Understanding the specific provisions of Luxembourg tax law applying to taxpayers resident in France

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Unlike other neighbouring countries, Luxembourg does not have a special tax regime for cross-border workers, and the general rule of taxation at source applies. Accordingly, income earned by cross-border workers employed in Luxembourg is taxed in the country where they are employed, i.e. the Grand Duchy.

However, taxpayers who do not reside in Luxembourg are generally taxed on the entirety of their worldwide income in their country of residence. In order to prevent the income of non-residents cross-border workers in Luxembourg from being taxed both in the country where they are employed and in their country of residence, the Grand Duchy has entered into double taxation avoidance agreements, in particular with neighbouring countries, such as France, Belgium and Germany. In most cases, these bilateral tax treaties were negotiated on the basis of the model treaty drawn up by the Organisation for Economic Co-operation and Development (hereinafter, the 'OECD model treaty').

Bilateral tax treaties are designed to avoid the risk of double taxation and confer the right to tax particular types of income to either the source country or the residence country. They also contain provisions aimed at eliminating double taxation, namely by way of the exemption method or the deduction method.

Thus, as part of their reporting obligations, cross-border workers employed in Luxembourg or receiving a pension or rental income from Luxembourg must identify the country entitled to tax their income.

Who is concerned

All taxpayers resident in France who receive income originating in Luxembourg and/or another country and who file income tax returns in Luxembourg and/or in their country of residence.

How to proceed

Treatment as a resident taxpayer

Under certain conditions, French cross-border taxpayers employed in Luxembourg may opt to be treated, for tax purposes, as a taxpayer resident in Luxembourg by filling in the appropriate boxes on page 3 of the 'model 100' tax return form. The taxpayer resident in France must then fill in a tax return declaring all of their household’s income, earned both in the residence country and abroad. Foreign income is exempt from tax under the rules laid down in the double taxation avoidance agreement entered into between France and Luxembourg. However, this income is taken into account to determine the average tax rate applicable to income taxed in Luxembourg.

Double taxation avoidance agreement

Pursuant to the provisions of the double taxation avoidance agreement entered into between France and Luxembourg, the different types of income are reported in the income tax return as either exempt or non-exempt income.

The main objective of the OECD model treaty is to clarify, unify and guarantee the tax situation of taxpayers engaged in commercial, industrial, financial or other activities in different countries by ensuring that all countries implement standardised solutions for cases of double taxation. The OECD model treaty indicates whether the source country or the residence country is entitled to tax different types of income. For certain types of income, the treaty confers the exclusive right to tax to one of the countries, while for others the right to tax is shared by both countries (e.g. for dividends and interest).

To a large extent, Luxembourg has relied on the OECD model treaty when entering into or updating bilateral tax treaties. However, some clauses of the double taxation avoidance agreement entered into between France and Luxembourg depart from the principles of the OECD model treaty. In these cases, the principle set out in the OECD model treaty is mentioned, followed by the provisions of the current agreement with France.

Taxation of income from paid employment

Under the double taxation avoidance agreement between France and Luxembourg, income from paid employment is taxed in the country where the taxpayer is employed. French cross-border workers are therefore taxed in Luxembourg on the income from their employment in the Grand Duchy.

By way of an exception to the general principle stated above, income earned by French residents from temporary employment in Luxembourg is still taxed in France when the following 2 conditions are both satisfied:

  • the employee carries out a temporary assignment in Luxembourg for a period no longer than 183 days;
    and
  • the employee’s compensation continues to be borne and paid by their French employer (thus their compensation is not paid or borne by a Luxembourg entity).

When either of these conditions is not satisfied, the compensation is taxed in Luxembourg for the entire duration of the assignment.

Income from paid employment in Luxembourg is considered as non-exempt income in the Grand Duchy and as exempt income in France.

Taxation of income from pensions or annuities

According to the principles set out in the OECD model treaty, pensions and other similar remuneration paid in consideration of past employment are taxed in the recipient’s residence country.

Luxembourg has departed from this principle in the context of the double taxation avoidance agreement entered into with France. Consequently, retirement pensions paid by a Luxembourg social security institution to former cross-border workers resident in France are taxed in the source country, thus in Luxembourg. These payments constitute non-exempt income in Luxembourg and exempt income in France.

