Since March 2020, the Corona virus has changed the world drastically. Also organizations have taken measures to reduce/limit the spread of the virus. The most obvious measures were reducing international travel and obligate home working for all employees. This impacted the work pattern of everybody and in particular the international working employees. In international employment situations, this could have an impact on the applicable social security regime. As well as the tax treatment of employment income of these employees.
Applicable social security regime
Belgian government decided that periods of home work on the Belgian territory as a result of the Corona virus, should, by way of exception, not be considered for the determination of the applicable social security legislation in an international context. As a result, these ‘home office working days’ will not have an impact on the determination of the competent social security regime.
In other words, the Corona measures will normally not impact foreign employees in Belgium. Yhey may remain under their home country social security. Same goes for employees seconded to Belgium who spent their time in their home country during the lock-down period.
Last week Belgian government extended the exceptional measures till the end of the year, i.e. December 31, 2020. The increased use of teleworking will not be considered for the determination of the applicable social security regime.
Taxation of employment income – place where the employment should have been executed
Early April 2020, the OECD published their position regarding international employment that the professional income of employees (also where government has stepped in to subsidize the keeping of an employee on a company’s payroll) should be attributable to the country where the employment used to the exercised.
Based on this recommendation, Belgium concluded bilateral agreements with the Netherlands, Luxembourg, France and Germany. Employees who worked from home during the Corona measures can remain taxable in the country where they worked prior to the outbreak of the COVID-19. This of course only applies for home working days due the pandemic. In addition, these agreements were initially concluded till June 30 and Augustus 31, 2020. Meanwhile, they have been extended a third time till December 31, 2020. If required, further extension may be expected.
These bilateral agreement are extremely important for all employees working cross border and / or in a salary split situation. For example, for the period that Belgian employees working in a Belgian-Dutch split situation were not able to work / be physically present in the Netherlands – due to the Corona measures –, Belgium will respect that the Netherlands are entitled to tax the employee’s remuneration related to working days who should have been executed in Belgium. Of course, this assumes that the physical presence requirement before and after the COIVD-19 measures is met.
Important remark: At this moment in time, this type of COVID-19 agreements are only concluded with the 4 above mentioned countries. For other countries, the general principle of taxation in the home country applies.
Application COVID-19 agreements
In order to benefit these COVID19 agreements, the following documentation may need to be provided towards the Belgian tax authorities:
- An employer’s attestation mentioning the number of home working days, exclusively linked to the COVID-19 measures;
- The proof of effective taxation of the remuneration related to these home working days in the country where these activities should have been performed.
The employer’s attestation (in the framework of the COVID-19 agreements) need – for each individual employee – to mention the following:
- All relevant information to fully identify the employee (name, first name , address, birth date);
- The nature of the function executed by the employee;
- An overview of the number of home working days exclusively linked to the COVID-19 measures;
- If applicable, an overview of the number of home working days as foreseen in the employment agreement;
- An overview of potential sickness, vacation and/or recuperation days;
- A declaration on honor that the attestation is “true and sincere”;
- Date and signature of the employer, as well as the co-signature of the employee concerned.
In conclusion, a thorough analysis for your tax situation and tax residency is important before starting to file your tax return in Belgium, as well as in your home country. An adequate qualification is crucial to complete the right tax return form (resident of non-resident), apply the correct tax rules and anticipate the different tax consequences.
However, if you would have questions/remarks as regards the applicable social security regime, the application Belgian tax treaties, as well as the application of the COVIS-19 agreements, feel free to contact us.