Germany and Luxembourg have extended for one month an agreement that prevents the double taxation of cross-border workers working from home.
All German cross-border workers employed in the private sector in Luxembourg who are working from home will continue to pay tax on their income in Luxembourg, according to a June 30 release from German member of Parliament Andreas Steier.
Germany and Luxembourg signed an agreement April 3 to clarify the tax status of cross-border workers who work from home as a result of the COVID-19 pandemic. Under the agreement, days on which workers work remotely from their main residence because of the pandemic measures are considered working days in the country in which they normally would work.
Days worked from home during the pandemic will not apply under the 19-day rule in the 2011 agreement on taxation of wages of cross-border workers. That agreement states that if an employee performs work in their state of residence, an exemption in that state applies to the wages earned if the worker is present in that state for fewer than 20 days in a calendar year, and the wages are taxed in part by the state that employs the worker.
“I am pleased that Luxembourg and Germany continue to take the situation of tens of thousands of employees in our greater region into account,” Steier said in the release.
The April 3 agreement was applied retroactively from March 11 through April 30, and automatically extends to the end of the next calendar month unless one of the competent authorities terminates it. A termination of the agreement is not “foreseeable at the moment,” according to Steier’s release.
Many countries relaxed their tax residency rules for cross-border workers in response to the pandemic. Germany signed agreements on taxation of cross-border workers with the Netherlands on April 6, Austria on April 15, and Belgium on May 6. Luxembourg and France reached a deal on taxation of cross-border workers March 19. Belgium and Luxembourg decided March 17 not to enforce a rule that would have taxed cross-border workers in their home countries after 24 days of working outside their country of employment.