A new Belgium-Luxembourg agreement introduces an important change concerning how many working days a cross-border employee resident in one country (e.g., Belgium) can work outside the country of employment (e.g., Luxembourg) before there is a tax consequence. The agreement will allow the employee to work 24 days outside the country in which the employer is established before taxation in the individual’s country of residence occurs. The upshot is that administrative burdens in such situations will potentially be reduced, as employees no longer face a tax liability in their country of residence beginning with the first working day outside their country of employment.
A new Belgium-Luxembourg agreement introduces an important change concerning how many working days a cross-border employee resident in one country (e.g., Belgium) can work outside the country of employment (e.g., Luxembourg) before there is a tax consequence.1
There are growing numbers of Belgium-Luxembourg cross-border workers. Oftentimes, they face tricky cross-border employment issues. For instance, such employees with work-days outside of Luxembourg can have compIex income tax filing positions that oftentimes result in an onerous administrative burden. On the one hand, they are obliged to prove every work-day in the country of employment; on the other hand they must pay income tax in their country of residence if they have just one day of presence outside the country of employment.
The new bilateral agreement potentially lowers this administrative burden significantly, as employees no longer face a tax liability in their country of residence beginning with the first working day outside their country of employment. This is particularly helpful for employees who have only incidental work-days outside of Luxembourg.
On 16 March 2015, the Belgian and Luxembourg governments entered into this bilateral agreement2, which still has to be confirmed in a protocol to the Belgium-Luxembourg double taxation treaty. The agreement will allow the employee to work 24 days outside the country in which the employer is established before taxation in the individual’s country of residence occurs3. We elaborate further on this change below.
Prior to this change, if a cross-border worker is employed by an employer in the other contracting state, article 15 of the Belgian-Luxembourg double taxation treaty provides that employment income is taxable in the employee’s country of residence, except if the employment is exercised in the other contracting state. As from 1 January 2015, a cross-border employee will remain taxable on his total employment income only in the country where his employer is resident provided that he is not working more than 24 days per annum outside of this country. For example, an employee who is resident in Belgium and who is working for a Luxembourg employer will be taxable only in Luxembourg on his total employment income if he works 24 days or less per annum outside Luxembourg. If he works more than 24 days outside of Luxembourg, then Belgium (the country of residence) gets to tax that income. The new rules apply as of 1 January 2015.
In the past few years, the Belgian tax authorities have increased the number of audits of returns in which an exemption for income taxable abroad is claimed. This has resulted in many amendments of income tax returns for Belgian taxpayers employed in Luxembourg who also had work-days outside Luxembourg. In many cases, this also implied that relief for double taxation had to be applied for in Luxembourg. The agreement should help to remedy this issue.
1 See the press release (Communiqué) of the Luxembourg government of 16 March 2015 (in French) at: https://www.gouvernement.lu/4572038/16-gramegna-overtveldt.
2 See: Belgium and Luxembourg sign agreements on border work
3 According to article 15 of the Belgium-Luxembourg double taxation treaty.
For additional information or assistance, please contact your local GMS or People Services professional or one of the following professionals with the KPMG International member firm in Belgium:
tel. +32 2798 3817
tel. +32 2708 3640
The information contained in this newsletter was submitted by the KPMG International member firm in Belgium.
© 2020 KPMG Tax and Legal Advisers, a Belgian Civil Cooperative Company with Limited Liability (burg. CVBA/SCRL civile) and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.
Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.