Taxation of income from a supplementary pension plan

Under the tax treaty between France and Luxembourg, income from a supplementary pension plan is taxed in the recipient’s residence country. Accordingly, pensions and annuities paid to a taxpayer resident in France under a supplementary pension plan set up by a Luxembourg employer are taxed in France, in line with the applicable legislation in that country.

This raises the problem of the double taxation of former cross-border workers resident in France at the time of the payment of supplementary retirement benefits, since the tax in Luxembourg on contributions made to the plan at the standard rate of 20 % is doubled by the taxation payments received, in line with the applicable legislation in France.

Income from a supplementary pension plan set up by a Luxembourg employer is thus considered as exempt income in Luxembourg and may be taxed in France, in line with the applicable legislation in that country.

Taxation of earnings from self-employment

Under the tax treaty between France and Luxembourg, earnings from self-employment are taxed in the country where the activity is pursued, provided that the self-employed individual has a fixed base of operations in that country. The notion of a fixed base of operations corresponds to the concept of a permanent establishment in which the taxpayer carries on business.

Accordingly, income earned by a self-employed taxpayer resident in France through a fixed place of business located in Luxembourg is taxed in Luxembourg. This income constitutes non-exempt income in Luxembourg and exempt income in France.

Directors' fees originating in Luxembourg that a non-resident taxpayer receives for serving as a director, auditor or in a similar position are taxed in Luxembourg under the category of 'Earnings from self-employment'. Under the tax treaty between France and Luxembourg, directors' fees paid by a Luxembourg company to taxpayers resident in France are taxed in Luxembourg. These directors' fees are non-exempt income in Luxembourg and exempt income in France.

Taxation of rental property income

Under the tax treaty between Luxembourg and France, the right to tax rental property income is conferred on the country where the property is located. Income from the rental of property located in Luxembourg and received by a taxpayer resident in France is therefore taxed in the Grand Duchy.

Income from the rental of property located in Luxembourg is taxable (non-exempt) income in Luxembourg and exempt income in France.

Taxation of capital gains on real property

Under the double taxation avoidance agreement between France and Luxembourg, capital gains from the sale of real property are taxed in the country where the property is located. Accordingly, the capital gain realised by a taxpayer resident in France on the sale of a property located in Luxembourg is taxed in Luxembourg.

Capital gains realised on the sale of properties situated in Luxembourg are exempt income in France and non-exempt income in Luxembourg.

Taxation of capital gains on the sale of assets other than real estate

Under the tax treaty between France and Luxembourg, capital gains on disposals of assets, speculative gains and liquidation surpluses are taxed in the recipient’s residence country. Accordingly, capital gains realised by a taxpayer resident in France on the sale of assets other than real estate, notably the sale of shares and/or securities, are taxed in France.

Capital gains realised on the sale of these assets are not taxed in Luxembourg—they are considered as exempt income in Luxembourg when the taxpayer opts to be treated, for tax purposes, as a Luxembourg resident—but instead in France, in line with the applicable legislation in that country.

Taxation of income from movable assets

Under the tax treaty between France and Luxembourg, dividends and interest are taxed in the recipient’s residence country; the source country can withhold tax at a rate of no more than 15 % of the gross amount of dividends and 10 % of the gross amount of interest (sharing of right to tax).

Dividends paid by Luxembourg companies to natural persons resident in France or Luxembourg are taxable and subject to a withholding tax corresponding to 15 % of the gross amount, in line with applicable Luxembourg legislation. Dividends are also taxed in France, in line with the applicable legislation in that country. This income may also be taken into account in case of taxation by tax base, at least for the determination of the tax rate.

Interest payments originating in Luxembourg are taxed in France, in line with the applicable legislation, and are considered as exempt income in Luxembourg when the taxpayer opts to be treated as a Luxembourg resident (for more information, see the pages 'Identifying and declaring interest paid by a Luxembourg bank' and 'Identifying and declaring interest paid by a foreign bank').

