Belgian tax resident working in Luxembourg
If a Belgian tax resident works in Luxembourg, the question arises where the Luxembourgish salary is taxable. This may be relevant considering the lower tax burden in Luxembourg.
According to the Belgium-Luxembourg double tax treaty, if the employment is exercised in Luxembourg, the salary relating to the days performed in Luxembourg is generally taxable in Luxembourg and exempt from tax in Belgium.
Belgian employees working for a Luxembourg employer may not always carry-out their work in Luxembourg, as more and more people work from home to avoid long commutes or employees may have to work in a third state because of conferences, business trips, trainings, etc.
In principle, any working day performed outside of Luxembourg is subject to tax in Belgium. This may thus significantly impact the tax burden on one’s salary.
For more information on the impact of the Covid-19 government measures for employees who normally work in Belgium's neighboring countries (including Luxembourg), we refer to our newsflash published 25 March 2021.
24-day tolerance going up to 48 days?
In 2015, the Belgian and Luxembourg governments introduced a tolerance, the so-called "24-day rule". According to this rule, Belgian employees working in Luxembourg may work outside of Luxembourg for 24 days per year and can still benefit from an exemption in Belgium and taxation in Luxemburg. However, as soon as the 24 day-limit is exceeded, the tolerance does not apply to the first 24 days either.
In 2019, the ministers of finance of Belgium and Luxembourg concluded an agreement in principle to increase the 24-day threshold up to 48 days. Read more about this in our newsflash published 12 November 2019.
On 31 March 2021 the Belgian minister of Finance stated in the Parliament that the intention in 2019 to revise the 24-day rule never materialized due to several technical and budgetary issues. However, this does – according to the minister of Finance – not entail that the issue has been shelved.
He further stated that the telework issue is part of a comprehensive renegotiation of the current Belgium – Luxembourg tax treaty (dating from 1970) and that it is important to adapt this treaty to the current standards. In this context, a balanced solution, including the issues relating to telework, is to be sought by the negotiators. Furthermore, by doing so, forthcoming discussions on the impact of telework at OECD level, can also be taken into consideration.
The minister of Finance concluded by stating that he instructed his administration to resume negotiations with Luxembourg to find a long-term solution considering the recent developments in relation to telework.
For now, the 24-days threshold still applies to Belgian individuals working in Luxembourg. When renegotiating the double tax treaty, the Belgian government will hopefully consider that in practice this threshold is easily exceeded and will provide for a pragmatic alternative.
Tiberghien’s international tax team will continue to monitor any upcoming developments in relation to this subject. In case you have any further questions or want to further discuss implications, please do not hesitate to contact the authors.
Laurine Vanherck - Associate (firstname.lastname@example.org)
Katrien Bollen - Senior associate (Katrien.email@example.com)