The exceptional COVID-19 situation resulted in various government introduced measures which are themselves also exceptional and which are aiming to combat the spread of the coronavirus. Measures such as international travel restrictions, quarantine and lockdown (in whatever form or degree), also impact international business travel and prevent cross-border workers from carrying out their professional activities abroad, forcing them into homeworking (in practice, in their country of residence). These home office days may lead to unforeseen and significant tax consequences (both for the individual employees and the companies they are working for).
As highlighted in our previous newsflashes, Belgium has recently reached agreements with Germany and with the Netherlands, recognising the ‘force majeure’ character of the COVID-19 health crisis and introducing a general tolerance with regard to the home working days spent by cross-border workers, solely due to the COVID-19 measures taken by governments.
Early in the corona health crisis, Belgian and France had already reached an agreement regarding a specific ‘force majeure’ tolerance for certain tax residents of France who normally work in Belgium and who are still subject to the former frontier worker regime (which is still applicable in a phase-out scenario).
On 15 May 2020, the competent authorities of Belgium and France concluded a more general agreement clarifying the situation of home working in the context of the COVID-19 crisis. This Belgian-French agreement is in line with the agreements reached between Belgium and the Netherlands and Belgium and Germany.
In the agreement it is stipulated that employees who work from home due to the COVID-19 crisis can (upon the choice of the individual taxpayers) remain taxable in the state where they previously practised their professional activity before the outbreak of the crisis.
Again, similar conditions apply as in previous agreements concluded between Belgium and its neighbouring countries. Hence, this fiction cannot be applied in relation to working days during which the cross-border worker, regardless of the COVID-19 measures, would have worked from home or in a third country. The fiction must also be used consistently, and the taxpayer must keep available for the tax authorities a statement from his employer indicating the number of days on which he has worked at home solely because of the government health measures and for which he has received income. Finally, the fiction can only apply when no double exemption would arise, and it is demonstrated that income is actually taxed in the other state.
Similar to the agreement concluded between Belgium and Germany and contrary to what is foreseen in the mutual agreement concluded with the Netherlands, the Belgian-French agreement does not foresee any specific rules on taxation of income related to non-working days due to the COVID-19 measures taken. Finally, important to note is that the Belgian-French agreement does not apply to residents of France under the specific regime of frontier workers (as a specific tolerance is foreseen).
The tolerance applies retroactively from March 11, 2020 until June 30, 2020 but it can be extended if the competent authorities of both countries decide to do so.
We will further follow-up on any further developments in this respect.