As mentioned in our newsflash of 13 March 2020, following the health situation linked to the Covid-19 crisis, in order to “flatten the curve”, companies are taking isolation measures and are moving in an accelerated pace to fully remote working (homeworking) where possible. In fact, many cross-border workers will be called upon to do more telework in the days and weeks to come.
Belgium – Luxembourg: corona measures overrule 24-days rule
The final Protocol of the Belgian-Luxembourg double tax treaty provides for a tolerance rule allowing cross-border workers to exercise their activity for a maximum of 24 days outside his usual State of activity while remaining taxable in this State.
Indeed, based on a mutual agreement of 16 March 2015, Belgium and Luxembourg have implemented a rule, allowing tax residents of Belgium, who (under normal circumstances) work in Luxembourg, to work outside the territory of Luxembourg up to 24 days per calendar year, without attributing taxation power to Belgium
Given the extreme challenges employees and companies are currently facing in combating the coronavirus, on 16 March 2020 the Luxembourg Minister of Finance has announced that the Belgian and Luxembourg authorities consider that the current situation linked to the coronavirus constitutes a case of “force majeure”, for which no day (e.g. home working in Belgium) is to be counted under the 24-days rule.
This was also confirmed on 17 March 2020 by the Belgian tax authorities, who (on their website) refer to Point C, 3 of the administrative practice note of 1 June 2015, which contains a list of situations whereby certain days may not be take in into account for the application of the 24-threshold. This includes, among other things, the case of ‘force majeure’.
Therefore, it was decided that as from Saturday 14 March, the presence of a worker at his home in particular to carry out telework, will not be taken into account in the calculation of the 24-days period. This measure applies until further notice.
Belgium – France: Frontier workers regime
Frontier workers are employees who are living in the border area of their home country and who are working in the border area of the other country. Based on the Belgian-French frontier workers regime, the salary of employees who are frontier workers remains fully taxable in their home country, even though they are physically working in the border area of the other country. In principle, there is only taxation in the home country (country of residence of the employee) and thus not in the host country. While the frontier workers regime was abolished for tax residents of Belgium who work in France, it is still applicable (in a phase-out scenario) for tax residents of France who work in Belgium.
Article 7 (b) of the Additional Protocol concerning frontier workers contains a list of situations – in which employees leave the border area – that are not considered for the application of the calculation of the so-called 30 days rule. This list contains, among other things, the case of ‘force majeure’ beyond the control of the employer and the employee.
On 13 March 2020 the Belgian tax authorities have announced (on their website) that due to the health situation surrounding the coronavirus, many French frontier workers will be encouraged to work from home over the next days and weeks.
The Belgian and French authorities considered that the current situation related to the coronavirus meets all characteristics of a force majeure situation.
Therefore, it was decided that as of Saturday 14 March 2020, the presence of a French frontier worker at his place of residence (in particular for teleworking in there) will not be taken into account for the calculation of this 30-days period. This measure also applies until further notice.
Impact of corona measures on situations of salary split?
It remains to be seen whether the Belgian tax authorities, from a Belgian income tax perspective, will also apply the ‘force majeure’ approach to other treaty situations, such as employment situations of salary split / split taxation. Again, also here, it is clear that the current corona crisis is heavily impacting various other situations of cross-border employment in a way that is totally beyond the control of companies and their workforce. This is being looked at, but no further information is available.