It is clear that employees are increasingly being asked to work from home. This means that within an international context, taxation of the allowance is likely to shift from the initial 'country of work' to the 'country of residence'.
In most cases so-called 'tax equalisation' will be applied. The issue will be transferred to the employer and the financial impact on the employee will remain limited.
However, it is important that the necessary adjustments are made to the payroll to ensure that the correct income tax is withheld.
There is no general tolerance to avoid the aforementioned impact. However, the Belgian administration has concluded individual agreements with neighbouring countries.
- Belgian cross-border workers working in Luxembourg are subject to the 24-day rule, a tolerance within the double taxation convention between Belgium and Luxembourg (vice versa). This arrangement introduces a tolerance whereby a (Belgian) frontier worker, who carries out his professional activity for a maximum of 24 days outside the state where he normally works (Luxembourg), nevertheless remains fully taxable in the latter state (Luxembourg). In concrete terms, the Belgian worker is allowed to work in Belgium for a maximum of 24 days, without these days being taxed in Belgium. The double taxation convention contains a list of cases in which no single day may be taken into account for the application of the 24-day rule. Among other things, it mentions the case of force majeure. The Belgian and Luxembourg authorities consider that the Corona crisis constitutes such a case of force majeure. Consequently, it has been decided that as from Saturday 11 March 2020, the presence of a frontier worker in his place of residence (Belgium, in particular to telework there) will not be taken into account for the calculation of the 24-day rule. Applicable until 30 June 2020.
- The authorities of Belgium and France concluded an agreement on 15 May 2020 clarifying the situation of frontier workers in the context of the COVID-19 health crisis. The agreement provides that workers who work from home as a result of the COVID-19 health crisis can continue to be taxed in the state in which they previously exercised their professional activity before the crisis broke out. The agreement does not apply to residents of France who are subject to the special regime for frontier workers (communication 13 March 2020).
- Belgium and the Netherlands have also concluded an agreement to prevent cross-border workers from suffering negative tax consequences as a result of the corona crisis. Concretely, from 11 March to 31 May, the home working days of frontier workers will be considered as days worked in the country of employment. As a result, the country of employment will continue to levy tax on income. If necessary, the agreement with the Netherlands can be extended after 31 May. There are also specific provisions concerning the taxation of the temporary unemployment benefit by corona.
- The competent authorities of Belgium and Germany also concluded an agreement on 6 May 2020 clarifying the situation of frontier workers in the context of the Covid-19 health crisis. The agreement provides that workers who, as a result of the COVID-19 health crisis, work from home can remain taxable in the state where they previously exercised their professional activity before the outbreak of the crisis. This regulation is applicable from 11 March 2020 to 30 June 2020.
Finally, teleworking could also have an impact on the social security of workers working across borders. The EC Regulation No 883/2004 regulates the coordination of social security systems and provides that a worker living in one Member State and working in another Member State is socially insured in the country of employment. In case of substantial activity in the country of residence (i.e. at least 25% of the working time), the worker will be socially insured in the country of residence. As at present employees are asked to work from home, this may lead to a change in the applicable social security legislation. Indeed, it is possible that, as a result of the telework, the employee will perform a substantial activity in the country of residence, as a result of which the country of residence suddenly becomes the competent Member State with regard to social security.
In view of the exceptional situation, it has been decided that periods of telework performed by employees on Belgian territory will not be taken into account for the assessment of the applicable social security legislation. The neutralisation of the teleworking periods worked as a result of the Corona virus will also save the workers and companies concerned from additional administrative formalities. This measure will apply from 13 March 2020 (midnight) and will apply until further notice.
Last update: 04/06/2020