For the employee
If you, as the employer, give an employee living in Belgium permission to telework from abroad (according to the definition in employment labour law, see above), the duration of the teleworking will determine the tax ultimately due by that employee.
In principle, the tax is due in the country where the work is performed. However, if the employee teleworks from abroad for fewer than 183 days per year or in any not-necessarily consecutive period of 12 months (depending on the applicable double-taxation treaty), tax will usually continue to be levied in Belgium as the country of residence.
However, the duration of the teleworking is not the only condition that determines the taxation. For example, tax will continue to be levied by Belgium if the salary continues to be paid by the employer established in Belgium. Thus, it may not be borne by an employer, or a permanent establishment of the employer, in the country from which the employee teleworks.
Furthermore, it is important that the employee retains his or her tax residence in Belgium during the period of teleworking from abroad. If he or she teleworks from abroad for only short periods, then, in principle, the Belgian tax residency is not impinged.
However, if he or she teleworks from abroad for a long period, regularly or otherwise, it is best to check whether the employee is considered a tax resident according to the tax laws of the country from which he or she is teleworking. If that is the case, it might be determined that he or she has a double-tax residence, in Belgium and in the country from which he or she is teleworking. The employee then runs the risk of being taxed twice on all or part of his or her income. This certainly applies to countries with which Belgium has not concluded a double-taxation treaty.
If the employee teleworks from abroad for more than 183 days, or if the long or regular teleworking from abroad shifts the tax residence abroad, you must know that the salary you pay for those teleworking days abroad will be taxed.
For the employer
As a consequence of the long-term or regular teleworking of employees from abroad, as the employer, you run the risk that a so-called ‘permanent establishment’ of your Belgian company is created in that country. Check out this risk before giving your permission for teleworking from a foreign ‘home office’.
If such a permanent establishment is created, your Belgian company will be subject to corporate income tax in the country where the work is performed. Furthermore, this then raises the question of profit allocation and how you can prevent double-taxation. If the permanent establishment is in a country with which Belgium has not concluded a double-taxation treaty, then it can also lead to additional costs.
Even if the existence of a taxable permanent establishment is excluded by the foreign tax authorities, it is still important to verify whether or not the country where the work is performed will consider the work location to be a foreign establishment on the basis of its domestic tax legislation. If not, this need not lead to additional taxes. But there is a risk of extra formalities and costs. For example, consider the comparable obligation of foreign companies with a Belgian establishment to submit a zero corporate income tax return for non-residents or the compulsory affiliation to a social insurance fund and the payment of the annual company contribution.