As highlighted in our previous newsflashes, Belgium has recently concluded mutual agreements with the Netherlands, Germany and France regarding a “force majeure” approach for cross-border workers. An agreement with Luxembourg was still missing. However, the Belgian government has now published the Belgian-Luxembourg agreement recognising the ‘force majeure’ character of the COVID-19 health crisis and introducing a general tolerance with respect to the home working days spent by cross-border workers, solely due to the COVID-19 measures taken by the Belgian or Luxembourg government.
Agreement between Belgium and Luxembourg
The competent authorities of Belgium and Luxembourg concluded an agreement clarifying the situation of home working in the context of the COVID-19 crisis. This Belgian-Luxembourg agreement is in line with the recent agreements concluded between Belgium and its other neighbouring countries.
In other words, it is agreed that for purposes of the Double tax convention, the salary linked to the days worked from home solely due to the measures taken to combat the COVID-19 pandemic by the Luxembourg or Belgian government, may be deemed to be spent in the State (Belgium or Luxembourg) where the cross-border worker would have exercised the employment in case no such measures had to be taken. Again, 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, in a third country or generally exercised his or her employment from home. The fiction must also be used consistently and the taxpayer must keep available all necessary documents to prove that he or she was unable to work in the other state. Finally, the fiction can only apply when no double exemption would arise and it is demonstrated the income is actually taxed (i.e. included in the taxable basis) in the other state. Similar to the agreements concluded between Belgium and Germany/France and contrary to what is foreseen in the mutual agreement concluded with the Netherlands, the Belgian-Luxembourg agreement does not foresee any specific rules on taxation of income related to non-working days due to the COVID-19 measures taken.
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.
