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Tax treaty

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

StepDate
The convention was signed in Paris.March 20, 2018
Entry into forceAugust 19, 2019
Publication by decree no. 2019-1274Official Journal of 4 December 2019
First application in France2020 income (withholding tax: from January 1, 2020)
Amendment of October 10, 2019 (relating to the elimination of double taxation)Decree No. 2021-320, Official Journal of 27 March 2021
Amendment of November 7, 2022 (34-day threshold)Decree No. 2025-382, Official Journal of 29 April 2025; tax periods opened since 1 January 2023

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

IncomeArticleWhat the convention stipulates
Dividends10 § 2 a)Source tax is capped at 15% of gross income if the beneficial owner is a resident of the other state.
Dividends paid to a company10 § 2 b)Taxable only in the state of the beneficiary: a company that directly holds at least 5 % of the capital for 365 days, including the day of payment
Real estate investment vehicle dividends10 § 615 % if the beneficiary holds less than 10 % of the capital; from 10 % onwards, the domestic tax rate applies
Interests11 § 1Taxable only in the beneficiary's state of residence
Royalties12 § 2State withholding tax capped at 5 % of gross

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

SubjectArticleRuler
Private guesthouses17 § 1Taxable only in the state of residence
Social security pensions17 § 2Taxable only in the state that pays them
Other income20Taxable in the beneficiary's state of residence
Real estate (wealth)21 § 1Taxable where they are located
Other elements of fortune21 § 4Taxable only in the state of residence

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.

Frequently asked questions

How many days of teleworking from France is a Luxembourg employee allowed?

The protocol sets a maximum of 34 days in total over the taxable period, from tax periods opened from 1 January 2023. The threshold is reduced pro rata for part-time work and exceeding it results in the loss of benefit from the first day.

Is a Luxembourg dividend subject to 15 %?

The convention caps the tax payable by the source state at 15 % of the gross amount if the beneficial owner is a resident of the other state. A company that directly holds at least 5 % of the capital for 365 days is taxed only in its state of origin.

Does the convention regulate inheritances?

The BOFiP list as of January 1, 2026 only lists income and wealth taxes for Luxembourg.

In what cases can the other state impose a capital gains tax?

According to Article 13: real estate located in that State (§ 1), shares whose assets are predominantly real estate (§ 4), and, for an individual, participation of 25% or more of the profits of a company in that State if the transferor was a resident there at some time during the five years preceding the transfer (§ 5). Other gains are subject to the tax regime of the transferor's State of residence (§ 6).

Review your income between France and Luxembourg

Balmont Conseil, a firm based in Lyon for almost 14 years, advises executives and families whose assets span France and Luxembourg. To discuss your situation, please schedule an appointment.

Alexis SagnierFinancial and real estate investment advisor, insurance broker, AMF certified
Founder of Balmont Conseil, Lyon (ORIAS 13003497)

Official sources