Belgium adopts 34-day rule in Tax Treaty with Luxembourg
On 22 December 2022, the Belgian Chamber of Representatives adopted the protocol, signed on 31 August 2021, amending the 1970 Income and Capital Tax Treaty between Belgium and Luxembourg that had already been amended by the 2002, 2009 and 2017 protocols.
The Act ratifying the protocol will be signed by the King and published in the Moniteur belge (the Belgian Official Journal) and will take effect from 2022.
The protocol extends the current tolerance for the taxation of “cross-border workers”, i.e. employees living in one country and working across the border in the other.
The rule for cross-border workers
The rule is that if they work in the other State for an employer in that State, they pay tax in that country for the days they work there.
This means that Belgian residents who work for a Luxembourg company pay tax in Luxembourg but only for the days they work – and are physically present – in Luxembourg. The Belgian tax authorities must then exempt that part of their salary.
If, however, they work from home or in another country (e.g. in France or Germany or on a business trip), they pay tax in Belgium on the salary for those days.
The mutual agreement of 16 March 2015 introduced the so-called ‘24-day rule’ that mitigates the general rule. This means that – since 2015 – a Belgian resident can work up to 24 working days outside Luxembourg and those working days will still count as days physically present in Luxembourg.
This is a tolerance for working days worked outside Luxembourg (that is at home in Belgium or elsewhere). Luxembourg can then tax the employment income for these days but only with a maximum of 24 working days.
During the COVID-19 pandemic, Belgium has agreed general tolerances with Luxembourg, France, Germany, and the Netherlands allowing workers to work from home and still be taxed in the state where they normally work. These tolerances started in March 2020 and ended in June 2022.
The protocol that will extend the 24-day rule to 34 days from 2022 has been welcomed as will improve the quality of life for cross-border workers and also reduce the number of passengers on transport infrastructures.
Belgian residents who work for a Luxembourg employer can now work up to 34 working days outside Luxembourg and those working days will still count as days of physical presence in Luxembourg.
Conversely, Luxembourg residents who work for a Belgian employer have a tolerance of 34 days that will count as days worked in Belgium.
They can work from home in or in France, Germany, or the Netherlands or elsewhere and still be taxed in their work state. It is to be noted that the 34-day rule will only apply for days worked in the work state if they do not count as days worked in in France, Germany, or the Netherlands under the double tax treaty between their country of residence and those countries. They would then be taxed in those countries.