Home office triggering a PE in a Belgian/Dutch context: new approach of the Belgian tax authorities

On 23 November 2023, the Belgian and Dutch Competent Authorities reached an agreement on how to approach cross-border employees working from home. The agreement, which was published in the Belgian Official Gazette on 12 December 2023, provides new insights on when the tax authorities of both countries consider a home office used by these employees to be a place of business at the disposal of their foreign employer and thus triggering a material permanent establishment. 
 
Under the agreement, “incidental remote work” (defined as less than 50% of the employee’s worktime per year) will not trigger a material PE. For “structural remote work” (i.e., the employee works from home more than 50% of the work time), it depends on (i) whether there is an actual option to work from an office provided by the foreign employer and (ii) whether this option is regularly exercised. In the latter case, the employee’s home office is in principle still not considered to be at the disposal of the foreign employer as an office space is available for the employee to use when they need one and they therefore do not have to work from home for lack of a realistic alternative. If such is not the case, there might be reasons to conclude that the home office is a fixed place of business at the disposal of the foreign employer, and such will depend on the factual circumstances. This would trigger a taxable presence, unless of course the activities of the employee exercised remotely are merely of an auxiliary and preparatory nature.  
 
It is somewhat remarkable that the agreement makes reference to other than legalistic criteria typically withheld in the past by the Belgian Ruling Office (e.g., the home office being mentioned as the primary place of work in the employment contract). This clearly indicates that the Belgian (and Dutch) tax authorities take a substance over form approach and will look through any paperwork not reflecting reality. The concept of “de facto” being at the disposal obviously is a grey area since it all depends on perspective and leaves several questions open, e.g., what is a reasonable commute distance. 
 
Be aware that the agreement only addresses the qualification of the home office as a fixed place of business. It does not address the dependent agent permanent establishment (commercial/sales representative). Therefore, if the commercial/sales representative would work less than 50% of the work time from the home office, but has the authority to conclude contracts, the foreign company can still be deemed to have a taxable permanent establishment in Belgium. 
 
Although this agreement is of a bilateral nature, in combination with a parliamentary question from 26 May 2023, it gives valuable insights in the viewpoint of the Belgian tax authorities. With the Netherlands now being onboard with this position, it cannot be excluded and is even expected that other neighboring countries could follow and/or that the Belgian tax authorities will also apply these principles under other double tax treaties concluded by Belgium. 
 
Closely linked to this topic, it is useful to note that a recent ruling confirms that the presence of an employee in Belgium for more than 30 days performing purely internal services (i.e., not client facing/project driven activities so no taxable permanent establishment under the treaty) is not considered to qualify as a Belgian establishment under Belgian domestic law, i.e., the triggering point for a.o. filing a tax return in Belgium, paying an annual company contribution, paying wage withholding tax on salaries taxable in Belgium, etc. 
 
However, a ruling decision has no general legally binding power, the law is - in our view - not clear on this point and the Belgian tax authorities assume a tax filing obligation when a foreign company is registered as employer in Belgium. Therefore, we recommend our clients to continue to file a (nil) non-resident tax return as soon as one or more employees are present in Belgium for more than 30 days, even if less than 50% of the professional time of the employee is spent at home. At least until the Central Tax Administration confirms its (dis)agreement with the position of the Ruling Office. 

Do not hesitate to contact your trusted BDO advisor or one of our experts, Olivier Michiels, Michaël Vangenechten or Alexandra Martin if you need assistance in assessing the impact of the above on your Belgian tax position.