IMPACT OF TELEWORKING IN CORONA TIMES ON CROSS-BORDER EMPLOYMENT SITUATIONS
In the wake of the corona crisis, many workers are still dependent on teleworking. But what impact does this teleworking have on the fiscal and social security position of workers who are normally employed across borders?
More teleworking can lead to a change in a worker’s social security position in cross-border situations. After all, EC Regulation 883/2004 stipulates that a worker who lives in one member state and works in another member state is socially insured in the country of employment. However, if the worker carries out a substantial activity (at least 25% of his working time) in the country of residence, the worker will be socially insured in the country of residence. For the worker who now has to telework because of corona, this could mean that the country of residence suddenly becomes the authorised member state regarding social security purposes.
In view of the exceptional circumstances, the Belgian authorities have decided that they will not take into account periods of teleworking on Belgian territory due to the corona crisis in their assessment of the applicable social security system, effective as from 13 March 2020. This measure was recently extended until 31 December 2020. Please note that this date can be revised depending on the corona measures.
In principle, personal income tax is due in the taxpayer’s state of residence. However, employees who are employed in a cross-border context (e.g. work in one or more other countries or make many business trips) may also be taxable in the country of employment. Where they are taxable, is generally determined by their effective physical presence in the countries concerned. For Belgian residents, this often results in a tax advantage, as the tax burden in other countries is usually somewhat lower than in Belgium.
Here, too, teleworking raises questions. Employees who normally often work abroad will now only work at home (in their country of residence). This has an impact on their physical presence in other countries and thus on their taxability. Employees who work in Belgium and benefit from the favourable status for foreign executives (expat status) will also be affected by their more limited professional travel.
On the fiscal front, however, there is no general measure in force such as that concerning social security.
Every day of telework performed in Belgium will therefore be treated as any other working day performed in Belgium for tax purposes. For the time being, the Belgian tax authorities have only provided for an exception in four very specific cases:
- In the event of simultaneous employment in Belgium and Luxembourg, the Belgian and Luxembourg tax authorities have agreed that the current situation constitutes a case of force majeure, as a result, as from 14 March 2020, a day of telework in Belgium will not be counted under the already existing 24-day rule of permitted physical presence during working days outside Luxembourg.
- There is also clarity for the French cross-border workers. As from 14 March 2020, telework will no longer be taken into account for the calculation of the period of 30 days of permitted physical absence during working days outside France.
- The Belgian and Dutch tax authorities concluded an agreement at the end of April on cross-border workers who are currently working from home because of the current corona crisis. Concretely, as from 11 March 2020, the teleworking days of cross-border workers will be considered as days worked in the country where they are normally employed. As a result, the country of employment will continue to levy tax on the income the cross-border worker earns during the days he teleworks. Belgium and the Netherlands also made specific agreements on the taxability of temporary unemployment benefits received by certain workers as a result of the corona crisis.
- Lastly, at the beginning of May the authorised tax authorities of Belgium and Germany also concluded an agreement clarifying the situation of cross-border workers in the context of the corona crisis. The rule will apply retroactively as from 11 March 2020. This agreement is very similar to the agreement previously concluded between Belgium and the Netherlands and stipulates that workers who work from home as a result of the corona crisis can still be taxed in the country where they previously carried out their professional activities before the crisis erupted. This rule can be applied only to the days on which the cross-border worker would normally have worked on the territory of the other country and not to the days on which he would have worked on the territory of the third country or at home in his country of residence. This rule will also apply only where there is no double exemption and it is established that the income is actually taxed in the other country.
The above agreements concluded by the Belgian tax authorities with the tax authorities of our neighbouring countries Luxembourg, France, the Netherlands and Germany have now been extended until 31 December 2020. Consequently, until 31 December 2020, due to the corona crisis, teleworking days will be considered as days worked in the country of normal employment by the tax authorities. As a result, the country of normal employment will continue to levy tax on the income earned by the workers concerned during the days of teleworking. Depending on the further course of the crisis, the tax authorities may also terminate the agreements prematurely, after which the normal rules stipulated in the double taxation treaties will apply again.
As always, we advise you to keep a detailed overview of where employees carry out their work. The drafting of a specific document between the employer and the employee confirming for which “foreign days” telework will still be carried out due to the corona crisis also remains appropriate.
If you have any questions about this, you can always contact Mieke Vanden Poel