Due to the travel restrictions caused by COVID-19 measures, cross-border workers face the risk that their employment income would become fully taxable in their state of residence. The mutual agreements with France and Luxembourg aim to ensure that cross-border workers will not suffer any tax disadvantages by working from home. Days worked from home will be assimilated to days worked in the country where the individual would normally have worked. This means that, despite working from home, the employment income can continue to be taxable in their state of work.
Based on the income tax treaty Belgium concluded with France and Luxembourg, employment income is taxed in the country where the activities are performed, with few exceptions. Without derogation, cross-border workers that are forced to work from home during the COVID-19 pandemic could suddenly no longer be taxed by the country where they work, but in their country of residence instead.
To avoid that cross-border workers would experience negative tax consequences as a result of the COVID-19 pandemic, days worked from home during the COVID-19 pandemic will be regarded as days spent working in the country where the employee would normally have worked.
This presumption only applies for days worked from home because of measures taken by the governments of the contracting countries to combat the COVID-19 pandemic. The principle cannot be applied on days where the cross-border worker would normally have been working from home or in a third country.
Individuals who want to take advantage of this presumption will have to do so in a consistent manner in both countries. Individuals may be asked to provide a certificate, issued by the employer, confirming the number of days worked from home solely because of health regulations taken by the governments to address COVID-19. The presumption can only be applied insofar as the income is actually taxed in the work state. This means that the income must be included in the basis for calculating the taxes due in the work state.
Different rules apply for resident taxpayers of France benefiting from the Belgian-French tax regime for frontier workers. These frontier workers are allowed to work a limited number of days outside of the frontier zone without this affecting their tax situation. The authorities confirmed that the COVID-19 pandemic is a situation of force majeure, beyond the control of the employer and the employee. Days worked from home as a consequence of COVID-19 will not be taken into account for the calculation of the days worked outside of the frontier zone.
The presumption applies to days worked from home between 11 March 2020 and 30 June 2020 for the agreement with Luxembourg and between 14 March 2020 and 30 June 2020 for the agreement with France. Both agreements may be extended until the end of the following calendar month, subject to agreements of the contracting countries.
The intention of the agreements is to provide clarity on the income tax situation of individuals working in one country whilst residing in the other country and that are now forced to work from home during the COVID-19 pandemic.
More careful consideration should be given to the situation of individuals working in more than one country or individuals that regularly worked from home or in third countries prior to the COVID-19 pandemic.