luxembourg does not exceed:

  • 29 days per year for France
  • 19 days per year for Germany
  • 24 days per year for Belgium.

Under a mutual agreement between the competent authorities in Luxembourg and France dated 16 July 2020 concerning cross-border workers in the context of the COVID-19 crisis followed by a press release of the Luxembourg Ministry of Finance on 25 August 2020, the 29-day rule applicable to French residents working from home shall not apply to the period 14 March 2020 – 31 December 2020. In a separate mutual agreement dated 16 July 2020 concerning the detailed rules of application of point 3 of the protocol to the tax treaty between France and Luxembourg, those authorities also stated that social security payments by the respective countries shall be taxable only in the jurisdiction from which they originate (by application of Article 17 para. 2 of the tax treaty).

For German cross-border commuters, on the basis of a consultation agreement signed on 3 April 2020 between Germany and Luxembourg (the “Consultation Agreement”), days teleworked from Germany due to the impact of COVID-19 that would otherwise have been spent in Luxembourg can receive the same tax treatment as days worked in Luxembourg. This means that the days on which employees resident in Germany telework from home may not need to be counted toward the 19-day limit. In particular, the following aspects of the Consultation Agreement should be noted:

  • Employed persons wishing to use the above-mentioned fictitious treatment (i.e. fictitious allocation of teleworking days to Luxembourg while the COVID-19 situation persists) are required to maintain appropriate documentation. In addition, the employment income allocated to Luxembourg must actually be taxed in Luxembourg, meaning that it must be included in the tax base for determining the employee’s Luxembourg tax liability. Finally, the employee shall be viewed as having consented to the taxation of this employment income in Luxembourg.
  • Such fictitious treatment cannot be used where, irrespective of COVID-19, home working days would have been spent in Germany or any country other than Luxembourg (e.g. where an employee already conducts their activities in Germany/from their home office as per the terms of their contract).
  • Germany and Luxembourg have agreed that payments made pursuant to the rules governing short-time work in Germany (Kurzarbeitergeld) and in Luxembourg (chômage partiel) qualify as social security payments by the respective country within the meaning of article 17 para. 2 of the double tax treaty between Germany and Luxembourg.
  • The Consultation Agreement came into force on 4 April 2020 and is applicable with respect to working days between 11 March 2020 and 30 April 2020. Its period of application will automatically be extended to the following month if neither Germany nor Luxembourg terminate it, respecting a notice period of one week before the end of each month. As Germany and Luxembourg did not terminate their agreement one week before 31 August 2020, it is extended de facto until 31 September 2020.

For Belgian cross-border commuters, on the basis of an agreement signed on 19 May 2020 between Belgium and Luxembourg, days teleworked from Belgium due to the impact of COVID-19 that would otherwise have been spent in Luxembourg can receive the same tax treatment as days worked in Luxembourg. This means that the days on which employees resident in Belgium telework from home may not need to be counted toward the 24-day limit. Such fictitious treatment cannot be used where, irrespective of COVID-19, home working days would have been spent in Belgium or any country other than Luxembourg. Cross-border workers who make use of this fictitious treatment are required to apply it consistently in both contracting States and to maintain appropriate documentation. In addition, the employment income allocated to Luxembourg must actually be taxed in Luxembourg, meaning that it must be included in the tax base for determining the employee’s Luxembourg tax liability. Following its second extension, the agreement is applicable with respect to working days between 11 March 2020 and 31 December 2020.

Your contact for more details: EmpCrisis@arendt.com
(26/08/20)

Companies and self-employed individuals deriving their income from a commercial, agricultural, forestry, or liberal profession and experiencing liquidity problems as a result of the COVID-19 pandemic may submit a request to the tax authorities for the following:

  1. a cancellation of quarterly (corporate) income tax advances and municipal business tax advances for Q1 and Q2 2020 (form accessible here)
  2. a 4-month extension of the payment deadline, with no penalty, for any (corporate) income tax, municipal business tax or net wealth tax due on or after 1 March 2020 (form accessible here).

Eligible taxpayer requests for such cancellations and deadline extensions are automatically accepted.

On 29 July 2020, the tax authorities indicated that it was still possible to submit such requests.

They also stated that for the cancellation of advances, no interest would be charged and any underlying late interest that had already been charged would be cancelled. Taxes due for the year 2020 will be computed based on the profit actually realised in 2020, and payable according to the usual rules.

