Employees in the new double taxation agreement with France
April 2022 – On 9 November 2021, Belgium and France signed a new double taxation agreement. The text of this agreement still needs to be adopted by the parliament. A double taxation agreement determines which country can tax which income. The old agreement between Belgium and France dates from 1964. Apart from a detailed re-numbering, the new treaty will not cause much upheaval, but it is still worth paying attention to the changes.
183-day rule
The 183-day rule is a fixed rule found in all double taxation treaties. When a Belgian receives a salary in France, this Belgian worker is in principle taxable in Belgium - his state of residence. If, on the other hand, the Belgian also physically stays in France, France (the state of work) may tax him.
There is an exception to this rule - which means that the Belgian worker will be taxed in Belgium - when three cumulative conditions are met:
1. The Belgian stays in France for less than 183 days.
2. The salary is not paid by a French employer.
3. The salary is not payable by a permanent establishment in France.
The logic behind this exception is relatively simple: if the salary is a deductible expense in France, it is logical that France also wants to be able to tax the salary as income.
The above rule applies in the same way to a French person who comes to work in Belgium.
What's new?
The 183-day rule (point 1 above) already existed in the old convention, but the 183 days are now calculated differently: in the old convention, the calculation was done per calendar year. A person who stayed in France from 2 July 2020 to 29 June 2021 complied with the less than the 183-day rule of the old convention. In the new agreement, the calculation is made per 12-month period. So if a worker leaves for France on 2 July 2020, the total number of days he or she has been in France will be examined on 2 July 2021.
The 183-day rule is already applied in this way in other recent double taxation agreements.
Another new feature is that the salary must be paid by or on behalf of an employer who is not resident in the state of employment (point 2 above). Previously, the salary had to be paid by a "Belgian employer". It is now sufficient that this employer is not a French employer. Under the old agreement, the 183-day rule did not apply to a Belgian who worked in France for a German employer. In the new agreement, it applies to him.
The third rule - the salary cannot be charged to a permanent establishment of the employer in the state of work - has simply been taken over from the old double taxation treaty.
Entry into force
The parliamentary process of adopting a tax treaty is difficult to predict. In Belgium, it requires the approval of both the federal state and the regions. Moreover, this type of document is generally not a legislative priority, although sometimes, when the importance of the document requires it, it can still be done quickly. Generally speaking, the new double taxation treaty with France can be expected to enter into force on 1 January 2023.
This gives you, as an employer, some time to determine whether the agreement will have an impact on your employees. Think of the Belgian who works temporarily in France for a German employer: suddenly he will be able to benefit from the 183-day rule, whereas he could not before. Surely it must be examined and calculated whether it makes sense to allocate the taxing power to Belgium by applying the conditions of the new 183-day rule, or whether, on the contrary, it is more interesting to avoid doing so.
Finally, one should also bear in mind that the above also applies to French residents who come to work in Belgium. The new agreement should be carefully examined, especially by groups of companies that have establishments in both countries and regularly bring their employees across the border.
