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Teleworking agreement between the Netherlands and Belgium

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The Netherlands and Belgium reach an agreement regarding the tax implications for employers with cross-border teleworking workers.

Following the European framework agreement on the social security position of cross-border teleworkers, the Netherlands and Belgium recently reached an agreement to provide employers in both countries with clearer guidelines on determining when remote work by employees in their country of residence constitutes a permanent establishment, potentially impacting income, sales, and corporate taxes.

The presence of a permanent establishment in the employee's state of residence for a company established in another state indeed depends on all relevant facts and circumstances of the case. However, based on the recently concluded agreement, for teleworking up to 50% within a consecutive 12-month period (explicitly aligning with the previously mentioned European framework agreement on social security regarding teleworking), there will not be a permanent establishment of the employer in the home country of the remote-working employee deemed present.

In situations in which the time spent on teleworking is 50% or more , the determination of whether there's a permanent establishment in the home country of the remote-working employee will need to be assessed on an individual basis, considering, among other factors, whether the following situations apply:
  • Working from home is done consistently with the option to work on-site; or
  • Working from home is consistent and mandatory.

With this agreement, Belgium and the Netherlands become the first two European countries to provide further clarity on the potential tax implications of cross-border teleworking following the conclusion of the framework agreement on social security for teleworking.

The Netherlands is also currently consulting with Germany for such an arrangement. Furthermore, Belgium, Germany and the Netherlands have indicated that they are working together to achieve a similar note within the European Union.

If you require further information based on the above, please feel free to contact our Human Capital department. Our colleagues Hans de Vries, Bart van Gool, and Aniek Versantvoort will be more than happy to provide you with advice.