5 key pointers for cross-border workers in Luxembourg

1) Paying taxes as a cross-border worker

Cross-border workers are liable for taxation in Luxembourg. However, unlike other countries, there are no special tax rules for cross-border workers. Instead, the general withholding tax system applies, which means that taxes are deducted directly from cross-border workers' income. This includes salaries, wages, pensions and other income from an activity. To avoid double taxation, Luxembourg has signed double taxation agreements with certain countries, including its neighbours, France, Belgium and Germany.

Cross-border workers are only required to submit an income tax return in Luxembourg under certain conditions. If they choose to do so on a voluntary basis, it may be worth considering opting to be treated as a resident for tax purposes. However, cross-border workers may need to submit a tax declaration in their country of residence if they or their spouse earn domestic income there.

3) Social security cover for cross-border workers in Luxembourg

Any person who is employed in Luxembourg must be registered with the Social Security Centre (CCSS). Registration with the CCSS provides employees with health and maternity insurance, pension insurance, accident insurance and long-term care insurance. Employers have to register employees with the Luxembourg social security centre within eight days of the start of their employment contract. A social security card is then automatically sent to the registered employee. Social contributions are deducted directly from the employee's salary, as are taxes. Cross-border workers may also register with a health insurance fund in their country of residence. The competent Luxembourg health insurance fund issues a certificate for this purpose.

4) What health services are cross-border workers entitled to?

In the event of an illness, the Luxembourg health insurance fund covers some of the costs for the insured person. Cross-border workers can therefore be reimbursed for the costs of healthcare services via their competent fund. However, the health insurance fund only covers healthcare services provided by medical professionals or facilities that are approved by the health insurance fund. To receive a reimbursement for healthcare services in their country of residence, cross-border workers must also register with a health insurance fund there.

Adequate support for children

Parents often face the challenge of juggling their professional and family lives. However, as a cross-border worker in Luxembourg, you have various options to make life easier. The Grand Duchy offers the necessary support for infants and young adults:

• Free childcare facilities for all ages
• Financial support for top-quality childcare
• Financial aid for students

5) Remote working as a cross-border worker

Cross-border workers who work from home must take both social security and tax aspects into account.

Following on from a special scheme implemented during the Covid-19 pandemic, a new multinational framework agreement which entered into force on 1 July 2023 allows cross-border workers to work from home between 25% and 50% of their total working hours under certain conditions, without this impacting their social security system. If the number of teleworking hours is below or above this percentage or if the framework agreement conditions are not met, the original European Directives apply. Therefore, people whose telework activity accounts for less than 25% of their total working time remain insured in their employer's country. For those who spend more than 50% of their working time in their home office, the social security system usually switches from the employer's country to the country of residence.

Different rules apply to tax liability. A cross-border worker's salary for days worked outside Luxembourg, e.g. when remote working, is generally taxed in the employee's country of residence. However, Luxembourg has concluded bilateral double taxation agreements with its neighbouring countries, which set tolerance thresholds (currently 34 days per year). If cross-border workers stay below this threshold, their salary is taxed in Luxembourg. If they exceed this threshold, whether by remote working or going on business trips abroad, the share of their income relating to the days worked outside Luxembourg is, in principle, subject only to taxation in their country of residence.