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Remote workers cross-border

NOW ALSO TAX AGREEMENTS BETWEEN THE NETHERLANDS AND BELGIUM

Rather suddenly, on 8 December 2023, an agreement between Belgium and the Netherlands was published that addresses the tax consequences of remote workers in the Netherlands and Belgium. 

The social insurance of remote cross-border workers

In the area of social insurance, a regulation will apply as of 1 July 2023 that sets out an exception to EU Regulation 883/2004, allowing the remote worker to retain social insurance in the employer’s country of residence. For completeness’ sake, please note that not every remote worker is eligible. For example, application is subject to the condition that the remote worker works only in the employer’s country and at home, and the latter for less than 50%. Moreover, remote work must be an actual reality at home.

Following the ‘solution’ to the social insurance position of cross-border workers, despite the amendment of the tax treaty, it was not immediate possible to match the tax rules to the new social insurance rules. As a result, it was and still is quite complicated for cross-border remote workers (as well as their employers) to correctly implement payroll administration and tax contributions; after all, different rules apply for social insurance contributions than for payroll taxes.

The tax position of cross-border workers working from home

An agreement concluded between Belgium and the Netherlands was published on 8 December 2023 (view it on the official website of overheid.nl) that addresses the tax implications of remote workers in the Netherlands and Belgium for their employers.

In other words, this determines when in the country of residence of employees who work partially from home (remote cross-border workers) a permanent establishment arises if their employer is located in the neighbouring country. If there is a permanent establishment abroad, this has various tax implications for payroll and income/corporate tax, among others. And with it, payroll accounting!

One of the key aspects of this agreement for employers is the following practical arrangement:
Parties may assume that the home office of an employee in one country for an employer in the other country does not constitute a permanent establishment in any case if the employee works 50% or less of the contractual working hours at home for the employer.

This is at least partly in line with the social security rules, which also use a percentage of 50%.

To be clear: this rule refers to the creation of a permanent establishment for the employer. This does not mean that cross-border workers who work 50% or less from home do not have to pay income tax or payroll withholding tax, which is still assessed on the basis of the “old” rules. Let us hope that a solution will eventually be found for this too.

We will look further into the details of this new treaty.

For now, it is important to note that the question of whether or not you have a permanent establishment abroad is ALWAYS assessed based on all the facts and circumstances.

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Since 1972, Interfisc has offered international HR & Payroll solutions in the Netherlands, Belgium, Germany, France, the United Kingdom, and Italy. We do this from our offices in the Netherlands and Belgium, and with an international team of around 45 committed and caring employees. 

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