France-Luxembourg tax treaty: withholdings, 34-day rule and tax credit

The convention of March 20, 2018, caps Luxembourg withholding tax at 15% on dividends and 5% on royalties. Interest is taxable only in the country of residence. For cross-border workers, a threshold of 34 days of presence in the country of residence maintains employment status in the employer's country. France eliminates double taxation through a tax credit. This page does not cover Articles 6, 7, 15, and 16.

The current text: dates and amendments

The 1958 convention ceases to have effect from the first application of the new one.

Residence: the tie-breaking order of Article 4

When both states consider you a resident, Article 4(2) applies, in order: permanent home, center of vital interests, habitual residence, nationality, and then the agreement of the competent authorities. For a company, only the place of effective management is relevant. According to the BOFiP (French Official Tax Bulletin), the occasional use of accommodation, for example for a leisure trip, does not create a permanent home.

Maximum withholding taxes

These are ceilings.

Capital gains: four rules depending on the asset (article 13)

• Buildings (§ 1): taxable where they are located.
• Shares in real estate-focused companies (§ 4): taxable in the other State if, at any time during the 365 days preceding the transfer, more than 50 % of their value was derived from buildings situated in that State.
• Substantial participation (§ 5): "25 % or more of the company's profits." The capital gain of a natural person is taxable in the State of the company, if the transferor was resident there at any time during the five years preceding the transfer.
• All other property (§ 6): taxable only in the State of residence of the transferor.

Employees: 183 days, then a threshold of 34 days

Principle (Article 14 § 1). Wages are taxable in the country of residence, unless the work is performed in the other country. For an employee residing in France who works in Luxembourg, Luxembourg may tax the remuneration for those days.

Exception of the 183 days (§ 2). The employee remains taxable in their country of residence if they stay in the other country for a total of no more than 183 days, provided the employer is not a resident of that country and the remuneration is not paid through a permanent establishment located in that country. The method for calculating this period should be verified in the relevant legislation: the tax treaty and the French tax authorities (BOFiP) do not define it in the same way.

The 34-day threshold (protocol, point 3). The protocol states that a cross-border worker physically present in their country of residence and/or in a third country for a total of 34 days or less during the taxable period is considered to be effectively working in the other country for the entire period. The threshold was 29 days; the amendment of November 7, 2022, raised it to 34. The French tax authorities clarify that the "29-day threshold" of the mutual agreement should be interpreted as a threshold of 34 days. The Luxembourg tax authorities write "34 days (29 days until December 31, 2022)." The amendment also extends the rule to the public service positions covered by Article 18.

How the days are counted (amicable agreement of July 16, 2020).

• Any fraction of a day counts as a full day; training days also count.
• Holidays, weekly rest days, public holidays not worked, illness and force majeure do not count.
• For part-time or part-time contracts, the threshold is reduced proportionally and rounded down to the nearest whole number.
• The assessment is annual and overall.
• In the event of an overrun, the employee loses the benefit of point 3 "from the first day".
• The burden of proof lies with the taxpayer: employer certificates, nominative tickets, hotel bills, attendance lists.

The protocol stipulates that the two states must meet before December 31, 2024, to establish the conditions applicable from January 1, 2025, and, if necessary, conclude a new amendment. This page does not report the outcome of these meetings: check the applicable threshold for your income year on impots.gouv.fr.

Pensions, other income, wealth

How France eliminates double taxation (Article 22)

France applies a tax credit. Luxembourg income is included in the French tax base, then a credit is deducted.

• For most income, including salaries, the tax credit is equal to the corresponding French tax, provided that the income is actually subject to Luxembourg tax. The BOFiP (version of 20/04/2023) describes a rule similar to that of the effective tax rate for your other income.
• For income from Articles 10, 12, 13 (§ 1, 4, 5), 14 § 3, 15 and 16 (§ 1, 2), as well as, for income subject to corporation tax, from Article 7 and Article 13 § 2, the credit is equal to the Luxembourg tax, up to the limit of the French tax on that income.

Luxembourg exempts income that France may tax, while retaining the right to take it into account for tax purposes. For dividends, royalties, and income covered by Article 16, it grants a deduction from French tax. A transitional tolerance allowed the previous exemption method to be maintained for the first few years of implementation: two official sources (the BOFiP and a ministerial response) provide different durations, which should be verified with the tax authorities. A ministerial response published on April 1, 2025, reiterates that the private Luxembourg salaries of cross-border workers generally remain taxed only in Luxembourg, which, according to this response, ensures the absence of double taxation of these salaries.

Article 28: Refusal of benefits

According to Article 28, a benefit of the Convention is not granted if its granting "was one of the principal objects of an arrangement or transaction," unless it is established that it is consistent with "the object and purpose of the relevant provisions of the Convention." The Convention applies primarily to persons resident in one of the two States within the meaning of Article 4.

Inheritance and gift

The list of tax treaties published by the BOFiP (as of January 1, 2026) links France and Luxembourg only to income and wealth taxes: no inheritance or gift tax treaties are listed for Luxembourg. Our page on inheritance and transfers between France and Luxembourg addresses this point.

Maximum withholding tax on €70,000 of Luxembourg income: a numerical example (fictitious profile)

Situation. A fictitious executive, a tax resident of France, holds 8 % shares in a Luxembourg company. He receives €40,000 in gross dividends, €10,000 in gross interest and €20,000 in gross royalties.

Issue. He wants to know the maximum Luxembourg withholding that the convention allows on these three flows.

Strategy. It applies Article 10 § 2 a) to dividends (15 %), Article 11 § 1 to interest (taxable only in its State of residence) and Article 12 § 2 to royalties (5 %).

Result. €6,000 on dividends, €0 on interest, €1,000 on royalties: a maximum of €7,000 on €70,000, or 10% of gross income. This Luxembourg tax then creates a credit on the French tax return, up to the limit of the French tax due on this income (Article 22). The profile is fictitious; the amounts are hypothetical.

What changes depending on your situation

• Your residence as defined in Article 4, which determines which convention applies to you.
• Holding: less than 5 % or a company, 25 % or more, or less than 10 % in a real estate vehicle.
• The place where you actually work, day by day, and your activity rate for the 34-day threshold.

The rule depends on your situation. No results are guaranteed.