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| Germany, Luxembourg Ink Salaries Agreement |
by Ulrika Lomas, Tax-News.com, Brussels
Tuesday, June 07, 2011
In order to avoid double taxation, Germany’s Finance Minister Wolfgang
Schäuble and his Luxembourg counterpart Luc Frieden have announced
agreement on more precise provisions pertaining to the taxation of cross-border
workers.
Following a series of meetings, the ministers signed a memorandum of understanding
on the bilateral agreement of August 23, 1958, as modified by the supplementary
protocol of June 15, 1973, which aims to avoid the double taxation of cross-border
salaries.
In its official release, the German finance ministry explains that in accordance
with the existing bilateral double taxation agreement in place between Germany
and Luxembourg, employees are basically taxed in the country of their employment
or activity (Tätigkeitsstaat). Until now, however, it has been unclear,
as to whether or not payments for so-called ‘unproductive’ activities
are also included under the provision, for example payments made in the event
of sickness, training and business trips.
The ministry reveals that in the memorandum of understanding there is a new provision according to which the country of residence (Wohnsitzstaat) allows
payments made in that state to be tax free for up to 20 days, irrespective of
whether or not they are considered to be productive or unproductive, provided
that those payments are taxed by the country of activity.
It has also been agreed that salary payments linked to illness
or to maternity leave are basically taxed in the country of activity.
According to the Luxembourg finance ministry, the agreement entered into force
on May 27, 2011.
A comprehensive report in our Intelligence Report series
devoted to a study of the ways in which expatriate executives and employees
can optimise their remuneration and taxation situations in a number of the main
English-speaking countries is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp
and a description of the report can be seen at
http://www.lowtaxlibrary.com/asp/description_report10.asp
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