Decision of the European Court of Justice: taxation of foreign employment income


In 2017, the Belgian Court of First Instance of Liege referred a question to the Court of Justice of the European Union (CJEU) for obtaining a preliminary ruling.

It concerned the situation of a tax resident of Belgium, employed in a company established in Luxembourg. His position as a financial consultant resulted in the fact that he had to go on brief missions and attend meetings on behalf of his employer outside Luxembourg.

For the tax years 2007 to 2009, the employee declared his salary as taxable income in Belgium, but he also declared all of that income as exempt (with progression-effect) from Belgian income tax. Following a check on the place of performance of the individual’s employment, the Belgian tax authorities adjusted the taxable basis relating to those tax years. The Belgian tax authorities stated that, by virtue of article 15, §1 of the Belgian-Luxembourg double tax treaty, the part of the remuneration which corresponded to the days on which the employee was actually carrying out his activity as an employed person outside Luxemburg was taxable in Belgium.

Before the Court of First Instance, the taxpayer argued that a limited number of occasional business trips did not restrict the exclusive power of the taxation of Luxembourg (source state of the income), since the activity was pursued mostly in Luxembourg and the services provided outside Luxemburg were part of the employment in Luxembourg.  Furthermore, the taxpayer claimed the Belgian tax scheme was in violation of the European freedom of movement of workers and the freedom to provide services.

On 24 October 2018, the CJEU rendered its decision in the case C-602/17 regarding the compatibility of Belgium income tax law with EU law.


The CJEU concluded that, in the case at hand, there is no infringement of EU Law. Article 45 TFEU (regarding the free movement of workers) is not impacted or frustrated by a tax scheme of a Member State under a double tax treaty (notably the ‘tax exemption with progression’ for foreign source employment income, embedded in Belgian tax law), which makes the exemption for the income, arising in Luxembourg, for a tax resident of Belgium subject to the condition that the professional activity in respect of which the income is paid, is actually performed in Luxembourg.

Please note that on 16 March 2015 the Belgian and Luxembourg government entered into a bilateral agreement, which was consolidated in a protocol to the Belgian-Luxembourg double tax treaty, allowing employees to work 24 days outside the country in which the employer is established (i.e. Luxembourg) before the country of residence (i.e. Belgium) can impose taxes on this income.