On November 23, 2023, the Competent Authorities (CA) of Belgium and The Netherlands signed an agreement* clarifying when a permanent establishment (PE) exists for the employer in the other country if employees are working from their home location in that other country. This agreement provides welcome additional guidance on the cases in which an employee occasionally works from home in the other State can or cannot constitute a PE in the other State.
Content of the agreement between the CA of Belgium and the Netherlands
The agreement provides additional guidance on the important question of whether or not the use of an employee’s home office could trigger the existence of a PE and more specifically, whether or not the home office can be considered to be “at the disposal” of the employer. The agreement indicates that a distinction has to be made between the following scenarios:
- Incidental home working
- Structural home working, with the option to work elsewhere; and
- Structural and mandatory home working.
In the first case, the agreement is clear that of the employee works from its home location on an irregular or incidental basis and working from its home location is not a part of a fixed working pattern, a PE will not be deemed to exist as the home office may not be seen to be at the disposal of the employer.
In the other scenarios a PE could exist, with the main trigger being the requirement to work from home. The agreement clearly states that this requires an analysis of the facts and circumstances and is hence case specific. Whether the home location is at the disposal of the enterprise through which the business of the enterprise is wholly or partly carried on will depend on whether the employer can determine the extent in which the company is present in that location and whether it can determine the activities that can be carried out there. In principle, the employee’s home location is at the disposal of the enterprise of the employer if one of the following (non exhaustive) situations occurs:
- The employer demands (contractually) that (a part of) the activities are performed at the employee’s home location;
- The employer does not demand contractually that (a part of) the activities are performed at the employee’s home location, but the employee is forced to work from its home location because no working spot is available for that employee in the residence state of the employer (or in cases where it is clear from fact and circumstance, that even is a location is available, it is not the intention to use this);
- The employee cannot stop the use of its home location unilaterally, for example because the employee cannot perform its activities adequately or conform it employment agreement if not performed at its home location.
Furthermore, the agreement clarifies that an employee’s home location will not constitute a PE of the employer if the employee is working from its home location 50% or less during a period of twelve months or when the employee is performing only preparatory or auxiliary activities that would not constitute a PE under the relevant treaty article, even if the employee’s home location was at the disposal of the employer’s enterprise.
Our take away
The agreement reached signifies a welcome clarification on the topic of working in the employee’s home location. It is however clear that in a number of cases, depending on the facts and circumstance, a detailed PE assessment will still be required.
Please reach out to Pieter Deré (pieter.dere@pwc.com), Evi Geerts (e.geerts@pwc.com), Dennis Mathijs (dennis.matthijs@pwc.com) and Stefaan De Baets (stefaan.de.baets@pwc.com), or your usual contact for further insights.
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* Belgisch Staatsblad – Moniteur Belge – 12 December 2023 – page 117345
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