The Netherlands has concluded mutual agreements with Belgium and Germany on how to apply the double taxation agreements for cross-border employees under the COVID-19 measures.
Due to the travel restrictions caused by COVID-19 measures, cross-border employees may face taxation of their employment income in their state of residence because of working at home, where the taxing right normally would have been with the other state. The mutual agreements with Belgium and Germany aim to ensure that cross-border employees have the choice to continue taxation in the other state. Days worked at home will be considered being days worked in the country where the individual would normally have worked if there had not been COVID-19 travel restrictions.
This means that, despite working at home, the employment income may continue to be taxed in the state of work, provided it is actually taxed there. The employee may also choose for taxation of the employment income of working days at home in his country of residence.
To make use of the agreement, it is necessary for the employer and employee to sign a statement stating wherein this is confirmed. The statement needs to be included in the administration of the employer. For the sake of completeness, we would like to note that the employee(s) in question need to save this document in their own administration as well. Please note that the tax authorities in the country concerned may impose additional administrative requirements.
The mutual agreements have been extended until 30 April 2021.
This article was produced by CELIA member firm Loyens & Loeff.