The Belgian tax authorities have published an administrative letter on 17 June 2020 (Circular Nr. 2020/C/81) regarding the general impact of COVID-19 on cross-border employment situations. It is not a very detailed letter and it is drafted as a FAQ list. It mostly focuses again on employment in our neighboring countries (i.e. Germany, the Netherlands, France, and Luxembourg) and simply restates what was already agreed in the bilateral agreements recently concluded with these countries. This we covered before in our news updates .
We nevertheless want to highlight some other employment situations that could be relevant to you, which are further explained in the administrative instruction.
• I live in Belgium and usually work in a country other than Germany, France, Luxembourg, and the Netherlands. Where is my salary for the home working days taxable?
Belgian tax authorities: “In principle, (employee) remuneration is taxable in Belgium, as the country of residence where the employment takes place. However, it is advisable to check the provisions of the relevant double tax treaty applicable between Belgium and the country where the professional activity is normally carried out (if such a treaty is in place)”.
In other words, the Belgian tax authorities simply confirm the general principle that in case the working days take physically place in Belgium as the country of residence; the salary is taxable here (even so for the COVID-19 home working days when people were forced to work from home).
It is highly regrettable that the Belgian authorities do not take this opportunity to apply a similar approach as stipulated in the recent agreements with our neighboring countries (and as also recommended by the OECD ), i.e. that the home working days are deemed to have been spent in the country where the employee would have worked in a ‘normal’ situation (i.e. in absence of the COVID-19 measures).
The instruction also does not say anything about the situation in which Belgium is the country where the employment normally takes place for foreign cross-border workers commuting to Belgium. Based on the above, it seems that those COVID-19 home working days would also remain taxable in the employee’s home country (and thus not in Belgium).
We remain of the opinion that a general ‘force majeure’ tolerance for cross-border workers in the context of COVID-19 should be applied to all relevant countries, but it looks like this is currently only the case for Germany, France, Luxembourg, and the Netherlands.
• I reside in Belgium and am employed by a Belgian company. While I was seconded to Germany (or France, Luxembourg or the Netherlands) for a period of 5 months, my assignment ended while working from home (due to COVID-19). Where is my salary for the home working days taxable?
Belgian tax authorities: “The COVID-19 agreements do not cover any temporary posting to Germany, France, Luxembourg or the Netherlands. The remunerations are therefore taxable in Belgium, as the country of residence where the employment takes place”.
The recent agreements do not cover the situation in which an employee of a Belgian company is temporarily assigned or seconded to one of our neighboring countries. In that case the general principle applies and there is no special tolerance due to COVID-19.
• I am residing in Belgium, but I benefit from the special expat tax status. Where are my remunerations for the home working days taxable?
Belgian tax authorities: “Since employees with the special expat tax status are considered to be non-residents, the double tax treaties concluded by Belgium do not apply to them, nor do the COVID-19 agreements. The remuneration is therefore taxable in Belgium, where the employment takes place”.
While this reply is a true example of a vague statement, we do share the opinion with the Belgian tax authorities that it would be very difficult to apply a special tolerance in this context due to COVID-19.
Although the ‘foreign travel exclusion’ (i.e. the Belgian tax exemption on foreign working days) often generates a significant tax benefit for employees working under the expat status, it is only granted in case the employee can actually demonstrate physical working time abroad. For the expats forced to work from home in Belgium, we believe it would be difficult to indicate the foreign country where the employment would have ‘normally’ taken place.
As a result of COVID-19, many employees benefitting from the special tax status who regularly travel abroad will likely be confronted with a significantly higher Belgian tax liability for income year 2020 (tax year 2021). This may also result in an important additional cost for the employer (depending on the contractual arrangement in place).
• I reside in Belgium and work as a self-employed individual (e.g. consultant). I usually exercise this activity in the offices available to me in Luxembourg (or Germany, France or the Netherlands). Where are my professional earnings from the activity exercised from home taxable?
Belgian tax authorities: “The professional earnings are taxable in Belgium, as the country of residence where the activity is performed. The COVID-19 agreements do not apply to self-employed earnings”.
This reply is again rather vague but confirms that the recent agreements with our neighboring countries only cover cross-border employment and not self-employment.
The general rule for self-employed income in most double tax treaties is that it is taxable in the country where the freelancer or independent is a resident unless they have a ‘fixed base’ available in the other country. Making abstraction of the country where the self-employed is actually registered for this purpose, working from home due to COVID-19 as a freelancer or consultant could in theory result in less income being attributable to the fixed base and therefore paying more income tax in your country of residence.
• The administrative letter also explains what you would have to do as a Belgian tax resident in order to claim the benefit of the COVID-19 agreements (with Luxembourg, Germany, France or the Netherlands).
The Belgian tax authorities confirm you should keep the following documents available:
1. An attestation drawn up by your employer stating the number of COVID-19 home working days as stipulated in the relevant bilateral agreement.
This attestation should contain the following information:
– personal information (name, first name, address, date of birth);
– function within the company;
– number of COVID-19 home working days;
– if applicable, the number of home working days as provided for in the employment contract
– the overview of sick days, holidays, or other days of absence;
– declaration that the information provided is ‘true and sincere’;
– date and signature of both employer and employee.
2. proof that the remuneration paid for the COVID-19 home working days has actually been taxed in the country where the activity would have normally been carried out.
The Belgian authorities also provide an email address you can contact in case you would require further information in this matter: firstname.lastname@example.org