Workers employed by companies established in a foreign country were regularly commuting to their workplace abroad.
In the current fight against COVID-19, many Belgian residents have been encouraged to work from home.
Double tax treaties generally provide for taxation of employment income in the work state. This means that income related to days worked from the Belgian domicile of the worker are, according to the Belgian tax authorities, taxable in Belgium.
With an increase in homeworking measures for Belgian residents, we can therefore also expect an increase in the portion of salary taxable in Belgium.
However, Belgium has one of the highest employment income taxation regimes in the world, making it often more advantageous to be taxed abroad. For workers residing in Belgium and generally carrying out their activities in another state with a double tax treaty, the impact of teleworking is likely to have negative tax consequences.
Because of the COVID-19 crisis, Belgium and certain neighbouring countries have reached agreements to limit the fiscal impact of telework for cross-border workers. These agreements recognize that the current crisis is a case of ‘force majeure’.
The final protocol to the Belgian–Luxembourg double tax treaty already provides for a tolerance rule allowing cross-border workers to exercise their activity for a maximum of 24 days outside their usual work state while remaining taxable in that state.
The Belgian and Luxembourg authorities have however agreed that, from 14 March 2020, the number of days worked from home by a cross-border worker will not be taken into account when calculating the 24-day tolerance.
An additional protocol to the Belgian–French double tax treaty also provides for a derogatory tax regime, but it only applies to workers residing in the French border area and working within the Belgian border area. The two states have nevertheless confirmed that, from 14 March 2020, a French frontier worker teleworking in France will not lose the benefit of this favourable regime.
Consequently, as far as Belgian residents working in a country other than Luxembourg are concerned, there are currently no specific measures in place and teleworkers will likely pay more taxes than expected following their 2021 tax return for their 2020 income.