As Covid-19 continues to spread across the world many countries, including Belgium, have taken measures to stop the spread of the virus. As of 18 March 2020 companies in Belgium, with the exception of those who provide essential services, are obliged to organise remote working arrangements for every position where this is possible. In this respect employees who are working in an international context might question whether their disrupted work pattern (i.e. in most cases, an increase in time spent working in their country of residence) could have an impact on the applicable social security regime and the taxation of their professional income.
The European regulations provide a set of rules to determine which social security legislation is applicable to people working simultaneously in two or more states within the European Economic Area and Switzerland. This regulation ensures that an individual can only be subject to the social security system of one country at a time. Employees who simultaneously work in multiple Member States are generally subject to the social security regime of their home country where they perform substantial activities (i.e. more than 25% of their working time or remuneration) there. In the case that no measures are taken by the Belgian Government, the obligatory remote working might cause a switch in the applicable social security regime from that of the state where they habitually work to the regime of their home country.
Therefore the Belgian social security authorities decided that as of 13th March 2020 (midnight) until the end of the emergency measures taken by the Federal Government (set at 3rd May 2020 at the time of writing this article) the periods of remote work performed on Belgian territory by cross-border workers due to Covid-19 will exceptionally be excluded from the exercise for the determination of the applicable social security regime.
Please note that the above position is from a Belgian perspective only and that it does not apply to situations that are not included in the scope of the Europe Regulations. Meanwhile the Netherlands has adopted a similar position. The expectation is that other Member States will also follow. In case an employee normally works in a country covered by a bilateral social security treaty, the Belgian social security authorities should be contacted as they will handle each case individually.
Taking into account the above, the increased remote working due to the Covid-19 virus of cross-border workers in Belgium will most likely not have an impact on the applicable social security legislation in most of the cases under review.
In general the professional income of employees is taxable in the home country. However in a cross-border context, it is possible that the income related to the professional activities carried out in another country, is taxed in that other country where the activities are performed.
Due to the emergency measures taken by the different countries employees are now often obligated to work from home which will have an impact on the physical presence abroad.
With respect to cross-border employment in Luxembourg and France, the Belgian tax authorities already announced the following measures:
Luxembourg
In favour of commuting frontier workers, Belgium and Luxembourg introduced a “tolerance rule” of 24 days. This “tolerance rule” stipulates that employment income received by a commuting frontier worker who is resident in Belgium and who is physically working in Luxembourg for a Luxembourg employer is fully exempted from taxation in Belgium, to the extent that the employee works a maximum of 24 working days in Belgium per calendar year. Vice-versa this tolerance rule also applies to the tax residents of Luxembourg who are working in Belgium for a Belgian employer.
The Belgian and Luxembourg government have agreed that, in the case of a “force majeure” like Covid-19, the days worked from home whilst the special Covid-19 measures are in force do not count towards the 24-day threshold.
In other words, as of 14 March 2020 the presence of a cross-border worker at home in Belgium will not be taken into account when verifying whether the 24-day threshold has been respected. This measure will apply until further notice.
France
A similar agreement was made between the Belgian and French government in the “frontier workers regime”. This regime stipulates that a French resident who is living in the border area of France and who is physically working in the border area of Belgium remains fully taxable in France to the extent that the French resident works a maximum of 30 working days outside the Belgian border area. Due to the Covid-19 virus, French cross-border workers will most likely work from home (i.e. outside of the Belgian border area). Therefore the Belgian and French government decided that the presence of French frontier workers at their residence in France shall not be taken into account for the calculation of the 30-day period. Consequently, the French cross-border worker will not lose his status of cross-border worker by working from home.
For now it is not clear yet whether the Belgian tax authorities will apply any tolerances with respect to individuals who have a “salary split” or whose cross-border employment involves other countries than Luxembourg or France, similar to the tolerance put in place by the Belgian social security authorities. It is therefore of the utmost importance that these individuals keep track of where they have worked and when during 2020.
One of the main benefits of the Belgian special tax regime for foreign executives is that only income relating to workdays performed on Belgian soil are taxable in Belgium. In this respect the taxable income in Belgium is determined by reducing the income with the so-called “travel exclusion”.
Due to the measures of the Belgian government in combating the Covid-19 virus, many companies have reduced or postponed all (non-essential) international business trips made by their employees. Moreover some of the employees benefiting from the special tax regime returned to their home country to remote work from there. Both situations will have a direct impact on the travel exclusion. To reduce the impact the Belgian tax authorities are currently reviewing potential approaches.
In order to avoid unpleasant surprises and to allow you to take necessary actions within due time, we strongly recommend to closely follow-up the presence of your cross-border workers.
Peter Wuyts
peter.wuyts@bdo.be
Charlotte Lemahieu
charlotte.lemahieu@bdo.be