Posting workers to Luxembourg
An employer based abroad may temporarily post employees to Luxembourg in order to carry out work in the Grand Duchy within the framework of a provision of services or supply of goods between the employer and a business or client.
Posted work does not amend the provisions in the original employment contract and the rights and obligations attached to the contract remain in effect. The employee remains under the social security scheme in the country where the employment contract is in effect.
A worker can be posted abroad provided that:
- the estimated period of posted work does not exceed 24 months at the most;
- the worker is not posted abroad to replace another posted worker whose maximum allowable period of posted work has ended (but a posted worker can replace another posted worker within the maximum allowable period of time).
A worker can be transferred for a longer period of time: in this case we no longer speak of posted work but of a transfer of personnel. The workers concerned fall under the Luxembourg labour law and social security scheme.
Employers also have to:
- ensure that their employees are authorised to stay/work in Luxembourg;
- prove that their employees are covered by social security;
- declare the posting to the Inspectorate of Labour and Mines (Inspection du Travail et des Mines – ITM) and designate a natural person who wil be responsible for keeping the required documents;
- respect labour law and income tax applicable to posted workers.
- If the employee’s work contract with the home company is terminated, the worker is deemed to have been transferred.
A posted worker is an employee who has an employment contract with an employer who is not established in the Grand Duchy of Luxembourg, who usually works abroad and who carries out work in the Grand Duchy of Luxembourg for a limited period of time as determined by a services contract.
The following is not considered to be posted work:
- transit, transportation and delivery of goods or persons within Luxembourg;
- any activity related to entertainment, i.e. music (e.g. concerts), theatre, etc.;
- foreign diplomats;
- sales representatives;
- meetings with foreign employees in Luxembourg (e.g. business meetings, site meetings, etc.).
A person who carries out a self-employed activity (independent) in a Member State and who leaves abroad to carry out a similar activity in another Member Stater remains under the social security scheme in the country of origin provided that the activity abroad does not exceed a period of 24 months.
Ministry of the Economy
A business established in a Member State of the European Union (EU) or in a country treated as such must notify the provision of occasional and temporary services to the General Directorate for SMEs and Entrepreneurship.
A business established outside the EU must first obtain a business permit.
Land Registration and Estates Department
Inspectorate of Labour and Mines (ITM)
Before posting workers abroad and regardless of the location of their registered office and the nationality of the posted workers, businesses have to:
- submit a declaration of posting of workers information;
- and request a social identification badge for each posted worker. The social identification badge contains the worker’s identity details and a bar code which can be read by the ITM and which contains the details provided by the company at the time of the declaration of posting of workers information.
The declaration of posting of workers information is carried out online. To this end, the Inspectorate of Labour and Mines has put in place a “Badge social e-Détachement” (e-posting social badge).
Before commencing any works, the company has to appoint a “temporary holding person” (THP) who must keep all the necessary documents that could be required by the ITM in the event of an inspection during the posting period.
Declaration of posted work and country of establishment of the posting business
Business established in an EU Member State or a country treated as such
A business established in an EU Member State or a country treated as such may post workers to Luxembourg for the provision of occasional and temporary services.
The following are considered to be countries treated as EU Member States:
- Iceland, Liechtenstein and Norway as signatories of the European Economic Area Agreement;
- the Swiss Confederation.
Businesses established in third countries
A business established outside the European Union may be authorised to post workers to Luxembourg to provide transnational services.
The service may be provided:
- either to a private person or to another business (subcontracting);
- or between the posting business and another business belonging to the same group.
Social security for posted workers
Depending on the place of establishment of the posting business, the administrative formalities for posted workers with regard to the registration for social security may vary.
A difference must be made between:
- businesses established in the EU;
- businesses established in a country treated as an EU Member State;
- businesses established in a country that has signed an agreement with Luxembourg;
- businesses established in a country with no agreement with Luxembourg.
