Due to the COVID-19 pandemic, a lot of employees still work (remotely) from home to ensure business continuity. The Netherlands has reached a tax agreement with the Belgian and German authorities on cross-border workers was and social security authorities agreed on a tolerance policy. However, this will soon come to an end.
Based on the tax agreements, remuneration derived from “home working days” solely due to Covid-19 travel restrictions may be deemed to be sourced to the country, where the cross border worker would have normally exercised his professional duties without travel restrictions. The cross border worker can make use of this agreement in the Belgian, German and the Dutch income tax return and should be applied consistently in both countries.
The cross border worker should keep appropriate records (including a written confirmation of the employer) on which part of the home-office-days were solely due to COVID-19 measures. No change of the set-up of the payroll by the employer is in principal required, but it can be helpful for the cross border worker as this may avoid the need to file an income tax return in the country of work. The tax agreements with Belgium and Germany have recently been extended until June 30, 2022. As of July 1, 2002 both agreements are terminated and the normal rules from the tax treaties will apply.
Social security position
Based on the EU Regulation 883/04, if in a 12 months period an employee works on a structural basis in their home country for more than 25% of their total EU workdays, he is subject to the social security system of the home country. Due to the forced working from home due to the COVID-19 pandemic a switch to the social security of the home country could happen.
To avoid this, the social security authorities of the EU/EEA countries and Switzerland agreed to ignore changes in work patterns resulting from the COVID-19 restriction measures, such as increased work time spent in the country of residence where this is not the usual country of employment, when determining the applicable social security legislation. This “no-impact” position applies until 30 June 2022. This means that changes in work patterns resulting from the COVID-19 restriction measures, do not affect the applicable social security legislation.
It is important to note that the tax agreements and the “no impact” policy for social security are aimed only at temporary changes in the work pattern due to the COVID-19 pandemic. Due to the duration of the COVID-19 measures it stands to reason that at some point authorities will once again start to apply the normal rules. June 30, 2022 will become a turning point.
Similarly the tax agreements and the “no impact” policy for social security are aimed only at temporary changes in the work pattern due to the COVID-10 pandemic. As countries relax their COVID-19 restriction measures authorities may argue that working from home cannot be the result of such measures and thus does not fall within the scope of the tax agreements and no impact policy anymore.
Working from home policy
In view of the duration of the COVID-19 pandemic employees and employers are starting to see the benefits of a flexible work place. Moreover in today’s market, hybrid working, the option to work partially from home, is becoming a relevant employment condition for finding and retaining employees.
In view of this, the relaxation of the COVID-19 restriction measures and the return to the normal rules for taxation and social security, employers should contemplate whether they want to facilitate remote work arrangements for their local employees and their cross border workers in the long run. If so, a working from home policy should be drafted taking into account the company’s goals, people strategy, data security and the labor law, social security and tax implications.
The experts from Bol International have the knowledge and practical experience to assist you in designing and executing your working from home policy. Do you need any help? Please fill in the contact form and we’ll get in touch as soon as possible!