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France Extends Cross-Border Tax Pacts With 4 Countries

Posted on Sep. 1, 2020

France has extended agreements with four neighboring countries to allow cross-border workers to continue to benefit from special tax regimes while they work from home during the coronavirus pandemic.

France has agreed to extend its cross-border agreements with Belgium, Germany, and Switzerland, until December 31, according to an August 31 release from the French Ministry of Finance.

Luxembourg announced March 19 that the pandemic constitutes a case of force majeure. Under the 2018 France-Luxembourg tax treaty, cross-border workers may telework from home or a third country for up to 29 days in a tax period without having their income taxed there. (2019 treaty protocol.)

To that end, France and Luxembourg decided August 27 to extend until December 31 a July 16 agreement  that provides that tax authorities won’t include remote work during the pandemic when calculating the 29-day period. The original agreement applied from March 14 to August 31.

These agreements prevent double taxation of employees who live in France and work in a different country. They also include provisions for cross-border workers who are not eligible for cross-border tax regimes. These workers, the release says, have the option of treating days worked at home because of recommendations and instructions related to COVID-19 as days worked in the state where they usually carry out their activity, and would remain taxable there.

Many countries relaxed their tax residency rules for cross-border workers at the beginning of the pandemic out of concerns that individuals and businesses could face unforeseen tax obligations from government-mandated lockdowns.

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