Conditions of residence and stay for posted workers in Luxembourg
The conditions of residence and stay in Luxembourg during the posting depend on the country of establishment of the posting business and the nationality of the posted workers.
Workers who are posted by an EU business must therefore hold:
- an ID card or passport if they are a EU citizens;
- a passport and a residence permit if they are third-country nationals. Within 3 months of arrival in Luxembourg, third-country nationals must apply for a residence permit for a worker from a service provider established in the EU.
- an ID card or passport if they are a EU citizens;
- a temporary residence certificate, a passport and a visa if they are third-country nationals. Within 3 months of arrival in Luxembourg, third-country nationals must apply for a residence permit for posted worker.
When a foreign business posts its workers to Luxembourg, it is required to comply with the legal provisions concerning Luxembourg labour law.
These provisions namely apply to:
- the social minimum wage
- the duration of work, rest breaks, daily and weekly rest hours;
- paid leave and collective leave where applicable;
- public holidays;
- the regulations regarding temporary work and labour leasing;
- the provisions on part-time work and fixed term contracts;
- protective measures which apply to young people, pregnant women and women who have recently given birth;
- illicit or illegal work, including the provisions regarding work permits for third-country nationals;
- the health and safety of employees in the workplace in general and more particularly the minimum requirements in terms of health and safety;
- mandatory collective agreements
The minimum conditions in Luxembourg with regard to social minimum wage and leave must be complied with unless the posted work is for work concerning the initial setup or first installation as part of a supply contract. The work:
- must be essential for the proper functioning of the good supplied;
- must be carried out by qualified or specialised staff;
- cannot exceed 8 calendar days over a period of 12 months;
- must not be in relation with construction work.
The installation work is nevertheless subject to a declaration of posted work.
Determining the place of taxation
The tax residence of posted workers and the duration of their posting will determine if the salaries received are subject to income tax in the country of origin and/or in Luxembourg.
In principle, the person is a tax resident in the country where he has his permanent place of residence.
The place of taxation is determined by international tax treaties signed between the country where the posted worker has his place of residence and Luxembourg.
Taxation in the country of origin
As a general rule, the salary will be taxable in the country where the worker has his main place of residence provided the following 3 cumulative criteria are met:
- the total duration of temporary stay in Luxembourg must not exceed 183 days.
The manner in which the 183 days are counted depends on the tax treaty applied, e.g. if the place of residence is:
- France: the duration of each assignment must not exceed 183 days, even if the total duration of the posted work in a year exceeds 183 days;
- Belgium or Germany: maximum 183 days in total per calendar year;
- the remuneration of the posted worker must be paid by an employer established outside of Luxembourg;
- the remuneration must not be paid by a permanent establishment in Luxembourg.
Whenever one of these conditions are not met, the salary paid to the worker for work carried out in Luxembourg becomes taxable in Luxembourg.
Taxation in Luxembourg
Salaries paid for work carried out in Luxembourg become taxable in Luxembourg when:
- one of the cumulative conditions detailed above is not met or;
- there is no tax treaty between the country where the posting business is established and Luxembourg or:
- the posted worker has established his tax residence in Luxembourg, i.e.:
- he has a permanent place of residence in Luxembourg (as well as his vital interests, i.e. social and family ties, cultural and political activities, etc.) or;
- he has his main place of residence in Luxembourg (at least 6 months per year).
In the case where the employee is taxed in Luxembourg, the employer must:
- either deduct the witholding tax himself;
- or allow the employee to complete an income tax return for residents.
Businesses in Luxembourg receiving posted workers
In the event of a posting of a third-country national in the framework of a provision of services, the business or the client where the worker will be posted must:
- verify the posted worker’s temporary residence certificate/permit before the worker undertakes any work;
- request a copy of the posted worker’s temporary residence certificate/permit and keep said copy for the whole duration of the assignment.
Employers who illegally employ one or more posted workers from third countries with no valid residence certificate or permit may face administrative and criminal sanctions.