OECD guidelines: COVID-19 impact on cross-border employment


In our newsflash of 13 March 2020, we highlighted that since the COVID-19 outbreak, due to travel restrictions and quarantine measures, many companies find themselves confronted with unforeseen and forced changes in the working pattern of their employees who are unable to perform their duties in their “normal” country of employment, especially in surrounding countries (such as Luxembourg, The Netherlands and France).  Many workers must stay at home and perform telework.

One of the main questions then is whether the coronavirus could qualify as a case of “force majeure”, by which a day worked at home (in Belgium, instead of the habitual place of work outside of Belgium) could be disregarded for tax purposes. Based on our first contacts with the Belgian tax authorities, it seemed that no tolerance would be applicable.

On 17 March 2020, we informed you that the Belgian and Luxembourg tax authorities have agreed that the coronavirus indeed 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. The Belgian and French tax authorities have also applied this “force majeure” approach for French frontier workers, who – due to COVID-19 – work at home (in France) instead of in the (Belgian) border area.

Based on our further contacts with the Belgian tax authorities, it was clear that for other double tax treaties (for example for Belgian tax residents working in France, The Netherlands or Germany) the normal tax treaty rules would remain applicable, until further notice. Indeed, we were informed that no general tolerance would be foreseen for tax residents of Belgium in other treaty situations, such as situations of salary split / split taxation or full taxation abroad (see our newsflash of 24 March 2020).

This is also being looked in the framework of the OECD. As a matter of fact, on 3 April 2020, the OECD Secretariat has issued its recommendations on implications of the COVID-19 crisis on cross-border workers (i.e. employees that work in one state but commute there from another state where they are resident):

  • The OECD guidance refers to article 15 of the OECD Model, which governs the taxation of employment income, distributing the right to tax between the employee’s state of residency (home country) and the place where they perform their employment (host country).
  • It is acknowledged that, if the country where employment was formerly exercised should lose its taxing right following the application of article 15, additional compliance difficulties will arise for employers, notably with respect to wage withholding tax obligations. Also, employees will be impacted, having a new or enhanced tax liability in their state of residence.

As exceptional circumstances call for an exceptional level of coordination between countries to mitigate the compliance and administrative costs for employees and employers associated with involuntary and temporary change of the place where employment is performed, the OECD is working with countries to alleviate the unplanned tax implications and potential new burdens arising due to effects of the COVID-19 crisis.

We are monitoring this closely and will check if Belgium will absorb and follow these OECD recommendations and whether it will apply any further tolerance (with other countries) in practice.

In case of any further questions, please do not hesitate to contact Sandrine Schaumont or Philip Maertens.