COVID-19 arrangements for cross border workers further extended to 30/06/2022
The mutual tax agreements between Belgium and neighbouring countries and the exceptional social security measures to prevent cross-border workers from being adversely affected by the COVID-19 pandemic have recently been extended.
Due to the travel restrictions caused by COVID-19 measures, cross-border workers face the risk their employment income would become fully taxable in the state of residence. The mutual agreements aim to ensure that cross-border workers will not suffer any tax disadvantages by working from home.
The mutual agreements between Belgium and the 4 neighboring countries (the Netherlands, France, Luxembourg and Germany) applicable as of March 2020 ran, after several extensions, until 31 December 2021. Recently all 4 agreements have once again been extended until 31 March 2022. The agreements with the Netherlands, France, Luxembourg will be tacitly extended until 30 June 2022 unless one of the contracting countries decides to end the agreement prematurely.
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 means that, despite working from home, the employment income can continue to be taxable in the state of work.
This so-called “fiction” 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 on days where the cross-border worker would normally have been working from home or in a third country
Individuals wanting to make use of the fiction will have to do this in a consistent manner in both countries. The fiction 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 individual will have to keep the necessary supporting documents, such as a written confirmation from the employer.
The Belgian social security authorities also confirmed that the increase of telework because of the pandemic will not influence the applicable social security scheme until 30 June 2022, provided that the normal working pattern is taken up again after that date.
When the pandemic-related restrictions start to lift, many employers have already announced plans for hybrid working arrangements, under which an employee’s working time may be split between home and the office. Working from another country might result in personal tax, social security, corporate tax and immigration obligations. We recommend employers to review the risks and potential exposure and set a framework and policy for these cases.