It is worth noting that, under the EU Savings Directive, Luxembourg paying agents are required to deduct a 35 % withholding tax from certain types of interest paid to taxpayers resident in France. The withholding tax does not apply when the taxpayer resident in France opts for the exchange of information or submits to the Luxembourg paying agent a statement drawn up by the competent French authority certifying that this income is from a known source.

Forms / Online services

Income tax return for resident and non-resident natural persons (form 100)

To complete your application, the information about you collected from this form needs to be processed by the public administration concerned.

That information is kept by the administration in question for as long as it is required to achieve the purpose of the processing operation(s).

Your data will be shared with other public administrations that are necessary for the processing of your application. For details on which departments will have access to the data on this form, please contact the public administration you are filing your application with.

Under the terms of Regulation (EU) 2016/679 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, you have the right to access, rectify or, where applicable, remove any information relating to you. You are also entitled to withdraw your consent at any time.

Additionally, unless the processing of your personal data is compulsory, you may, with legitimate reasons, oppose the processing of such data.

If you wish to exercise these rights and/or obtain a record of the information held about you, please contact the administration in question using the contact details provided on the form. You are also entitled to file a claim with the National Commission for Data Protection (Commission nationale pour la protection des données), headquartered at 1, Avenue du Rock'n'Roll, L-4361 Esch-sur-Alzette.

By submitting your application, you agree that your personal data may be processed as part of the application process.

Déclaration pour l'impôt sur le revenu pour personnes physiques résidentes et non résidentes (modèle 100)

Les informations qui vous concernent recueillies sur ce formulaire font l’objet d’un traitement par l’administration concernée afin de mener à bien votre demande.

Ces informations sont conservées pour la durée nécessaire par l’administration à la réalisation de la finalité du traitement

Les destinataires de vos données sont les administrations compétentes dans le cadre du traitement de votre demande. Veuillez-vous adresser à l’administration concernée par votre demande pour connaître les destinataires des données figurant sur ce formulaire. Conformément au règlement (UE) 2016/679 relatif à la protection des personnes physiques à l'égard du traitement des données à caractère personnel et à la libre circulation de ces données, vous bénéficiez d’un droit d’accès, de rectification et le cas échéant d’effacement des informations vous concernant. Vous disposez également du droit de retirer votre consentement à tout moment.

En outre et excepté le cas où le traitement de vos données présente un caractère obligatoire, vous pouvez, pour des motifs légitimes, vous y opposer.

Si vous souhaitez exercer ces droits et/ou obtenir communication de vos informations, veuillez-vous adresser à l’administration concernée suivant les coordonnées indiquées dans le formulaire. Vous avez également la possibilité d’introduire une réclamation auprès de la Commission nationale pour la protection des données ayant son siège à 1 Avenue du Rock'n'Roll, L-4361 Esch-sur-Alzette.

En poursuivant votre démarche, vous acceptez que vos données personnelles soient traitées dans le cadre de votre demande.

Einkommensteuererklärung für ansässige und nicht ansässige Personen (Vordruck 100)

Ihre in diesem Formular erfassten personenbezogenen Informationen werden von der zuständigen Verwaltungsbehörde verarbeitet, um Ihren Antrag erfolgreich abzuschließen.

Diese Informationen werden von der Behörde für den zur Verarbeitung erforderlichen Zeitraum gespeichert.

Die Empfänger Ihrer Daten sind die im Rahmen Ihres Antrags zuständigen Verwaltungsbehörden. Um die Empfänger der in diesem Formular erfassten Daten zu erfahren, wenden Sie sich bitte an die für Ihren Antrag zuständige Behörde.

Gemäß der Verordnung (EU) 2016/679 zum Schutz natürlicher Personen bei der Verarbeitung personenbezogener Daten und zum freien Datenverkehr haben Sie das Recht auf Zugang, Berichtigung und gegebenenfalls Löschung Ihrer personenbezogenen Informationen. Sie haben zudem das Recht, Ihre erteilte Einwilligung jederzeit zu widerrufen.

Weiterhin können Sie, außer in Fällen, in denen die Verarbeitung Ihrer Daten verpflichtend ist, Widerspruch einlegen, wenn dieser rechtmäßig begründet ist.

