On 10 October 2019, France and Luxembourg signed an amending protocol ("Amending Protocol") to the Luxembourg-France Double Tax Treaty ("DTT") which entered into force recently on 19 August 2019.

For more information on the DTT, please refer to our April 2018, December 2018 and February 2019 Newsletters.

The Amending Protocol put an end to uncertainties about the method used in France to mitigate double taxation with respect to Luxembourg-sourced income derived by French resident cross-border workers.

Prior to the Amending Protocol entering into force, France was to grant a tax credit for the French tax paid on the Luxembourg-sourced income equal to the amount of tax already incurred in Luxembourg. As a result of this so-called "credit method", French resident cross-border workers, in addition to the Luxembourg tax, were at risk of bearing the portion of the French tax exceeding the amount of Luxembourg tax due.

The Amending Protocol clarifies that French resident cross-border workers will benefit in France from a tax credit equal to the French taxes levied on the Luxembourg-sourced income (to the extent the latter has been subject to Luxembourg taxes).

On 16 December 2019, the Luxembourg Government tabled a bill (7505) before the Luxembourg Parliament setting out the draft legislation that will approve the Amending Protocol. The bill must now follow the legislative process.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.