Key takeaway: The new circular from Luxembourg’s Direct Tax Administration (Administration des Contributions Directes) restates how the 34-day tax threshold under the France-Luxembourg tax treaty applies. It confirms the calculation rules already in use and extends their application to Luxembourg civil servants and public employees. If the threshold is exceeded, compensation linked to days worked in France or in a third country can become taxable in France from the very first day concerned.

What is the 34-day tax threshold between France and Luxembourg?

The 34-day tax threshold allows a French tax-resident cross-border worker who normally works in Luxembourg to work a limited number of days outside Luxembourg without immediately calling into question the tax treatment provided for under the France-Luxembourg tax treaty.

In practice, this threshold mainly concerns situations such as:

• teleworking from France,
• business travel to a third country,
• attending certain professional training sessions outside Luxembourg.

What does the new Luxembourg circular clarify?

The new circular published by the Direct Tax Administration:

• restates the calculation rules already in force for the 34-day tax threshold;
• specifically extends these rules to compensation received by Luxembourg civil servants and public employees;
• restates the taxation principles applicable in cases of illness, maternity, notice periods with release from work (garden leave), and severance pay.

How is the 34-day tax threshold calculated?

The calculation is based on the employee’s physical presence outside Luxembourg.

Any day, or even part of a day, during which the employee is present in their country of residence and/or in a third country to carry out work there or attend professional training, counts as a full day.

Which days are not counted?

The circular specifies that certain days are excluded from the 34-day count:

• vacation days;
• weekly rest days;
• statutory public holidays, only when the employee is not required to work on those days;
• days of incapacity for work due to illness;
• force majeure situations beyond the control of both employer and employee.

How does proration work for part-time employees or those present only part of the year?

For employees working part-time and/or present only part of the year, the 34-day threshold is prorated, rounded down to the nearest whole number.

Proration example

An employee working 32 hours per week instead of 40 benefits from a threshold calculated as follows: 34/40 × 32 = 27.2.

The applicable threshold is therefore 27 days in France, rounded down.

For comparison:

• France: 27 days, rounded down;
• Belgium: 28 days, rounded up;
• Germany: 34 days, no proration.

What happens if the 34-day threshold is exceeded?

When the tax threshold is exceeded, the compensation corresponding to days worked:

• in France,
• and/or in a third country,

becomes in principle taxable in France, starting from the very first day of activity carried out outside Luxembourg, subject to any provisions to the contrary under an applicable double taxation treaty.

In other words, exceeding the threshold triggers a shift in taxation for the days concerned, with concrete consequences for both the employee and the employer.

Does exceeding the threshold always determine where taxation applies?

Even when the 34-day threshold is not exceeded, it remains necessary to examine the double taxation treaty between:

• the employee’s country of residence;
• and the country where the work is actually performed.

This check confirms where the compensation is taxed.

What supporting documents should employees keep?

An employee benefiting from this tax tolerance must be able to prove their days of presence in each country in the event of an audit.

It is therefore recommended to keep, depending on the situation:

• a professional diary/calendar,
• travel records,
• proof of teleworking,
• transport tickets,
• expense reports,
• internal attendance certificates.

How is compensation taxed in cases of illness or maternity?

The circular restates that compensation received due to illness or maternity is taxable in the country from which it originates.

What is the tax treatment of severance pay and notice periods with release from work?

Severance pay, as well as compensation paid during a notice period where the employee is released from work, is taxable in the country where the employee would have continued working had they not been released from their duties, taking into account their prior work situation.

Example

An employee who works:

• 80% in Luxembourg;
• and 20% in France,

will in principle have their severance pay taxed according to this same split.

What obligations do Luxembourg employers have?

Luxembourg employers who allow their French cross-border employees to work beyond the authorized tax threshold must declare to the French tax authorities the portion of compensation taxable in France.

To do so, the Luxembourg employer must in particular obtain a SIRET number. Since issuance generally takes 3 to 6 weeks, it is advisable to start this process early.

What is the PASRAU filing deadline for 2026?

For the year 2026, the PASRAU declaration must be filed no later than February 10, 2027.

Key points to remember

For French cross-border workers, the new circular confirms several essential points:

• the 34-day tax threshold remains a key criterion for taxation;
• any day or part of a day spent outside Luxembourg counts as a full day;
• the threshold is prorated for part-time employees or those present only part of the year;
• if exceeded, taxation in France applies from the first day concerned;
• employers must plan ahead for their reporting obligations, particularly regarding PASRAU.

Feel free to contact us with any questions!