The fiscal and social impact of teleworking in Luxembourg for 2023
Carrying out one’s professional activity in part or in whole by teleworking, can have implications on one’s taxation and one’s social security. Understand the impacts with concrete examples.
From 1uh January 2023, the agreements issued between Luxembourg, France and Belgium, the number of days tolerated in teleworking is 34 days per year. For Germany, it remains at 19 days. This number of days is calculated over a full year, and full-time, 40 hours or per week, from 1uh January to December 31. Therefore, if it is a part-time contract, or if the work year is not complete, this threshold must be prorated by 34 days or 19 days, depending on the country of residence.
How is the tax calculated in Luxembourg in the context of teleworking?
Cross-border workers can telework and be taxed in Luxembourg if they are not subject to the tolerance thresholds. They will therefore be taxed in Luxembourg at 100%.
However, it is important to note that if these thresholds are exceededall the days worked from home, starting from the first, will be exempt from tax in Luxembourg but taxed in the country of residence. The rest of the days worked in Luxembourg will be taxed in Luxembourg.
It is important to remember that the combination of taxable and exempt income represents the worldwide income in each country.
- There was, however, an exception for civil servants or qualified as such; indeed, they were taxed from 1uh day in their country of residence, even if they did not exceed the limit of 34 days or 19 days for Germany. A new legal framework allows them to take advantage of the 34-day tolerance thresholds, like non-civil servants. Special feature for French residents where taxation is specific depending on the case.
Teleworking and social security: the 25% rule
The employee must not carry out his professional activity outside Luxembourg for more than 25% of his working time, i.e. approximately 50 days per year for a full-time job. If it exceeds this threshold by 25%, he will no longer be affiliated to Luxembourg social security, and he will no longer receive Luxembourg family allowances or social benefits. Moreover, he will no longer contribute to his retirement in Luxembourg.
Thereby, he will be affiliated to the social security of his country of residence. In addition, all social benefits paid by Luxembourg during the year concerned, and therefore undue, must be reimbursed (CNS benefits, family benefits, study grants, parental leave, etc.). Finally, social security contributions are higher in neighboring countries than in Luxembourg.
The company that employs you must, in principle, register you with the foreign social security organization and pay the foreign social security contributions there.
Examples of the tax impact of telework, in Luxembourg and in the country of residence
In the context of teleworking, with an overrun of the authorized thresholds, what is the tax reduction in Luxembourg and what is the tax increase in the country of residence?
The tax amounts indicated below do not represent the overall amount of taxes but only the impact on income exempt in Luxembourg and taxable in France or Belgium.
The tax amounts indicated, in France or in Belgium, are given for information only, but are very close to reality, even if certain parameters may slightly modify these calculations.
All examples below are based on 50 full-time telecommuting days.
For Belgian residents, we run two simulations:
Calculation 1 : real estate purchase made after 01/01/2016 (beneficiary of the tax credit in the form of a housing voucher, with or without income from Belgium)
Calculation 2 : real estate purchase made before 01/01/2016 (the loan can give a tax gain if there is taxable income in Belgium)
Example 1 : Married couple, 2 children, the 2 salaried employees in Luxembourg
Married couple, 2 children, both employees in Luxembourg | Input 1 | Contribution 2 |
Gross annual income | €75,000 | €40,000 |
Interest on mortgage | €6,000 | |
Various deductible insurances | €2,500 | |
Childcare costs | €2,000 or 120 days of custody | |
Reduction of tax in Luxembourg | €2,702 | |
If French resident: Additional tax of: | + or – €1,094 | |
If Belgian resident additional tax of: calculation 1 | €5,217 | |
If Belgian resident additional tax of: calculation 2 | €3,493 |
* Calculation of taxes established on the basis of the official simulator of the administration on “impots.gouv.fr” and the rules of calculations of 2022
For French residents, there is an overall reduction in household tax, so teleworking is advantageous.
For Belgian residents, there is a tax increase of €2,515 (5,217 – 2,702) in calculation 1 and only €791 (3,493 – 2,702, in calculation 2).
Example 2 : Married couple, 2 children, 1 employee in Luxembourg and 1 employee in their country of residence.
Married couple, 2 children, 1 employee in Luxembourg, 1 in his country of residence | Input 1 | Contribution 2 |
Gross annual income | €85,000 | €22,000 |
Interest on mortgage | €6,000 | |
Various deductible insurances | €2,500 | |
Childcare costs | €2,000 or 120 days of custody | |
Reduction of tax in Luxembourg | €2,728 | |
If French resident: Additional tax of: | + or – €2,401 | |
If Belgian resident additional tax of: calculation 1 | €7,100 | |
If Belgian resident additional tax of: calculation 2 | 5 5 34 € |
For French residents, there is a decrease of €327.
For the Belgian resident, the additional tax cost is very significant.
