The spread of the coronavirus has a far-reaching impact on business and society all over the world. Countries have taken extensive measures in order to fight this virus. As several of these measures entail countries closing their borders, international business travel has become very difficult, if not impossible. As a result, the working pattern and work location of several employees and self-employed workers have changed due to this crisis. In this newsletter we inform you on how this may affect the application of social (security) legislation and how this may impact international taxation.
SOCIAL LAW PERSPECTIVE
From a social security point of view, the European Regulation 883/2004 on the coordination of social security systems is applicable in case of a cross-border working pattern within the European Economic Area (EEA). In case an employee or self-employed individual would be more or even fulltime (tele)working from home following the coronameasures, this might lead to the result that the social security legislation of another EU member state should be applicable according to the rules of designation included in this European Regulation.
Considering the fact that many employees or self-employed individuals are working from home during this period of crisis, the Belgian government has decided that the period of teleworking carried out by cross-border workers on Belgian territory following the spread of the coronavirus, will exceptionnaly not be taken into account in order to determine the applicable social security legislation. The fact that many employees or self-employed workers are now teleworking and thus have a different working pattern than usual, will not have an impact on the applicable social security system.
The above decision is applicable to individuals in a simultaneous employment situation, i.e. working in 2 or more EU member states at the same time, but is also valid for secondments and frontier work situations. After all, due to the corona measures, it is possible that the seconded worker will need to stay in the host country longer than planned or that the frontier worker should work from home instead of travelling to his work location abroad on a daily basis. Several other situations may occur during these global crisis, following the corona measures. Under these circumstances, it is not desirable that the changes in working patterns which are directly and exclusively linked to the corona measures and which are limited to the duration of this exceptional situation, lead to a change in the applicable social security system. This has lead to the decision that the competent EU member state will not change due to changing working patterns following the corona crisis.
This poliy decision will be valid for as long as the period of the exceptional measures taken by the Belgian government continues or until a different policy point of view is adopted. In any case, A1 certificates which have already been issued, remain valid. In addition, it is not necessary to inform the Belgian social security authorities about the change in working pattern following the corona crisis nor should an exceptional agreement or any other formality be fulfilled in this regard.
It is merely required that the change in working pattern is due to the corona measures and that the situation is normalized again as soon as the corona measures are lifted. This means that the same working pattern as applicable before corona, should again be followed after corona.
Please be informed that the above decision concerns the cross-border employment situations within the EEA or Switzerland. For cross-border employment situations concerning third countries outside the EEA or Switzerland, the Belgian social security authorities should however be informed about any changes in working pattern due to the corona crisis and each and every file or situation will be investigated and treated separately.
From an employment legislation point of view, secondment agreements within the EU are in principle governed by the law of the home country of the posted worker. However, the legislation of the host member state regarding the basic employment condition (minimum wage, maximum working time and minimum rest time, rules regarding health, safety and hygiene at work etc.) will continue to apply, as usual. In case it would not be allowed to go the work location due to corona restrictions, the posted worker should respect the rules of the host member state. In any case, he or she will remain entitled to social security benefits from the member state where he or she pays social security contributions. The employment agreements for frontier workers are usually governed by the employment legislation of the member state of employment. During this period of crisis, the employment contracts will continue to be governed by the law of the member state of employment, unless the frontier worker agreed with his or her employer differently. The fact that the frontier worker is now working from home in his residence country due to corona restrictions, does in principle not change the applicable employment legislation.
Finally, a side note about the Belgian Limosa declaration: in case a Limosa declaration has been done but due to the corona crisis, the location of employment does not correspond to the current actual location of telework, the Limosa declaration does not need to be updated. Furthermore, in the situation when employees or self-employed workers who usually work abroad but now work from home in Belgium due to the corona crisis, no Limosa declaration is required.
Individual income tax is generally due in the worker’s country of residence. However, employees who work in cross-border situations may be taxable in other countries than their country of residence. These rules are generally based on physical presence of an individual in a certain country. Following the corona measures, employees who usually work abroad or in cross-border situations, may now carry out more telework or are working from home in their residence state very frequently. From an international taxation perspective, the general rules to determine which country has taxing rights remain applicable, also during this period of crisis. Consequently, the country in which these employees should be taxed, may change now during this corona period. Within this framework, it is important to verify whether this change in working pattern has any consequences with respect to income tax or payroll tax obligations in the residence state of the concerning employee. Furthermore, it may be worthwhile to investigate in any case whether the employee could make already some advance tax payments somehow to ensure that there will be no unpleasant surprises at the moment when the tax settlement for income year 2020 arrives.
As mentioned earlier, the general rules in order to determine which is the competent country with respect to taxation, remain applicable. The authorities however have taken some specific measures with respect to the Belgian-French situations and the Belgian-Luxembourg situations. In practice, the Belgian authorities have reached an agreement with the French, respectively the Luxembourg authorities for the application of some corona measures.
In the Luxembourg-Belgian double tax treaty, a set of specific rules is in place for frontier workers, i.e. workers who live in one country but are travelling to the other country almost on a daily basis to work there. In these situations, there is foreseen in a 24-day rule which means that the frontier worker can work for 24 days in his home country without triggering taxation there. Following the corona crisis, the authorities of both countries have reached an agreement on a list of situations in which days worked in the home country will not be taken into account for the 24-day rule. Force majeure situations such as the spread of the coronavirus is one of these. Therefore, days worked at home due to the corona crisis, as from March 14th, 2020 onwards, will thus not be included for the application of the 24-day rule.
In the French-Belgian double tax treaty, there is foreseen in a similar 30-day rule for frontier workers. Also in a French-Belgian context, the days worked from home instead of at the work location in the frontier area, will not be taken into account for the application of the 30-day rule. The authorities of both countries agree that this situation constitutes force majeure. Consequently, every day worked at home due to the corona crisis, as from March 14th, 2020 onwards, will thus not be taken into account for the application of the 30-day rule.
Except for these exceptional measures in these specific situations, it is important to keep in mind that the general rules to determine which country has taxing rights remain applicable, also during this period of crisis.
If you would like to receive additional information on this matter or assistance, the tax team of RSM Belgium is at your disposal: [email protected].