On 24 June 2026, the Luxembourg tax authorities (the “LTA”) issued an updated circular on remote work by cross-border employees (Circular L.G. – Conv. D.I. No. 61, the “Circular”), explaining how the 34-day threshold is calculated, the consequences of exceeding it, its application to certain public-sector employees and the evidence required from taxpayers.
The Circular replaces the previous circular issued in October 2020, which was based on a 29-day threshold. This threshold was increased to 34 days from fiscal year 2023 following an amendment to the tax treaty between France and Luxembourg (the “Treaty”). The Circular therefore clarifies an existing rule rather than introducing a new threshold and explain how the existing 34-day rule is applied in practice.
The general rule and related tolerance
Under Article 14 of the Treaty, employment income is generally taxable in the employee’s country of residence (e.g. France). However, where the work is physically performed in another country (e.g. Luxembourg), that country may also tax the corresponding salary. Accordingly, the employment income of a French resident working in Luxembourg is taxable in Luxembourg for the days worked there, with France providing relief from double taxation under the Treaty.
Without the 34-day tolerance, employment income relating to any day worked from home in France would generally be taxable in France. The tolerance hence allows a French resident normally working in Luxembourg to work from France for up to 34 days per calendar year without changing the usual place of taxation of their employment income. For Treaty purposes, the employment is treated as having been exercised in Luxembourg entirely, provided that the employee works outside Luxembourg for no more than 34 days in total.
Any day worked in a third country also counts towards the threshold as the corresponding employment income is, in principle, taxable in France, unless otherwise provided under the applicable tax treaty between France and that other country.
It should also be reminded that the tolerance only applies to income tax, that it does not create a right to remote work or determine the employee’s position for social security, employment law or immigration purposes.
Calculating the 34-day threshold
To calculate the 34 days:
- any day, or part of a day, worked outside Luxembourg counts as one full day towards the threshold;
- professional training days spent outside Luxembourg also count;
- holidays, non-working weekends, public holidays, sickness days and qualifying cases of force majeure are excluded;
- the threshold is reduced proportionately for part-time employees and where the employment begins or ends during the year. The resulting figure is rounded down to the nearest whole day. For example, an employee working 75% of full time has a threshold of 25 days. An employee starting work on 1 July has a threshold of 17 days for that year.
- where an employee works part-time for only part of the year, both reductions apply. The threshold is therefore adjusted according to both the employee’s working time and the duration of the employment during the year; and
- the threshold is calculated for the entire calendar year and applies globally across all employment contracts held by the employee during that year.
Tax consequences of exceeding the threshold
Once the 34-day threshold is exceeded, the Treaty rules apply to all working days carried out outside from the start, i.e. not only to the days above the threshold. The benefit of the tolerance is therefore lost for the entire year. For a French resident employed in Luxembourg, the remuneration relating to all days worked in France during that year becomes taxable in France, while the remuneration relating to days worked in Luxembourg remains taxable in Luxembourg. The same consequence applies to public-sector employees (meeting the conditions of Article 18(1)(b) as further detailed below). The remuneration relating to days worked in a third country is, in principle, taxable in France, unless otherwise provided under the applicable tax treaty between France and that country.
The counting of days must be distinguished from the allocation of remuneration. Any day partly worked outside Luxembourg counts as one full day. However, once the threshold is exceeded, the remuneration for a split working day is allocated according to the time actually worked in each country. For example, an employee who has already worked 34 full days in France and then works half a day in France and half a day in Luxembourg will exceeds the threshold, as the half day counts as one full day. The employee is therefore treated as having spent 35 days outside Luxembourg for the purpose of the threshold, while the remuneration corresponding to 34.5 working days becomes taxable in France.
Application to public-sector employees
The Circular also explains how the 34-day tolerance applies to certain French residents employed by the Luxembourg State or a Luxembourg public establishment, which was not addressed in the previous circular issued in 2020.
The tax treatment of public-sector remuneration is governed by Article 18 of the Treaty and depends, in particular on the employee’s nationality. Under Article 18(1)(a), remuneration paid by the Luxembourg State or a Luxembourg public establishment is in principle taxable in Luxembourg. However, Article 18(1)(b) provides an exception for services performed in France by an employee who is resident in France and holds only French nationality (i.e., without Luxembourg nationality). In that case, the remuneration in relation to services performed in France is in principle taxable in France. For the French resident holding French nationality, but no Luxembourg nationality, they may benefit from the 34-day tolerance as well, in which case the same rules as described above apply. For an employee who is resident in France and holds Luxembourg nationality, including dual French and Luxembourg nationality, the 34-day threshold is not relevant: the remuneration remains taxable in Luxembourg for services performed in France, irrespective of the number of days worked there.
Treatment of specific payments
The Circular also clarifies the treatment of certain payments:
- Sickness and maternity payments: payments made under the social security legislation of France or Luxembourg are taxable only in that country, irrespective of the 34-day threshold.
- Overtime: overtime generally follows the tax treatment of the employment to which it relates. If the threshold is exceeded, overtime relating to work performed in France becomes taxable in France. Overtime performed in a third country remains subject to any applicable tax treaty with that country.
- Termination payments and notice-period remuneration: the Circular links both categories to the country in which the employee would reasonably have continued to work had the employment not been terminated or the employee not been released from the obligation to work. For termination payments, this differs from the previous circular, which provided that, where the payment was calculated by reference to the employee’s previous period of employment, it should be allocated proportionately between the places where the employment was exercised during the preceding twelve months.
Documentation and burden of proof
The burden of proof remains on the taxpayer to demonstrate where they physically worked. The Circular confirms that evidence may include employment contracts or employer certificates, time records, travel tickets, hotel or car rental invoices, signed attendance lists for meetings or training, payment receipts, travel orders and any other relevant supporting documents.
Employees and employers should therefore keep accurate records of remote-working days, business trips, training days and days worked in more than one country throughout the year, rather than attempting to reconstruct this information during a tax audit.
Key takeaways
- The new guidance: the Circular replaces the previous circular issued in 2020. However, the 34-day threshold is not new and is applicable from fiscal year 2023.
- Counting of the days: any day, or part of a day, worked outside Luxembourg counts as one full day.
- Exceeding the threshold: if the employee works outside Luxembourg for more than 34 days, the Treaty rules apply to all relevant working days during the year, not only to the days above the threshold.
- Public-sector employees: a French resident employed by the Luxembourg State or a Luxembourg public establishment may benefit from the tolerance if they hold French nationality without also holding Luxembourg nationality. Where the employee holds Luxembourg nationality, including dual French and Luxembourg nationality, the threshold is not relevant and the remuneration remains taxable in Luxembourg for services performed in France.
- Supporting evidence: taxpayers must be able to demonstrate that the conditions of the 34-day tolerance are met. Records showing where the employee worked should therefore be kept throughout the year.
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