According to EU Regulation 883/2004, an employee must be socially insured in the country where they work. Therefore, cross-border workers are generally insured in the country of employment, not in the country of residence. However, if an employee teleworks for 25% or more of their working hours from their country of residence, social security must be paid there, by both employer and employee.
Belgium and the Netherlands have a double taxation treaty that stipulates cross-border workers are taxed in the country of employment. When an employee works from home, tax must be paid in the country of residence for the portion of work done at home. For tax purposes, there is no threshold like the 25% rule in social security law. If a remote workplace in the employee’s country of residence is considered a permanent establishment, the employer is liable for taxes in that country.
Anyone working in Belgium falls under Belgian labor law; those teleworking from the Netherlands are subject to Dutch labor laws for work conducted there.
During the COVID period, Belgian social security and tax laws remained applicable even if employees were teleworking from the Netherlands. These temporary exceptions, which were in place until July 1, 2023, aimed to avoid negative consequences from mandatory remote work.
In 2023, Belgium and the Netherlands signed a European framework agreement on cross-border teleworking, effective from July 1, 2023. Under this agreement, employees can telework up to 50% of their total working hours from their country of residence and still be socially insured in the country of employment, provided both employer and employee apply jointly. This so-called Article 16 agreement can be requested for up to three years, with the option for renewal.
To remain under the social security system of the country of employment, employees may telework no more than 50% from their country of residence, must perform only
telework in the residence country, and must not perform structural work in a third country.
The current double taxation treaty (DTT) between Belgium and the Netherlands does not provide for exceptions based on a percentage of telework. In principle, taxes must be paid in the country of residence for the work performed there. Employees are thus liable for taxes in their home country for the hours worked there for a foreign employer.
On June 21, 2023, Belgium and the Netherlands entered into a new DTT, expected to take effect on January 1, 2025. This treaty defines the concept of “permanent establishment,” which could impact cross-border teleworking. If a remote workplace qualifies as a permanent establishment, the employer may be liable for taxes in the employee’s country of residence.
There is no permanent establishment if the employee teleworks occasionally. Regular telework according to a fixed pattern, without a requirement to work from home, also does not create a permanent establishment. However, if the employee is required to telework regularly from home, this may constitute a permanent establishment, making the employer liable for taxes in the employee’s country of residence. It has been agreed that teleworking less than 50% per year does not constitute a permanent establishment. Support activities, such as secretarial or IT tasks, also do not create a permanent establishment.
The new treaty does not change income tax obligations for employees who telework across borders between Belgium and the Netherlands, despite expectations due to the rise in teleworking. Unlike the double taxation treaty between Belgium and Luxembourg, which allows telework up to 34 days per fiscal year without tax consequences, such an arrangement is not yet in place between Belgium and the Netherlands.
