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 our newsletter of April 2020, we explained how this may affect the application of social (security) legislation and how this may impact international taxation. Herewith, we provide you with an update in this respect.
INTERNATIONAL TAXATION – DOUBLE TAX TREATY BETWEEN BELGIUM AND THE NETHERLANDS
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.
The Belgian and Dutch authorities have now agreed on some specific measures following the Covid-19 pandemic. In case employees are working from home following the corona crisis, it will be assumed that the individual concerned will have worked in the country where he would have been working without the application of the corona measures. It is thus required that the employee is working from home solely and exclusively due to the corona crisis. This rule cannot be applied to working days during which the employee would have worked from home anyway or in third countries. It is important in this respect to keep track of all these days in a travel calendar, potentially together with an attestation from the employer confirming which days the employees has worked from home following the corona measures. The same rules are valid for the working days during which the employee normally would have been working, but has not worked due to the corona crisis and on the condition that he still has received salary for those working days.
In case Dutch tax residents who usually work in Belgium, would receive temporary unemployment benefits due to force majeure following the corona crisis, these temporary unemployment benefits will be taxed in the country which has taxing rights for the remuneration paid for the work carried out within the framework of the position or function. This means that the usual working pattern as applicable before the coronacrisis is relevant in order to determine which country has taxing rights. The temporary unemployment benefits are thus taxed according to the same working pattern as the normal remuneration or salary is taxed.
These exceptional corona measures agreed upon between the Belgian and Dutch authorities are valid for the period as from March 11th, 2020 until May 31st, 2020. Please note that they have foreseen in a possibility to extend this period, should the authorities of both countries agree to do so.
Except for some exceptional measures taken under these specific circumstances, 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].