What are the impacts of cross-border working?

The place of employment is critical in determining taxation, social security and labour law. The basic principle is always that an employee's salary is taxed and subject to the social security requirements of the country where the employee effectively carries out the work. This can result in these kinds of obligations suddenly transferring from Belgium to Spain, for example, when an employee spends the winter working in the south.

How do I remain worry-free as an entrepreneur?

To enjoy a worry-free winter, we recommend that Belgian employers pay sufficient attention in advance to the following elements: labour law, tax and social security.

Labour law

A first question that arises with cross-border employment is: Which labour law is applicable to the employment relationship? As an employer, you can make your own choice and then formalise this agreement with your employees. Have you not yet made a choice? Then the regulations revert to the legal system of the country where employees normally carry out their work.

However, particular attention should be paid to the mandatory provisions of the labour law in the country to which the employee is moving. These provisions are always, without exception, to be respected.

Taxation

A second element where there may be a shift of jurisdiction from Belgium to Spain is the taxation applicable to wages. As mentioned earlier, employee wages are taxed in the country where employees physically work, but there are exceptions to this general rule. This is to ensure that the tax on the wages is still due in Belgium instead of Spain. You should therefore bear the following exceptions in mind:

• +Employees do not remain in Spain for more than 183 days over a 12-month period;
• +Salaries continue to be paid in full by the Belgium-based employer;
• +Wages are not chargeable to a permanent establishment (PE) or fixed place of business (FPOB) in Spain;

If there is a branch, office, factory or other company workplace at which the employee is managed, it will be considered a tangible, permanent establishment. Any site with a duration exceeding 12 months would also fall into this category.

However, a more important concept in this context is an agency permanent establishment. This arises when an employee usually and customarily has the authority to conclude contracts on behalf of the company or plays a significant role in negotiating and/or concluding them. However, assessing the existence of a personnel permanent establishment is a question of fact.

Social security

Things may also change in terms of social security when employees are performing their work in another country. Here too, the basic principle is that wages are subject to the regulations of the effective place of employment. However, the European Union has provided some ground rules to ensure that employees in a cross-border context are only subject to the legislation of one member state.

As long as your employees perform at least 25% of their working hours in Belgium and/or earn at least 25% of their salary there, the social security of the state of residence (Belgium) remains applicable. Are your employees working less than 25% in Belgium or earning less than 25% of their wages from work carried out in Belgium? Then Belgian social security still remains applicable if you are the sole employer and the employees work at least 5% in Belgium or earn at least 5% of their wages there. 

Are your employees making a big move this winter and do you want to be well prepared for it? Then contact your account manager or our experts at contact@vdl.be.