28 January 2021 - The Covid-19 crisis and the measures taken by governments have led to considerable travel restrictions. Quarantine measures and lockdowns can make it effectively impossible to get to the office and meet clients, leaving employees no option other than to work from home. This specifically affects employees who used to travel abroad regularly and pay tax in two or more countries.
Agreements with Belgium and Germany
Employees who work part or all of their time outside of their country of residence, pay tax in both their country of residence (worldwide income) and their country of work (source income). Tax is due on the income relative to the time spent in each country (salary split). This typically comes with a dual payroll requirement for the employer to meet the tax and social security obligations.
When the time spent in a country changes, the tax liability changes. Let’s take an example: a resident of the Netherlands used to work four days a week in Germany, but is now forced to work five days a week from home in the Netherlands. This change in the work pattern would normally lead to a shift of taxation from Germany to the Netherlands. The Netherlands consider this undesirable and have entered into agreements with Belgium and Germany to mitigate the effects on the tax position of frontier workers. This means that the tax position of frontier workers remains unchanged, as if they had continued their normal work pattern during the Covid-19 crisis.
The Netherlands have recently extended the agreements with Belgium and Germany and these are currently valid until 1 July 2021.
The agreements stipulate that the days worked at home as a result of the Covid-19 measures may be treated as days worked in the country where they would have been working under normal circumstances. This does not apply to days on which the employee would also work at home under normal circumstances. Note that the Dutch tax authorities will require supporting evidence for this position, such as a written confirmation of your working days from the employer, travel calendars from pre-Covid periods.
Please note that the Netherlands have not concluded agreements with other countries. This may very well mean that the payroll processing and the actual tax liability may not be in-sync, which will require settling via personal income tax return filing. This can be a complex matter.
Want to know more?
If you need any help submitting your personal income tax filing, or preparing your payroll processing through 2021, please contact Alexander Rasink by e-mail or by telephone: +31 (0)88 277 16 15 or Mia van Dijk by e-mail or by telephone: +31 (0)88 277 14 25. They will be happy to help you.
