[Updated on 29/06/2020] In response to the COVID-19 crisis, on 17 March 2020, the Luxembourg Government has declared the “state of emergency” for Luxembourg and announced several tax measures for legal entities and individuals. The main objective of these measures is to alleviate the financing and liquidity needs of companies and self-employed persons who are heavily impacted by the economic implications of the COVID-19 pandemic.
Tax deferral
With regard to direct taxes, tax payment deferrals will be granted to companies and certain individuals. More specifically, legal entities and self-employed persons performing a commercial, agricultural, forestry or liberal activity and experiencing liquidity problems due to the COVID-19 crisis may request a cancellation of their tax advances for the first two quarters of 2020. This measure applies only to (i) income tax for individual taxpayers and (ii) corporate income tax and municipal business tax for corporate taxpayers, excluding net wealth tax.
Moreover, legal entities or self-employed persons may also apply for a four-month extension on the payment deadline for taxes which became due after 29 February 2020. This deadline extension will not be penalised by late interest payments and applies to (corporate) income tax, municipal business tax and net wealth tax. Payment of withholding tax on salaries is however not eligible for the deadline extension.
In order to benefit from these measures, taxpayers must send a specific form to the Luxembourg authorities for direct taxes (Administration des contributions directes). The forms are available for download under the following address hyperlinks:
- Request for cancellation of tax advances: https://impotsdirects.public.lu/dam-assets/fr/formulaires/covid/annulationavances.pdf
- Request for a four-month extension on the payment deadline https://impotsdirects.public.lu/dam-assets/fr/formulaires/covid/delaipaiement.pdf
Any request is automatically accepted upon receipt by the authorities.
Furthermore, the deadline for submitting tax returns has been extended to 30 June for all legal entities and individuals. The deadline for submitting, revoking or amending a request for individual tax assessment for married couples is extended to the same date.
VAT refund
With regard to indirect taxes, the competent Luxembourg authorities (Administration de l’Enregistrement, des Domaines et de la TVA) will henceforth reimburse all VAT credit balances below EUR 10,000. This measure equally seeks to ensure the liquidity of approximately 20,000 businesses established in Luxembourg.
Teleworking for Belgian, French and German cross-border commuters
Additionally, the Luxembourg Government has agreed on an “exceptional measure” with the Belgian, French and German Governments regarding the taxation of Belgian, French and German cross-border commuters normally working in Luxembourg and now teleworking from their homes.
In principle, an employee who resides abroad but works in Luxembourg is subject to tax in Luxembourg on the remuneration corresponding to the work actually performed in Luxembourg.
The final protocol of the double tax treaty concluded between Luxembourg and Belgium contains a tolerance threshold to such principle of 24 working days spent in the State of residence (e.g. Belgium) or in a third State. If this threshold of 24 days is exceeded, any remuneration realised outside Luxembourg is in principle taxed in the residence State. The same principle applies to the new double tax treaty recently concluded between Luxembourg and France as well as the protocol of the double tax treaty between Luxembourg and Germany with the only exception of providing for different thresholds, e.g. 29 days (France) and 19 days (Germany) instead of 24 days (Belgium).
The Belgian, French, German and Luxembourg authorities declared the current sanitary situation to constitute “a case of force majeure” and have announced that the application of the respective thresholds are to be suspended.
As a result, as of 14 March 2020, any days of presence of a cross-border worker at his home, in particular to carry out teleworking, are not to be taken into account for the calculation of the 24-day (Belgium) or 29-day (France) period. The measures applying to French and Belgian cross-border workers are applicable until 31 August 2020.
The measure applying to German cross-border workers is applicable as of 11 March 2020 and lasted until 30 April 2020, at which point an automatic monthly renewal took place, which will continue unless Germany or Luxembourg terminate the agreement.
Conclusion
The Luxembourg Government has decided extensive tax deferral measures and ordered VAT refunds for businesses and self-employed persons in order to counteract the economic impacts from the COVID-19 crisis. Moreover, the tolerance threshold relating to teleworking for Belgian, French and German cross-border commuters has been provisionally suspended, so that teleworking for more than 19 working days (Germany), 24 working days (Belgium) or 29 working days (France) in 2020 should not trigger taxation of (a portion of) the employee’s remuneration in Belgium, France or Germany respectively.
By taking the above mentioned measures, the Luxembourg Government is trying to ease the economic implications arising from the COVID-19 virus as much as possible.
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