The Luxembourg government admitted to having relayed "incomplete and inaccurate" information regarding taxation on overtime carried out in Luxembourg.
A new double taxation agreement between Germany and Luxembourg came into force on 1 January 2024, with additional, significant changes agreed on 11 January.
The agreement implies a tax increase for any German cross-border workers who work overtime in the Grand Duchy.
Last week, banking union ALEBA criticised the fact that German cross-border workers would effectively be worse off through the agreement, as they could not claim an allowance of 11,604 euros on their overtime, whereas overtime hours are not usually taxed in Luxembourg. The new agreement means overtime hours can be taxed in Germany, retroactively from 1 January, as this would not result in double taxation.
ALEBA said the Luxembourg finance minister, Gilles Roth, recently declared that German cross-border workers were not affected by the regulations on overtime, but that this was false information and could see German taxpayers risking criminal proceedings if they failed to file a tax return based on this mistaken belief.
The Ministry of Finance announced on Thursday that the information sent to one of the German financial authorities was incomplete and not exact.
In an interview with the German Ministry of Finance, it was confirmed on Thursday that the allowance could not be used for overtime.
Luxembourg's Ministry of Finance states that it is in close contact with its German counterparts regarding how the double taxation agreement between Luxembourg and Germany will be applied, but declined to supply details on how this would unfold.
