Belgium has concluded mutual agreements with the Netherlands and Germany to prevent cross-border workers from being adversely affected by the COVID-19 pandemic.
Due to the travel restrictions caused by COVID-19 measures, cross-border workers are at risk that their employment income becomes fully taxable in their State of residence. The mutual agreements with the Netherlands and Germany aim to ensure that cross-border workers will not suffer from 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 the State of work.
Based on the income tax treaty Belgium concluded with the Netherlands and Germany, employment income is taxed in the country where the activities are performed, with a few exceptions. Without derogation, cross-border workers that are forced to work from home during the COVID-19 pandemic are suddenly no longer being taxed by the country where they work, but instead, in their country of residence.
To avoid that cross-border workers 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, or local subdivision, to combat the COVID-19 pandemic. The principle cannot be applied to days where the cross-border worker would normally have been working from home or in a third country.
Individuals who would like to benefit from this presumption will have to do so in a consistent manner in both countries. 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.
The agreement between Belgium and the Netherlands also clarifies that if an employee stays at home for one or more working days without working but continues to receive a remuneration, the remuneration will be taxed according to the same working pattern as if the employee had worked.
The intention of the agreement is to provide clarity on the income tax situation of individuals working in one country whilst residing in another country and that are now forced to work from home during the COVID-19 pandemic.
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.