France hints at support for unlimited remote working

On Friday, the cabinet of the French Ministry of the Economy met with the members of the Lorraine Regional Parliament to discuss the negotiations with Luxembourg on rules for working from home.

France is said to be in favour of unlimited teleworking for cross-border workers in exchange for tax compensation from Luxembourg.

Read also: Working from home - how many days are permitted for cross-border employees?

According to a press release published by French MPs Martine Etienne, Charlotte Leduc, and Senator Olivier Jacquin, the government announced that it "wishes to increase the use of telework by simplifying procedures for Luxembourgish companies through the introduction of an advance payment deducted directly by the Direction Générale des Finances Publiques."

In practice, Luxembourg would pay tax compensation to France. The three elected representatives do not see this arrangement in a positive light. In their press release, the two MPs from the Leftist LFI-NUPES and the senator from the French Socialist Party wonder whether such an agreement would represent "another tax gift for Luxembourg".

An arrangement such as the one proposed by the French government would effectively suspend the enforcement of the 29-day cap on teleworking. At the moment, cross-border workers are no longer taxed in the Grand Duchy after 29 days of telework and must declare any additional days of telework to the French tax authorities.

The extraordinary arrangement reached with Luxembourg in the context of the Covid-19 pandemic expired on 1 July 2022 after more than two years. In principle, workers pay taxes in the country in which they work.

As a result, France and Luxembourg would have to resolve the sensitive issue of tax sharing. While the Grand Duchy is in fact discussing an increase in teleworking with Paris, the current proposal just raises the ceiling from 29 to 34 days.

Another problem: Social contributions

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Before such an agreement could be implemented, a European solution would have to be found regarding social contributions. The current rule is that once a cross-border worker spends over 25% of their time working in their country of residence, for instance through telework, the French employee returns to the French social security system and is no longer affiliated with Luxembourg. The opposition MPs from Lorraine raised this issue as well, asking, "does the French government intend to disobey European legislation?"

And this is not the only problem. If an agreement were to be reached, some French companies might decide to relocate to Luxembourg. "These agreements do not take into account the issue of French companies that could relocate to Luxembourg and the increased risk of creating a harmful, separating factor between the two countries," according to the press release in question.

The transitional period would likely turn out to be challenging, especially since the issue of the advance payment has not been settled. The elected representatives from Lorraine are also suspicious of the Luxembourgish government, claiming that "the commitment of the Grand Duchy to these proposals is not subject to any guarantee".

Will telework become a necessity?

However, considering that energy conservation has become a major issue, there is a chance that European governments will once again turn to telework to achieve their objectives. According to a Eurofound study, 46% of employees in the European Union wish to continue working from home every day or several times per week since the pandemic.

In addition, a petition calling for two days of telework "for everyone" recently broke all records in Luxembourg. In just a few hours, it passed the threshold of 4,500 signatures.

But all this does not solve the issue of existing legislation. Luxembourg and France still have a lot to discuss on the fiscal and social fronts. The issue of double taxation of French cross-border workers, in particular, remains unresolved. In other words, we are not even close to the finish line.