Taxation of cross-border commuters stuck by Covid-19 restrictions

Bilateral arrangements with Luxembourg, the Netherlands and Austria

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Germany has concluded bilateral arrangements with Luxembourg, the Netherlands and Austria governing the taxation of cross-border commuters during the Covid-19 crisis in order to prevent unwanted changes in the taxation of the respective employees.


Cross-border commuters, who normally commute daily from their country of residence in order to work in another country, are heavily affected by the current exit restrictions. They now increasingly pursue their activities in their home office. Due to the provisions of international tax law, in particular the underlying double tax treaties, this change in the number of days spent in the country of work has significant tax consequences. In particular, it might switch the right of taxation to the country of residence and lead to a change in the tax situation of the employees concerned.

New “Tax Option”

In effect, the arrangements provide for a temporary option to choose the tax treatment. As long as the health authorities continue to advise home offices to prevent the expansion of Covid-19, the employees concerned can choose to be treated as if they had been able to carry out their work as usual in the other state. The Covid-19-related home office activity would thus not have any adverse tax consequences for the cross-border commuters concerned. Working days for which wages are received and on which cross-border commuters are stuck in their home office only because of the measures to combat Covid-19, can be regarded as working days spent in the other state (fiction of facts). This option, however, does not apply to working days which would have been spent in the home office or in a third state independently of Covid-19, e.g. due to the provisions of the employment contract.

As soon as the restrictions due to Covid-19 are repelled, the special arrangements will cease to be in force.

How to make use of the “tax option”

The tax option has to be exercised by the cross-border commuter, i.e. the employee.  He has to notify his employer and the competent tax authorities of his country of residence. Moreover, records must be kept to document the “mandatory home-office days”.

Usefull Links:

Bilateral arrangements with Luxembourg

Bilateral arrangements with the Netherlands

Bilateral arrangements with Austria

See also our post regarding shut down of permanent establishments during Corona crisis.