COVID-19 – Teleworking and the tax treatment of frontier workers

March 25, 2020

In the exceptional health context of the COVID-19 epidemic and in light of the public authorities’ directives, companies and their employees are adapting to ensure the continuity of their business activity. Teleworking is becoming increasingly widespread, giving rise to questions notably with regards to frontier workers.

France, in agreement with its German, Belgian, Swiss and Luxembourg partners, is securing the situation of frontier workers: their being restricted to work from home will not have any consequences on the tax regime applicable to them.

Germany, Belgium, Switzerland:
The tax treaties concluded with these countries lay down specific tax regimes for frontier workers: their salaries are taxed solely in the State of residence (France for frontier workers residing there), on the condition that they do not exceed a certain number of days worked outside the frontier zone of the other State.
In agreement with Belgium and Switzerland, the days during which frontier workers end up working from home due to the directives relating to the COVID-19 epidemic will not be counted and therefore will not have any impact on the tax regime applicable to them.
Regarding Germany, under the agreement concluded in 2006, the situation of (FR/GER) frontier workers will not be impacted by the confinement period.

In the absence of any specific tax regime for frontier workers, the general rule applies, meaning that the salaries are taxed in the State of the place of work (for French resident frontier workers who commute to Luxembourg to work: their remuneration is taxed in Luxembourg). Since the entry into force of the new French-Luxembourg tax treaty, French frontier workers can telework from France for their Luxembourg employer for up to 29 days without the associated remuneration being taxed in France.
It has been agreed between France and Luxembourg that the period during which the French frontier worker is forced to work from home may be disregarded for purposes of calculating the 29 days and therefore will have no impact on the taxation of his or her remuneration.

Spain and Italy:
Lastly, for frontier workers working in Spain and Italy, the tax regime is more flexible: it is based on the performance of a regular frontier activity, without any precise condition as to the number of days spent in the country of work and the country of residence. The tax regime applicable to these frontier workers should therefore remain unchanged, without difficulty.

In the face of this unprecedented situation, the tax administration will most likely take an accommodating approach to any particular situations that may arise. We are available to assist you in identifying and implementing any steps that may be beneficial to your company.

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