Example 3 : A married couple, 2 children, 1 employee in Luxembourg, 1 taxpayer without income.
Married couple, 2 children, 1 employee in Luxembourg, the other without income | Input 1 | Contribution 2 |
Gross annual income | €85,000 | 0€ |
Interest on mortgage | €6,000 | |
Various deductible insurances | €2,500 | |
Childcare costs | €2,000 or 120 days of custody | |
Reduction of tax in Luxembourg | €1,890 | |
If French resident: Additional tax of: | + or – 0 € | |
If Belgian resident additional tax of: calculation 1 | €4,682 | |
If Belgian resident additional tax of: calculation 2 | €2,972 |
For the French resident, the impact is very positive, given the overall tax difference.
For the Belgian resident, the additional cost is €2,792 for calculation 1 and €1,458 for calculation 2. Is exceeding 16 days of teleworking really worth it?
Examples 4 and 5 : A single taxpayer (not PACS), 1 dependent child.
Single and non-pacsed taxpayer, 1 dependent child in class 1A | Contributory income of €85,000 | Contributory income of €40,000 | |
Gross annual income | €85,000 | €40,000 | |
Interest on mortgage | €3,000 | €3,000 | |
Various deductible insurances | €1,200 | €1,200 | |
Childcare costs | €1,800 or 120 days of storage | €1,800 or 120 days of storage | |
Reduction of tax in Luxembourg | €4,603 | 498 € | |
If French resident: Additional tax of: | + or – €2,765 | 95 € | |
If Belgian resident additional tax of: calculation 1 | €5,946 | €1,738 | |
If Belgian resident additional tax of: calculation 2 | €4,314 | 433 € |
For French residents, the tax gain is €1,838 for an income of €85,000 and €403 for an income of €40,000.
For the Belgian resident, the additional tax cost will each time be greater than €1,300 for calculation 1.
While conversely in calculation 2, it is less than the tax reduction in Luxembourg. This makes telework very attractive here.
Examples 6 and 7 : A single taxpayer (not PACS), without dependent children.
Single and non-pacsed taxpayer, without dependent children in class 1 | Contributory income of €65,000 | Contributory income of
€40,000 |
|
Gross annual income | €65,000 | €65,000 | |
Interest on mortgage | €2,000 | €2,000 | |
Various deductible insurances | 800 € | 800 € | |
Reduction of tax in Luxembourg | €3,433 | €1,147 | |
If French resident: Additional tax of: | + or – €2,078 | 0€ | |
If Belgian resident additional tax of: calculation 1 | €4,707 | €2,128 | |
If Belgian resident additional tax of: calculation 2 | €3,075 | 660€ |
For the French resident, the tax gain is €1,355 for an income of €65,000.
For the Belgian resident, exceeding the 34 days generated a higher tax if he took out his mortgage after 2016 (case 1) while in case 2, he realizes a tax gain of more than €400 in the event of telework .
Conclusion : For the French border workerteleworking that exceeds the 34 days allowed, as here with an additional 16 days, can reduce taxes in most cases.
For the Belgian cross-border commuter, in some special cases the advantage is for the taxpayer because the tax increase can be reduced, but in most other cases the increase is quite substantial. Perhaps it is preferable, in these cases of necessary increase in tax, to limit oneself to 34 days of teleworking by a way of not being taxed more in one’s country of residence.
Warning : these are just a few random examples; one should neither generalize nor draw too hasty and erroneous conclusions. One case is not the other!
Depending on the spouse’s income, loan interest deductions, insurance, childcare or domestic costs, any rental income, everything can change.
It is therefore strongly advised to have a precise tax analysis drawn up before deciding to do more or less than 34 days of telework, in order to check whether the impact is attractive, without effect or, on the contrary, quite penalizing.
This article is taken from Tax Guide 2023 which will be released in early March.
AssCoFisc S.à.rl, is also the main editor of your “Taxes Guide”.
“AssCoFisc can also, on simple request, organize a conference within your company, on this subject of Teleworking and its tax impacts or on any other tax subject”
The society AssCoFisc S.à.rlpresent for more than 25 years in Luxembourg is specialized in the taxation of employees in Luxembourg, expert in taxation of cross-border workers, it is represented by Philippe Graces, Tax expert graduate of the LSC (Luxembourg School for Commerce), Graduate in Accounting and Taxation from the Belgian Chamber of Accountants and Chartered Accountants, as well as a graduate in Wealth Management
We offer you a tax simulation as well as a detailed explanation of all tax-deductible products in Luxembourg, either by sending us an email ([email protected]) or by calling us on (00352) 691 45 63 39.
“The taxation of cross-border workers is our speciality! » Tax advisor in Luxembourg, with nearly 25 years of experience in the tax field, Philippe Graces is at your disposal for any further information. |
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