Where possible, improved coordination of taxation and social security for frontier workers working from home

Minister Karien van Gennip (Ministry of Social Affairs and Employment) wants to coordinate the consequences for taxation and social security of working from home (internationally) as much as possible. She announced this by letter to the Lower House of Parliament.

Despite the recent conclusion of a framework agreement for frontier workers working from home in the field of social security, taxation still retains its own rules, backgrounds and approach. While the social security position of the frontier worker working from home does not change in the case of a limited number of days working at home, the right to tax employment income from days worked at home already shifts to the country of residence with effect from the first working day. In the recently published letter to the Lower House of Parliament, the Minister stated that it is her intention to limit the lack of coordination between taxation and social security where possible.

Specifically, with regard to taxation, the government is focusing on two measures to facilitate working from home for frontier workers:

• Include a working from home measure aimed at frontier workers in the bilateral tax treaties. This may include, for example, allowing the frontier worker to work from home for up to a certain number of days without their salary being taxed by the state of residence. In this regard, the Netherlands would prefer to align the percentage, where possible, with the social security percentage (up to 50%).

• Remove uncertainty with regard to the creation of a permanent establishment as a result of working from home. At present, this point appears to be an obstacle for many employers to allow working from home or to employ frontier workers.

The Netherlands is already in consultation with neighboring countries about amending tax treaties, but no agreement has yet been reached. The new tax treaty between the Netherlands and Belgium has been signed, but it does not include a working from home scheme for frontier workers. It does, however, remain a subject of discussion between the Netherlands and Belgium. It is expected that an agreement to clarify matters will be concluded with Belgium in the short term on the creation of a permanent establishment in corporate income tax when working from home.

Once agreement has been reached between the countries, we will of course report this. Therefore, please keep an eye on our website/LinkedIn page, but in the meantime feel free to contact us.