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New tax treaty between Belgium and the Netherlands: what could this mean for your tax position?

Published on: 04 september 2023
Type of publication Insight

The Netherlands and Belgium share a border of several hundred kilometres. It will come as no surprise that many Dutch people work in Belgium (and vice versa). ‘But if you work in a different country than your country of residence, it is crucial to remain in control of matters such as wage tax, labour law and social security.’ Tamara van den Broek, senior manager Employment Advisory at Baker Tilly Netherlands, explains how she and her team help clients deal with Global Mobility issues. ‘When legislation or treaties change, this can have significant consequences for taxpayers. We provide clarity on these matters  for our clients, so that they know what awaits them and how they can prepare for these changes. The collaboration with our network partners within the Baker Tilly International network is of immense value.’

‘Increasingly, employees work in more than one country or start working in a different country. Tax treaties play an important role in determining which country may levy tax, and in preventing double taxation,’ Tamara elaborates. In the case of Belgium, these matters are stipulated in a 2001 tax treaty. ‘That treaty is more than 20 years old, but the Netherlands and Belgium recently concluded a new treaty.’ Both Dutch and Belgian national legislation is relevant when applying the new tax treaty. ‘For this reason, whenever it concerns Dutch-Belgian situations, we work closely with the advisors at Baker Tilly Belgium.’

International consultation on the consequences

Tamara continues: ‘When the text of the new treaty was published, we invited Yves and his team to discuss the changes and their consequences.’ Yves Coppens is Individual Tax Partner at Baker Tilly Belgium. His work includes personal income tax and international employment, and like Tamara, he is involved in international Global Mobility advice. ‘We see a number of topics that are almost always relevant in international employment situations,’ Yves explains. ‘Salary splits, for example, and the question of the application of social security. Just like the Netherlands, Belgium has a favourable tax regime for expats. But athletes and artists also regularly work abroad. In the past, the had a special tax status, but under the new treaty their tax treatment will follow the articles on business profits or income from employment While that makes their tax position more straightforward, it does require some adjustments.’

Clearer update, but not everything has been adjusted

Tamara and Yves both agree that the new treaty contains a number of important changes and clarifications. In addition to changes for employers and employees, the new treaty text has revised stipulations for matters such as emigrated shareholders, dividends and interest provisions. Tamara: ‘A lot has changed over the past 20 years, so it is good that the two countries now have a new treaty. However, a number of matters on the fiscal wish list have not been addressed.’ Yves adds: ’It was expected that the problems regarding cross-border pension would be dealt with in the new text of the treaty, but this hasn’t proven to be the case. The position of teleworkers was another topic we had expected an update on, but this wasn’t provided. During the treaty negotiations, working-from-home situations were discussed separately in light of the Framework Agreement Social Security; perhaps it was decided to await the outcome of those discussions.’

Map the consequences and opportunities!

Yves and Tamara advise their clients to prepare for the expected changes. ‘In some cases, the tax treatment of income may change. That can be beneficial, or detrimental, but in any case, you need to be aware of the consequences. Especially considering the fact that it may, for example, be necessary to apply changes to your (payroll) administration. New registrations and tax returns in the other country may be required,’ Yves explains.

‘As a private individual, you want clarity on this,’ Tamara says, ‘but it is equally important to map the potential consequences for you as employer.’ Tamara mentions a recent development regarding the responsibilities of employers in the case of changing tax treaties. ‘In the Netherlands, the Advocate-General has concluded that an employee should inform his personnel abroad if a treaty changes. This is supposedly part of being a ‘good employer’. It is unclear whether the Dutch Supreme Court will follow this conclusion, but if it does you will absolutely need to take this matter into account as an employer.’

Additionally, Yves notes that the new text of the treaty is better aligned with the current practice in which directors often have two roles: statutory and operational. ‘For example, someone who lives in Belgium but is the statutory director of a Dutch company. In the past, their directors’ remuneration was fully taxable in the Netherlands, at the progressive personal income tax rates. Under the new treaty, a distinction is made between the directors’ activities and other activities. The latter are subject to the stipulations of the article for income from employment. If that director works from home, the non-directors’ remuneration may under circumstances be subject to Belgian personal income tax. The director should therefore accurately track what kind of work he performs where.’

What’s next?  

The text of the treaty still needs to be ratified by both countries. It is not yet clear when the new treaty will actually enter into force. ‘There are general elections planned soon in both Belgium and the Netherlands, which might lead to a delay in the ratification. It remains to be seen whether the new treaty will apply as of 1 January 2024, or possibly not until 1 January 2025,’ Yves explains.

‘Over the coming months we will be helping our clients prepare for the changes. And of course, we will discuss the new text of the treaty with the worldwide Global Mobility experts within our Baker Tilly International network. This means our international clients can count on high-quality support,’ Tamara remarks in conclusion.

Would you like to know more about international employment and the consequences of the changes to the treaty? Our Global Mobility experts would gladly help you map the relevant points of attention from the perspective of labour law, administrative obligations and (foreign) tax liability. We can also help you with (international) payroll coordination and HR matters. Together with our global network partners of Baker Tilly International, our experts would be happy to advise you in the areas of treaty application, foreign withholding obligations, the salary split and social security.

The legislation and regulations in this area may be subject to change. We recommend that you discuss the potential impact of this with your Baker Tilly advisor.