Belgium: Treaty relief with Luxembourg, for cross-border workers

Increased period during which a cross-border worker may engage in work activity without triggering taxation in the other country

Increased period during which a cross-border worker may engage in work activity

Representatives of the governments of Belgium and Luxembourg on 31 August 2021 agreed to and signed an amendment to the income tax treaty that would increase to 34 days (from 24 days) the period during which a cross-border worker may engage in work activity without triggering taxation in the other country.

Summary

Article 15 of the Belgium-Luxembourg income tax treaty addresses the tax treatment of cross-border employees for work conducted in Luxembourg (on behalf of a Luxembourg employer) by a Belgian tax resident. The taxation in Luxembourg is based on the number of days actually worked in Luxembourg. The country of the employee’s residence (in this case, Belgium) would retain the right to tax all days worked outside Luxembourg (whether these are days during which the individual worked in Belgium or worked in third countries).

Under what is known as the “24-day rule,” Belgium and Luxembourg will not take into account the physical presence of such cross-border employees in a country or state other than that of the person’s (usual) place of employment, provided that this presence does not exceed 24 days during the tax period. As a result, an employee is considered to have actually conducted the tasks of employment in that person’s usual country where such work is performed. This 24-day rule makes it possible to avoid a change in the authority to tax for a minimal number of days for work conducted outside the usual state of activity (either in state of residence or in third countries).

The August 2021 treaty amendment increases the 24-day period to 34 days during which a cross-border worker can work outside that person’s (usual) state of activity, while remaining taxable in that country on the full amount of remuneration.

This new 34-day threshold is effective 1 January 2022 (but is pending ratification and parliamentary approval required of the two countries for the measure to enter into force).
 

Read a September 2021 report (French) prepared by the KPMG member firm in Belgium


 

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