Posted on 04 May 2022

CROSS-BORDER COMMUTERS: Can I be assimilated to a Luxembourg resident? Which implications are there?

More than 200,000 persons cross the border each day to get to work in Luxembourg. However, as non-residents of Luxembourg, how are these thousands of cross-border commuters taxed? Can they benefit from the same tax advantages available to Luxembourg residents? 
Over the past few decades, tax treaties aim to grant the same advantages to residents aswell as to non-residents. Nevertheless, there are specific conditions  to be complied with.
To benefit from the same advantages and deductions as Luxembourg residents, it is necessary to be assimilated to a Luxembourg resident. In other words, the cross-border worker will be considered as a Luxembourg resident for tax purposes and will be able to benefit from the same advantages and deductions.
Please note: This also implies that you have to declare your worldwide income in Luxembourg, i.e. your income from Luxembourg and your income from abroad. Your foreign income will be considered for the calculation of the global tax rate, but this rate will only apply to your Luxembourg income.
To be eligible, you must meet at least one of the three conditions below:
  • At least 90% of the household income is realized in Luxembourg

  • The household realizes less than 13,000 euros net income abroad (excluding Luxembourg)

  • For Belgian residents only, if more than 50% of the professional income is realized in Luxembourg.
If at least one of the conditions is met, then the taxpayer can be considered as a Luxembourg resident. For married or civil union couples, at least one of the two spouses/partners must meet one of the three conditions.
However, if you do not meet these conditions, only your Luxembourg income will be considered but you will not be able to claim any deductions.

1. John is resident in France. He is employed in Luxembourg and has 10,000 euros net rental income in France. John’s foreign income in France is less than 13,000 euros, therefore he can be assimilated to a Luxembourg resident.

2. Chloe and her partner are resident in Germany. Chloe works in Luxembourg and her partner in Germany. Chloe fulfills the first condition because 100% of her income is generated in Luxembourg, so they can be assimilated to Luxembourg residents, even if Chloe's partner has income in Germany.

3. Eva lives in France. She is employed in Luxembourg and receives a pension in France of 15,000 euros per year. Since her foreign income is more than 13,000 euros, she cannot be assimilated to a Luxembourg resident.
Note that married non-residents cannot be assigned tax class 2 directly but will have a fixed tax rate.
This is the equivalent of tax class 2 for non-residents. Once taxed at a fixed rate, non-resident married taxpayers will be required to file their tax return in Luxembourg every year.
In fact, the processing of the tax return allows the rate to be updated, either upwards or downwards, depending on the increase or decrease in income.

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