Impact of the COVID crisis
The COVID pandemic has dramatically changed remote working. Examples include the introduction of teleworking, the option to work from a second residence, teleworking from a member state other than where the employer is located, etc. These practices have led to new types of international mobility, with consequences that companies were not particularly well prepared for.
Teleworking within an international context
With the approval of a framework agreement concerning the application of article 16(1) of Regulation (EC) No. 883/2004 in the event of regular cross-border telework, the European Union aims to clarify the social security rules applicable to employees who regularly engage in cross-border operations.
Under the framework agreement, employees who spend up to 49% of their working hours teleworking across state borders shall be subject to the social security legislation of the member state where they would normally work if they were not teleworking. This means that they shall be subject to the same social security system as the one that would apply if they were working in the same location as their employer. It also requires approval from the employer and the employee, and must be confirmed on an annual basis.
This measure simplifies the payroll administration for the employer and eliminates the need for multiple registrations in countries where some employees are teleworking. Nevertheless, it is important to verify that the conditions for the implementation of the framework agreement are met. Employers consequently need to obtain A-1 certificates substantiating the correct application of these European agreements.
Moreover, two recent decisions by the Office for Advance Tax Rulings clarify the tax implications of teleworking, more specifically the implications for the concept of a Belgian establishment. In particular, we note that these decisions are based on a lack of recognition of a Belgian establishment, given the conditions of the teleworking policy (no provision of a home to the employer, prohibition to sign or negotiate contracts and to perform managerial functions from abroad).
New special regime
After 40 years of administrative practice, the Belgian legislature decided to replace the special tax regime for some foreign executives and researchers with a new special regime for incoming taxpayers and researchers.
Without going into the details of the new special regime, we would like to emphasize the following:
- The regime also applies to Belgian nationals and to any legal entities with a CBE number.
- They are part of the international fiscal mechanisms.
- Henceforth the benefit shall consist of a reimbursement of expenses specific to the employer up to a maximum of 30% of the gross compensation, with an annual ceiling of €90,000.
- The benefit can only be enjoyed for a maximum of 8 years (5 years, with the possibility of a 3 year extension).
- Incoming taxpayers (not incoming researchers) must receive compensation in excess of €5,000 annually. Moreover, they must have resided at a distance of more than 150 km away for 60 months prior to the start of their Belgian mission and must not have been subject to Belgian tax by virtue of their professional income.
Any persons subject to the old special regime for some foreign executives and researchers, who could not opt for the new regime and have their main residence in Belgium shall be considered Belgian residents for tax purposes as of 1 January 2024. Persons with a principal residence outside Belgium shall be considered ordinary non-residents.
Sound preparation is everything
What can you, as an employer, do to prepare for these new rules governing international mobility? Some guidelines:
- Notify employees working within an international context of their new obligations (declaration of worldwide income, specific returns, real estate income, financial accounts, annual tax on securities account, tax on stock exchange transactions, etc.).
- Identify candidates who shall be able to benefit from the incoming taxpayer and researcher regime in the future. The deadline for applying for the benefit is three months from the start of the mission in Belgium.
- Identify cases of salary split and optimize the social and tax consequences.
- Review the teleworking policy to minimize fiscal and social risks.
Do you have specific questions about this topic or would you like further information? If, so please feel free to contact us. We would be happy to assist.
