TAXATION OF EMPLOYEES RESIDENT IN GERMANY
Dear partners,
Our various newsletters issued this year have informed you about the developments regarding the taxation of German cross-border workers employed in Luxembourg.
Generally, employers who employ German cross-border workers are required to calculate withholding tax only in respect to the days the employee has physically worked in Luxembourg.
In fact, days worked sporadically in Germany or in a third country are taxable in Germany under the 1958 Germany-Luxembourg Double Taxation Treaty.
By virtue of the Mutual Agreement signed on 26 May 2011, which introduces an exemption of 19 days, two scenarios may arise:
- either the 19-day threshold is not exceeded for the year 2011 – in which case, the withholding tax does not need to be adjusted in any way; or
- the 19-day threshold is exceeded for the year 2011 – in which case, the withholding tax has be adjusted in order to exempt all days worked outside Luxembourg.
In order to ensure the accuracy of your pay books for the year 2011, we kindly invite you to send us, no later than 31 December 2011, the list of your employees resident in Germany who have worked more than 19 days outside Luxembourg in 2011.
Please note that the working days to be taken into account includes:
- productive working days spent outside Luxembourg: business trips, visits to customers, attendance at work-related meetings, hours/days spent on stand-by, with or without intervention, teleworking and, where applicable, overtime worked in that connection;
- non-productive working days spent outside Luxembourg: training, seminars, social activities organised by the employer or the group and, where applicable, overtime worked in that connection.
In order to be able to proceed with the adjustment of the Luxembourg withholding tax and to determine the amount taxable in Germany, we request different information which are detailed in the two files attached:
- "Days worked outside Luxembourg 2011";
- "Calendar for Non-Resident Germans"
We would be grateful if you could return these two files, duly completed, to us by no later than 31 December 2011.
Should you have any further questions, please do not hesitate to contact us.
Yours truly,
The IF Payroll & HR team
