OUR INSIGHTS AT A GLANCE
- Over the past 18 months, the Luxembourg Government has been taking several measures to deal with the spread of the Coronavirus and guarantee the continuity of the Luxembourg economy.
- Although the situation is definitively improving, the COVID-19 pandemic is not yet over and continues to impact the good governance of businesses which still cannot operate under fully normal conditions. They still need a framework enabling them to hold their meetings remotely and, when needed, to have their employees working from home without suffering any negative social security and/or income tax implications.
- This is why the Luxembourg Government decided to extend the period during which companies and other legal entities are able to hold their corporate body meetings remotely until 31 December 2021. Luxembourg also managed to reach an agreement with Belgium, France and Germany, extending the COVID-19-related income tax and social security agreements concluded with these three countries.
- While the extension of these exceptional measures is positive, as the current COVID-19 pandemic often makes it difficult to have all company meetings taking place physically and all employees working in the office, one should still manage the organisation of meetings and work carefully, given the related potential negative tax implications.
Tax and social security measures for cross-border workers
Income tax measures
The protocols to the double tax treaties concluded by Luxembourg with Belgium, France and Germany provide rules allowing cross-border workers to perform their activities outside of their employment state (Luxembourg in most cases) for a maximum amount of days (19 days in Germany, 24 days in Belgium and 29 days in France), while remaining taxable in their employment state.
Given that the maximum amount of days can easily be exceeded during the COVID-19 crisis due to travel restrictions and the requirements of "social distancing", resulting in many employees working from home and thus outside of Luxembourg, the Luxembourg Government concluded agreements with Belgium, France and Germany, according to which the days spent outside of the employment state (Luxembourg in most cases) solely because of the current crisis would not be taken into account when computing the maximum amount of days of 19, 24 or 29.
The agreements with France and Belgium were supposed to end on 30 June 2021 but were extended on 19 May 2021 (Belgium) and 15 June 2021 (France) until 30 September 2021. The agreement with Germany is still in force and is renewed automatically every month. Given the similar agreements reached by Germany with several of its bordering countries, it can be expected that the agreement concluded by Luxembourg with Germany will also remain in force until at least 30 September 2021.
Social security measures
As far as social security is concerned, the Luxembourg Government also concluded agreements with Belgium, France and Germany to make sure that cross-border workers and their employers remain subject to the social security legislation of their employment state, and do not become subject to social security in their residence state, even if they spend 25% or more (threshold applicable under the EU social security rules) of their working time in their residence state due to COVID-19. These agreements have now been extended until 30 September 2021, as far as French cross-border workers are concerned, and until 31 December 2021 for Belgian and German cross-border workers.
Measures regarding the holding of general and management body meetings
The law of 30 June 2021 amends the law of 23 September 2020 so as to extend its application until 31 December 2021, and thus the exceptional measures it provides, including the holding of corporate body meetings without any physical presence. Under the rules which were in force before the amendment, the measure was supposed to end on 30 June 2021.
Even if the articles of association do not provide any such possibility, and no matter the number of attendees at these meetings, until 31 December 2021, companies and any other legal entities will be able to hold their general meetings remotely. They will be able to require their shareholders and other participants to attend the meetings and exercise their rights through one or more of the following forms:
- remotely, by vote in writing or electronic form, provided that the full text of the resolutions or decisions to be taken has been published or communicated to the participants;
- by video conference or other means of telecommunication allowing the identification of the participants; or
- through a proxy appointed by the company.
Management body meetings
Notwithstanding any contrary provisions in the articles of association, until 31 December 2021, it will also be possible to hold meetings of management bodies remotely and companies will be able to require their participants to exercise their rights remotely as follows:
- by means of written circular resolutions; or
- by video conference or any other means of telecommunication allowing the identification of the participants.
This measure will allow the bodies of any company or legal person to hold their meetings without requiring the physical presence of their members, while guaranteeing their effective participation and the exercise of their rights. Remote participants will be considered as present for the purposes of computing quorums and majorities.
While the extension of these exceptional measures is positive, as the current COVID-19 pandemic often makes it difficult to have all company meetings taking place physically, one should still manage the organisation of such meetings and work carefully, given their potential negative tax implications, i.e., shift of the place of effective management of a company outside Luxembourg or creation of a permanent establishment (for more information on these potential negative tax implications, please refer to our 23 September 2020 ATOZ Alert).
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.