Benny Bürocratie is exasperated as his wife drops him off at the Trier bus station. His daughter has been rehearsing for months for today’s school play. Fortunately, his wife can attend and record the event, but Benny has to be in the office.
As usual, Benny’s wife will go alone. Even though she is the CFO of a multinational company and enjoys a flexible work arrangement, Benny, who works in Luxembourg, has limited opportunities to work from home.
Substance rules
Benny is a Conducting Officer, a role formalized by the CSSF to ensure that Luxembourg maintains jurisdiction over its financial sector. If Benny doesn’t spend more than 50% of his time working in Luxembourg, his employer could face sanctions.
During Covid, Benny worked from home without any issues, making the current requirement to be physically present in Luxembourg feel frustrating and somewhat excessive. Unfortunately, this isn’t the only reason Benny must go to the office.
Tax residency requirement
Germany and Luxembourg have a tax agreement limiting the number of days Benny can work outside Luxembourg before Germany starts taxing his salary. Benny doesn’t want to be taxed twice, so he needs to come into the office to work.
His employer shares in his frustration. Though experienced with cross-border tax agreements, ensuring they withhold taxes and social contributions correctly is challenging. These details have significant implications for Benny’s access to social benefits at home.
Work from home policy
Benny’s employer has always allowed employees to work from home on special occasions and expanded this policy after seeing positive results during Covid. However, they now require employees to be in the office three days a week.
Ironically, even with this new policy and considering that Benny must spend 50% of his time in Luxembourg, he could work remotely for up to 104 days per year. Yet, due to the tax agreement, only 34 of those can be from his home in Germany.
In practice, though, even without a tax ruling, Benny would still be in the office most of the time due to how team and project meetings are scheduled. Although he’s technically allowed to work remotely, his physical presence is usually expected.
So, as usual, Benny heads into the office, resigned to the idea that he may never fully reap the benefits of working from home—unless he changes his profession, residence, or employer. Until then, his wife will continue recording his daughter’s plays.
Gregory Kennedy is a columnist for Investment Officer Luxembourg. His columns appear every other week. He also works as a business development manager at Finsoft Luxembourg.