Wenn Sie diese Rechte ausüben und/oder Einsicht in Ihre Informationen nehmen möchten, können Sie sich unter den im Formular angegebenen Kontaktdaten an die zuständige Verwaltungsbehörde wenden. Sie haben außerdem die Möglichkeit, bei der Nationalen Kommission für den Datenschutz Beschwerde einzulegen (Commission nationale pour la protection des données, 1, Avenue du Rock'n'Roll, L-4361 Esch-sur-Alzette).

Wenn Sie Ihren Vorgang fortsetzen, akzeptieren Sie damit, dass Ihre personenbezogenen Daten im Rahmen Ihres Antrags verarbeitet werden.

Déclaration pour l'impôt sur le revenu 2017 pour personnes physiques résidentes et non résidentes (modèle 100)

Les informations qui vous concernent recueillies sur ce formulaire font l’objet d’un traitement par l’administration concernée afin de mener à bien votre demande.

Ces informations sont conservées pour la durée nécessaire par l’administration à la réalisation de la finalité du traitement

Les destinataires de vos données sont les administrations compétentes dans le cadre du traitement de votre demande. Veuillez-vous adresser à l’administration concernée par votre demande pour connaître les destinataires des données figurant sur ce formulaire. Conformément au règlement (UE) 2016/679 relatif à la protection des personnes physiques à l'égard du traitement des données à caractère personnel et à la libre circulation de ces données, vous bénéficiez d’un droit d’accès, de rectification et le cas échéant d’effacement des informations vous concernant. Vous disposez également du droit de retirer votre consentement à tout moment.

En outre et excepté le cas où le traitement de vos données présente un caractère obligatoire, vous pouvez, pour des motifs légitimes, vous y opposer.

Si vous souhaitez exercer ces droits et/ou obtenir communication de vos informations, veuillez-vous adresser à l’administration concernée suivant les coordonnées indiquées dans le formulaire. Vous avez également la possibilité d’introduire une réclamation auprès de la Commission nationale pour la protection des données ayant son siège à 1 Avenue du Rock'n'Roll, L-4361 Esch-sur-Alzette.

En poursuivant votre démarche, vous acceptez que vos données personnelles soient traitées dans le cadre de votre demande.

Einkommensteuererklärung 2017 für ansässige und nicht ansässige Personen (Vordruck 100)

Ihre in diesem Formular erfassten personenbezogenen Informationen werden von der zuständigen Verwaltungsbehörde verarbeitet, um Ihren Antrag erfolgreich abzuschließen.

Diese Informationen werden von der Behörde für den zur Verarbeitung erforderlichen Zeitraum gespeichert.

Die Empfänger Ihrer Daten sind die im Rahmen Ihres Antrags zuständigen Verwaltungsbehörden. Um die Empfänger der in diesem Formular erfassten Daten zu erfahren, wenden Sie sich bitte an die für Ihren Antrag zuständige Behörde.

Gemäß der Verordnung (EU) 2016/679 zum Schutz natürlicher Personen bei der Verarbeitung personenbezogener Daten und zum freien Datenverkehr haben Sie das Recht auf Zugang, Berichtigung und gegebenenfalls Löschung Ihrer personenbezogenen Informationen. Sie haben zudem das Recht, Ihre erteilte Einwilligung jederzeit zu widerrufen.

Weiterhin können Sie, außer in Fällen, in denen die Verarbeitung Ihrer Daten verpflichtend ist, Widerspruch einlegen, wenn dieser rechtmäßig begründet ist.

Wenn Sie diese Rechte ausüben und/oder Einsicht in Ihre Informationen nehmen möchten, können Sie sich unter den im Formular angegebenen Kontaktdaten an die zuständige Verwaltungsbehörde wenden. Sie haben außerdem die Möglichkeit, bei der Nationalen Kommission für den Datenschutz Beschwerde einzulegen (Commission nationale pour la protection des données, 1, Avenue du Rock'n'Roll, L-4361 Esch-sur-Alzette).

Wenn Sie Ihren Vorgang fortsetzen, akzeptieren Sie damit, dass Ihre personenbezogenen Daten im Rahmen Ihres Antrags verarbeitet werden.

Who to contact

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