Luxembourg cross-border workers: Germany, France, Belgium

In Luxembourg, due to the tiny size of the country and to the high costs involved in renting/ buying property in the country, most of the workers are cross-border (frontaliers). This way, they can benefit from a higher remuneration, while paying a fraction of the housing costs that the residents have to cover.

This means that they may reside in Germany, France or Belgium and work in Luxembourg, so they commute daily to Luxembourg to work and then they travel back to their respective residence country during weekdays.

These professionals, when they are EU/EFTA nationals, can come and go without any restriction, nor any obligation to register in Luxembourg. If they are third-country nationals however, they must hold a valid work permit in any of the aforementioned countries and a valid employment contract, on which it is clearly stated that they might need to work for some days of the month in Luxembourg. Nonetheless, many of them do not have these documents in place, hence they are non-compliant and they could expose their end client, recruitment agency and management company (if any) to a considerable risk of fines and/ or prosecution.

Taxes

Cross-border workers working compliantly in Luxembourg have nothing to fear, whether they are employed or self-employed. They are paying taxes in Luxembourg for their income generated in the country but not for their worldwide income, as they are non-residents. Employees are taxed at source and self-employed individuals have to fill out a tax return by the 31st of March of the year that follows the tax year. The fiscal year in Luxembourg is the calendar year, running form the 1st of January to the 31st of December.

There are DTA (Double Taxation Agreements) in place between Luxembourg and these three adjacent countries. Basically, when a person comes to Luxembourg to live and work for less than 182 days in any given 12-month period, he/ she will only pay taxes in Luxembourg for the Luxembourgish income and in his/ her home country for the worldwide income. After this period, the worker is considered a resident and has to pay taxes in Luxembourg for the worldwide income.

Cross-border workers are, by their very nature, non-residents for an indefinite period of time.

Social security

Employees in Luxembourg pay their part of the social security in Luxembourg just like the residents, unless they are coming during a detachment from their mother company in France, Belgium or Germany. In that case, they provide their Luxembourgish employer with an A1 certificate for a maximum duration of 2 years. Once this period elapses, they need to pay social security in Luxembourg. In reality, most cross–border workers prefer to pay the social security in Luxembourg as it costs less. However, they are not entitled to the same benefits, notably regarding the child benefits. A new law has been introduced to change that and equalise these disparities.

Self-employed professionals in Luxembourg, can also provide the Social Security administration (CCSS) with an A1 certificate for a maximum duration of 2 years, if they are paying social security in their residence country. As in Germany it is not compulsory to contribute to a pension fund for the freelancers, they must do so in Luxembourg.

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