Taxation of French cross-border workers: end of the grace period announced for the application of the new tax treaty

The French government has announced that the exceptional arrangement of the double taxation elimination method in the tax treaty between France and Luxembourg will be extended again for the taxation of 2023 income.

In other words, for the 2024 tax return, based on 2023 income, nothing changes this year; on the other hand, the new 2018 treaty will apply in full for 2024 income. This new tax treaty has changed the method of eliminating double taxation for French residents receiving Luxembourg-source income.

Previously, Luxembourg income was taken into account when calculating the tax rate applicable to French-source income (in order to respect the progressive nature of tax).

Now, Luxembourg income is taxed in France and the corresponding tax is credited immediately to eliminate double taxation.

What's new

What changes under the new method is the way in which Luxembourg income is declared: until now, income tax was deducted (gross pay - social security contributions - tax deducted). This will no longer be the case next year.

There will therefore be an increase in overall income and in the rate applicable to French income.

ALEBA has asked that the impact on households be studied and presented to the cross-border workers concerned (i.e. all those with French and Luxembourg income) and urges its members to adapt their income tax rate via their personal space on impots.gouv.fr to avoid unpleasant surprises when they receive their tax notice next year.

ALEBA will continue to monitor developments closely and is also ready to organise information sessions for any of its members who may be affected.