News item | 11-12-2023 | 6:00 PM
The Dutch and Belgian governments have concluded an agreement to provide employers with clarity about the tax consequences of employees working from home. This removes uncertainty about the tax consequences of working from home by employees living on the other side of the border. The agreement provides clarification of the existing tax treaty between the Netherlands and Belgium, and also provides practical guidance that applies from the publication date of December 8.
The Netherlands and Belgium have explained in the agreement when there is (not) a permanent establishment for cross-border workers who work from home. In addition, as a practical guideline, it has been established that if an employee works from home for 50 percent or less of the working time during a year, there is in any case no permanent establishment. If 50 percent or more of the working hours in a year are worked from home, the presence of a permanent establishment depends on the factors mentioned in the agreement. It is expected that the clarity provided will remove the barrier that employers currently experience in allowing employees to work from home.
Over the past six months, negotiations have been held with Belgium about a threshold arrangement for hybrid working across the border. These discussions have not yet led to an amendment to the treaty itself and will therefore continue. The Netherlands’ aim is that such a threshold scheme ensures that cross-border workers experience fewer administrative burdens and are not in a more uncertain tax position compared to employees who do not work across the border.
In total, there are more than 50,000 Dutch and Belgians who work across the border, some of whom also work from home. With this agreement, the Netherlands and Belgium want to provide more clarity for employers with employees who want to work from home across the border. For employers, there was uncertainty as to whether working from home leads to a so-called ‘permanent establishment’ when the employee works from home, but this is in a different country than where the company is located. If there is a permanent establishment, the employer must pay tax on the company’s profits in the country where the employee lives.
The government remains committed to removing obstacles that cross-border workers experience as much as possible. The government is also discussing further agreements with neighboring countries about the consequences of income tax for cross-border workers who work from home. The Netherlands also continues to promote cross-border workers (who work from home) within the OECD and the European Union.