Bjorn Van Hees | Tuerlinckx Tax Lawyers
Bjorn.Vanhees@tuerlinckx.eu

The coronavirus crisis is presenting us with unprecedented challenges. International taxation is no exception. In Belgium, a blanket entry and exit ban on non-essential travel has been in effect since 18 March 2020. In addition, teleworking is mandatory for all employees whose function allows it.

In principle, Belgian residents who commute abroad to work there – and of course also foreigners in the reverse situation – cannot travel daily, weekly or monthly any longer for that purpose. This creates complications, in particular when it comes to determining which country can levy taxes on their salaries. This is because the tax liability is often determined on the basis of the famous “183-day rule”. Working days in Belgium are included in the calculation of the 183 days. However, leave days, sick days and unemployment days also count if employees spend these days in Belgium.

Belgium has since entered into agreements with France and Luxembourg. An agreement is being drawn up with the Netherlands, according to Finance Minister Alexander De Croo. However, in spite of these agreements, there is still a lack of clarity regarding the position that the Belgian tax administration will take with regard to the practical interpretation. How should tax residence be determined and how should the 183-day rule be calculated in these very special circumstances?

Different situations urgently require clarity from the Belgian tax authorities, in particular regarding:

1. the way the 183-day rule will be interpreted for non-residents with a professional activity in Belgium whose income may be taxable in Belgium;
2. qualifying for tax residence for Belgians who have been posted abroad, but who have returned to Belgium during the lockdown. For example, because of the better hospital care or to take care of relatives; or, for recent Belgian residents who return to their “previous home state” for the same or similar reasons;
3. the prevention of double taxation for Belgian residents who are also taxed abroad because they are in full-time employment there (State of work), and for whom that State now accepts that a compulsory teleworking day in Belgium should nevertheless be regarded as a working day in the State of work. Something the Netherlands is doing, for example. Otherwise, this will lead to double taxation, because Belgium regards the same teleworking day as taxable in Belgium. Clarity and consistency must be created in this regard;
4. the prevention of double taxation for non-residents who are employed full-time in Belgium and who are also liable to pay tax on the income from this work. While these employees are teleworking from their State of residence and their Belgian employer is withholding tax on their salary, the employees are liable to tax on the salary from those teleworking days in the State of residence;
5. the manner in which the withholding tax must be declared and paid in the above cases.

Without clarification, tax audits on the 2021 assessment year (income year 2020) may be plagued by legal uncertainty. The employee may end up being the victim of this situation by paying twice.

Without these much-needed clarifications, the tax return for the 2021 assessment year (income year 2020) will look more like a calculated guess. And no one should ever wish that.

Agreements and clarity are crucial. Also regarding international employment taxation.

The government needs to take action, not today but yesterday.