Impact COVID-19 on cross-border workers: Belgian-Dutch agreement

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Impact COVID-19 on cross-border workers: Belgian-Dutch agreement

Since COVID-19 has forced a lot of cross border commuters to work (virtually) from home, it may impact the tax position of the employee and/or employer.

The COVID-19 pandemic has forced a lot of cross border commuters to work (virtually) from home to ensure business continuity. As this may cause that cross border workers work in another country than they would normally do, it may impact the tax position of the employee and/or employer.

The main rule is that the right to levy tax on the employment income is attributable to the home country. However, in case the employee works in another country, the right to levy tax on the employment income relating to those work days is in first instance taxable in that country. So, in case an employee normally works in another country than the home country, the right to levy tax is primarily allocated to the country in which the work is performed. Due to the COVID-19 pandemic, the employee may work from home and as such the right to levy tax is no longer allocated to the country in which the work would normally be performed.

Belgian – Dutch agreement valid from March 11, 2020 until May 31, 2020

Days physically working from home

  • The following fiction is introduced: days physically working from home may be deemed as days of work performed in the country where the cross border worker would have exercised the employment without the COVID-19 measures.
  • This fiction does not apply to working days that would have been performed either as home office-days or in a third State, independent from the COVID-19 measures.
  • This fiction should be applied consistently in both countries; the respective wages for the days physically working from home are actually taxed in the State in which the cross border worker would have exercised the employment without the measures taken to combat the COVID-19 pandemic.
  • The cross border commuter should keep appropriate records (i.e. written confirmation of the employer on which part of the home-office-days were solely due to COVID-19 measures).
  • The cross border commuter makes use of this fiction in the Belgian and the Dutch income tax return.
  • No change of the set-up of the payroll by the employer is in principal required.

Days spent in the home country without working

  • The same fiction goes for employees spending days at home without working, but while receiving salary: these days may be deemed as working days performed in the country where the cross border worker would have exercised the employment without the COVID-19 measures.
  • No change of the set-up of the payroll by the employer is in principal required.
  • For employees spending days at home while receiving Belgian social security payments instead of their regular salary , these payments will be taxed in the country where the regular salary would have been taxed without the COVID-19 measures. In this respect it is important that the employment contract is not terminated. 

The agreement is applicable from March 11, 2020 until May 31, 2020. From May 31, 2020 onwards, the agreement remains applicable if the Belgian and Dutch competent authorities agree on this.

The above is in line with the OECD recommendations on how to treat international tax treaties during the COVID-19 crisis. Considering the COVID-19 situation as force majeure, the Netherlands and Germany concluded on an agreement on the application of the tax treaty in case employees are working from home or are unable to work due to the COVID-19 measures.
More information can be found via this link.

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