In the case of international employment, the general principle applies that an employee is taxable in the country where they physically work. However, there are a number of exceptions to this main rule. For example, in the case of one-off assignments abroad, no taxes are due in that country.
Employees who mainly work abroad for international companies are generally also taxed abroad for those activities. As a result of the coronavirus, many of these employees are currently working from home, in Belgium. However, as a result, the tax liability on wages for the days these employees work from home changes from abroad to Belgium.
For example, employees who normally work full-time abroad but who are now working from home will not be allowed to exempt the full annual salary in their personal income tax return. In addition, it is important that these working days abroad are exempt from taxes.
For employees who have a contractual salary split and therefore work according to a fixed percentage in two or more countries, it will be important to take the new ratio as a result of working from home into account.
Working from home due to the coronavirus can also have an impact on employees working in Belgium under a special status for foreign executives, referred to as 'expats'. One of the advantages of this status is that foreign business trips are not taxable in Belgium ('travel exclusion'). A lower travel percentage will generally lead to a higher tax burden in Belgium for these employees.
For companies and employees in such situations, it is therefore important to anticipate this by adjusting the withholding tax at source. Moreover, these situations can lead to foreign companies being confronted with a mandatory deduction of Belgian withholding tax on professional income. Conversely, Belgian companies may be confronted with an obligation to withhold tax abroad.
Some allowances were agreed with neighbouring countries
Recently, in response to the corona crisis, an agreement was concluded between Belgium and the Netherlands. This agreement stipulates that for the days that employees are working from home due to the corona crisis, the normal tax regime will be maintained. In other words, these days are considered as if they had been performed in the usual country of work.
In the double tax treaty with France and Luxembourg, there is a specific regime for frontier workers. For employees who make use of this cross-border workers regime, some tolerances for working from home as a result of the corona virus have been granted.
In all other situations, the general rules must be followed and the pay for the days of working from home is taxable in Belgium.
Social security contributions
Due to a number of rules in the European Union, the EEA and Switzerland, those subject to Regulation 883/2004 only fall under the legislation of one Member State and therefore social security contributions have to be paid in only one Member State. When a Belgian worker works substantially, i.e. more than 25 percent of the working time and/or salary, in the state of residence, the Belgian social security remains applicable. In view of the obligation to work from home, it is quite possible that a worker will work more than 25% of the working time in Belgium as a result. In a recent article, we already explained what the situation looks like in coronavirus times.
If you work in an international context and have questions about working from home, please contact your account manager or our specialists at firstname.lastname@example.org.