The Luxembourg Tax Authorities have clarified the 34-day leniency threshold for French cross-border workers in a circular dated 24 June 2026.
Circular L.G. – Conv.D.I. no 61 of 24 June 2026 (the "Circular") replaces the circular dated 21 October 2020 and clarifies the detailed application of the 34-day leniency threshold set out in the France-Luxembourg double taxation treaty of 20 March 2018, modified by the amendment of 7 November 2022 (the "Treaty").
Below are the key points to note.
1. Background
As a general rule, the income of a cross-border employee is taxable in their country of residence, unless the work activity is carried out in the other State. However, the Treaty introduces a leniency rule: if a French resident employed in Luxembourg works for a maximum of 34 days per year in France and/or a third State, their entire remuneration remains taxable in Luxembourg.
2. How is the 34-day threshold calculated?
Included in the calculation — each (entire) day is deducted from the balance of 34 days:
- Physical presence outside Luxembourg — every day or fraction of a day of physical presence in France or a third State for the purpose of working there.
- Professional training — every day or fraction of a day of training attended outside Luxembourg.
Excluded from the calculation — these days are not deducted from the balance of 34 days:
- Leave, weekly rest periods and statutory public holidays (if the employee does not work).
- Sickness days.
- Incidents of force majeure.
3. Proportional reduction of the 34-day threshold
The 34-day threshold is reduced pro rata to working hours and to the duration of the contract over the year. Several scenarios are possible:
- Part-time — a 75% contract → 34 x 75% = 25-day threshold (rounded).
- Contract entered into during the year — started on 1 July → 34 x 6/12 = 17-day threshold.
- Combination of both — 75% from 1 October: combine the pro-rata calculations → (34 x 75%) x 3/12 = 6-day threshold (rounded).
4. Allocation of taxing rights
Summary under Article 14 of the Treaty, for an employee who is a tax resident in France with a Luxembourg employer and 220 working days per year:
- 200 days LUX + 20 days FR → threshold not exceeded → 100% Luxembourg.
- 200 days LUX + 10 days FR + 10 days third country → threshold not exceeded → 100% Luxembourg.
- 180 days LUX + 40 days FR → threshold exceeded → LUX: 180 days / FR: 40 days.
- 180 days LUX + 20 days FR + 20 days third country → threshold exceeded → LUX: 180 days / FR: 40 days.
Note: days spent in third States are added to days spent in France to calculate the threshold.
5. Consequences of exceeding the threshold
If the 34-day threshold is exceeded, the general rules reapply: France reacquires the right to tax the remuneration corresponding to all the days worked outside Luxembourg, not just those above the threshold.
Points to note:
- Overtime — taxable in the State where the work is actually carried out.
- Sickness and maternity benefits — taxed in the State that provides the social security benefits, regardless of the threshold.
- Termination payments and garden leave — taxable in the State where the work would normally have been carried out.
6. Burden of proof
It is for the taxpayer to prove that they were physically present in Luxembourg using any available means: employment contract, timesheets, travel orders, travel tickets, hotel bills, signed attendance registers or any other relevant document.
7. Practical recommendations
- Implement rigorous tracking of working days outside Luxembourg for all cross-border employees.
- Systematically file evidence of presence (travel orders, name tags, travel tickets).
- Prepare for the impact on withholding tax at source in the event of risk of exceeding the threshold.
- Adapt remote working (teleworking) policies and travel orders accordingly.
Authors:
- Raphaëlle Carpentier, Arendt
