Tax treatment
𝗧𝗮𝘅 𝘁𝗿𝗲𝗮𝘁𝗺𝗲𝗻𝘁 𝗼𝗳 𝗵𝗼𝗺𝗲 𝘄𝗼𝗿𝗸𝗶𝗻𝗴 𝗱𝗮𝘆𝘀 𝗚𝗲𝗿𝗺𝗮𝗻𝘆-𝗕𝗲𝗹𝗴𝗶𝘂𝗺
The Netherlands has made agreements with Germany and Belgium on the tax treatment of home working days under the tax treaties during corona. These agreements have been renewed several times, most recently up to and including June 30, 2022. When the agreements were last extended, it was agreed in consultation with Germany and Belgium that the agreements would expire on July 1, 2022.
𝗡𝗼 𝗳𝘂𝗿𝘁𝗵𝗲𝗿 𝗲𝘅𝘁𝗲n𝘀𝗶𝗼𝗻𝘀
The home working agreements concern a crisis measure to avoid unexpected consequences of home working due to the corona crisis. Without corona measures related to working from home, there is no longer any justification to deviate from the agreements in the tax treaty. This would require an amendment in the treaty. The home working agreements are also not suitable for further extension. This is because they are directly linked to the corona measures relating to home working and therefore do not lend themselves to a permanent measure.
𝗡𝗲𝘄 𝗮𝗴𝗿𝗲𝗲𝗺𝗲𝗻𝘁𝘀
On the initiative of the Netherlands, in consultation with our neighbouring countries, it is being considered whether, partly because of the increase in working from home, new agreements can be made for frontier workers in the tax treaties. After the home working agreements expire (on 1 July of this year), the rules of the tax treaties with Belgium and Germany will apply as they did before Corona. These rules adequately prevent double taxation, also for frontier workers working from home, according to the Deputy Minister.
𝗣𝗼𝘀𝘀𝗶𝗯𝗹𝗲 𝗵𝗼𝗺𝗲 𝘄𝗼𝗿𝗸𝗶𝗻𝗴 𝗿𝘂𝗹𝗲 𝗶𝗻 𝘁a𝘅 𝘁𝗿𝗲𝗮𝘁𝗶𝗲𝘀
The Netherlands is in talks with both Belgium and Germany about a possible home working scheme in the tax treaties. The exact design of a home-working arrangement is not simple and requires a good analysis of the advantages and disadvantages of such an arrangement for frontier workers who work from home and their employers.
𝗥𝗲𝗹𝗲𝘃𝗮𝗻𝘁 𝗽𝗼𝗶𝗻𝘁𝘀 𝗳𝗼𝗿 𝗰𝗼𝗻𝘀𝗶𝗱𝗲𝗿𝗮𝘁𝗶𝗼𝗻 𝗶𝗻𝗰𝗹𝘂𝗱𝗲:
- the administrative consequences and income consequences for frontier workers;
- the administrative consequences for employers; and
(preventing) dis-coordination between social security and taxation.
𝗔𝗽𝗽𝗿𝗼𝗽𝗿𝗶𝗮𝘁𝗲 𝗮𝗹𝗹𝗼𝗰𝗮𝘁𝗶𝗼𝗻 𝗼𝗳 𝘁𝗮𝘅𝗶𝗻𝗴 𝗿𝗶𝗴𝗵𝘁𝘀
It must also be considered whether a home-working measure leads to an appropriate distribution of tax rights (within the treaty system) and what the budgetary consequences are for the treaty partners. It is therefore uncertain whether a home-working rule will be included in the tax treaties and, if so, what exactly it would look like. If agreement can be reached on a treaty amendment, it will be quite some time before it becomes applicable.
In its discussions with neighbouring countries, the Netherlands wants to explore whether it is desirable and possible to amend the tax treaties with neighbouring countries in such a way that a certain number or percentage of homeworking days does not affect the distribution of taxing rights over the income of a frontier worker.
𝗣𝗿𝗲𝘃𝗲𝗻𝘁𝗶𝗻𝗴 𝗱𝗼𝘂𝗯𝗹𝗲 𝘁𝗮𝘅𝗮𝘁𝗶𝗼𝗻
Even without a specific home working arrangement, the tax treaties adequately prevent double taxation for frontier workers working from home. In addition, it is quite possible that the current system of split taxation as a result of working from home (partial taxation in the state of residence, partial taxation in the state of employment) has a beneficial effect on the net income of a frontier worker.
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