The tax authorities indicated that requests for the 4-month payment deadline extension can be made online by clicking here or by downloading the appropriate template. This form is to be addressed to the respective tax office, and will allow the taxpayer to pay off the tax debt in a single instalment. This payment can be made 4 months after the due date on the tax statement that was attached to the tax assessment, without any late interest being charged. Taxpayers who have paid the debt and have already been charged for late interest may request that this interest be cancelled by downloading the appropriate template and returning it, duly completed and signed, to the head (“Directeur”) of the tax authorities.

VAT-taxable individuals and entities, and entities registered for VAT purposes, which are experiencing financial difficulties due to the

Your contact for more details: Thierry Lesage (thierry.lesage@arendt.com)

(30/07/20)

It is generally accepted under both LUX GAAP and IFRS that for December year-end, companies should consider the Covid-19 crisis as a non-adjusting event after the reporting period as at 31 December 2019. Nevertheless, companies should still disclose the nature and include an estimate of the financial impact of this material event in the notes of their financial statements (Law of 19 December 2002 on the Register of Commerce and Companies, Art  65, (1), 18° and IAS 10.21).  

However, if the management of a company determines after the reporting period that, due to the Covid-19 crisis, it intends either to liquidate the company or to cease trading, or that it has no realistic alternative but to do so, IFRS provides that such company shall not prepare its financial statements on a going concern basis (IAS 10.14-15 and IAS 1.25-26).

Your contact for more details: Yvan Stempnierwsky (yvan.stempnierwsky@arendt.com

(07/04/20)

The general 5-year statute of limitations with respect to direct taxes due to expire on 31 December 2020 is extended to 31 December 2021.

Your contact for more details: Thierry Lesage (thierry.lesage@arendt.com)
(08/05/20)

The 3-month period to file claims and hierarchical recourses with the tax authorities is suspended from 18 March 2020 to 30 June 2020.

Your contact for more details: Thierry Lesage (thierry.lesage@arendt.com)
(08/05/20)

The Luxembourg government has announced that a tax deduction will be granted to landlords who renounce a portion of the rents owed by tenants during the 2020 calendar year. The objective of the measure is to encourage landlords to reduce company rents by means of a tax deduction, which will correspond to twice the amount of rent reduction granted, up to a maximum of EUR 15,000.

Your contact for more details: Thierry Lesage (thierry.lesage@arendt.com)
(27/05/20)

The law of 24 July 2020 implements into domestic law Council Directive (EU) 2020/876 of 24 June 2020, which amends Directive 2011/16/EU to address the urgent need to defer certain time limits for the filing and exchange of information in the field of taxation because of the COVID-19 pandemic (the “DAC amendment”).

In line with the DAC amendment, the law provides for an extension of the reporting deadlines for the purposes of Directive 2018/822/EU (“DAC 6”). The deadlines for the communication and exchange of information provided for in the law of 25 March 2020 (the “DAC 6 law”), which implements the provisions of DAC 6 into domestic law, have been extended by 6 months.

In practice, this means that reports for reportable cross-border arrangements from the period 25 June 2018 – 30 June 2020 should be filed by 28 February 2021 (instead of 31 August 2020). In addition, the 30-day reporting period for cross-border arrangements that become reportable from 1 July 2020 should begin on 1 January 2021. Finally, the first automatic exchange of information between Member States should take place on 30 April 2021 (instead of 31 October 2020).

The notification obligations incumbent upon intermediaries covered by legal professional privilege (i.e. lawyers, chartered accountants and auditors) should also start as from 1 January 2021.

You can find more details on former deadlines in our newsflashes of 23 March 2020 and 11 May 2020.

The law provides for the retrospective entry into force of the provisions as of 30 June 2020.

Your contact for more details: Thierry Lesage (thierry.lesage@arendt.com)
(29/07/20)

The law of 24 July 2020 implements into domestic law Council Directive (EU) 2020/876 of 24 June 2020, which amends Directive 2011/16/EU to address the urgent need to defer certain time limits for the filing and exchange of information in the field of taxation because of the COVID-19 pandemic.

To this end, the law of 24 July 2020 introduces provisions amending the law of 18 December 2015 on common reporting standards (the “CRS law”).

In addition, as announced by the Luxembourg government in early June, the law of 24 July 2015 related to FATCA (the “FATCA law”) has been modified to extend the reporting deadline it imposes for the year 2019.

Due to these amendments, the deadlines in the CRS law and FATCA law for the communication of data for the year 2019 have been extended by 3 months (i.e. this information should be reported by 30 September 2020).

The law provides for the retrospective entry into force of the provisions as of 30 June 2020.

Your contact for more details: Thierry Lesage (thierry.lesage@arendt.com)
(25/08/2020)