Agreement between Belgium and the Netherlands on cross-border home office permanent establishments

Due to travel and office restrictions imposed by various governments during the COVID-19 period, working from home became temporarily mandatory. Employees and employers have clearly embraced working from home (so-called “teleworking”) and continued to do so after those restrictions had been lifted. In particular, in a cross-border context, whereby the tax residence of the employer and the employee is in different states, employers could be faced with unexpected tax implications if the employee’s home office would constitute a permanent establishment (PE) of the employer. 

To provide more certainty to employers, Belgium and the Netherlands have signed an agreement on 23 November 2023 regarding the (non-)recognition of a “home office PE” within the meaning of article 5, §1 of the current double tax treaty in case of cross-border teleworking. 

This agreement was published in the Netherlands on 8 December 2023 and in the Belgian Official Gazette on 12 December 2023. 


According to Article 5, §1 of the current double tax treaty concluded between Belgium and the Netherlands, the term PE means “a fixed place of business through which the business of an enterprise is wholly or partly carried on” (so-called “material PE”). 

The question arises whether a home office of an employee residing in Belgium can qualify as a material PE of its employer established in the Netherlands (or vice-versa). This would require that such home office would be at the disposal of the foreign employer with a certain degree of permanence, and that it is used to effectively carry out the activities of the foreign employer. This is a very factual analysis that has given rise to ruling practices in Belgium and the Netherlands, demonstrating the extent of uncertainty that exists when assessing a home office PE situation. Such cross-border situations may also give rise to discussions with the Belgian and Dutch tax authorities.

The intention of the present agreement is to provide more clarity and practical guidance for employers on the (non-)recognition of a “home office PE” in a cross-border Belgian-Dutch context. 

Practical guidelines for material home office PEs

The agreement distinguishes between the following situations: 

1. Incidental teleworking

2. Structural teleworking

3. Home working activities of a preparatory or auxiliary nature

Situations not covered by the agreement

The agreement is limited to the material PE and does not provide guidance for other types of PEs that could arise. Belgian and Dutch employers should therefore in particular carefully monitor situations where employees habitually conclude and/or extensively negotiate contracts on behalf of the employer when working from home in the other jurisdiction (so-called “agency PE”). Although the current double tax treaty between Belgium and the Netherlands formally requires the habitual conclusion of contracts by the employee in the other state, the Belgian and Dutch tax administrations may take a substance-over-form approach with respect to negotiation powers (e.g. if the employer merely rubberstamps the contract negotiated by the employee) for the recognition of an agency PE. This is particularly relevant for senior and/or commercial personnel in cross-border situations.

Relevant considerations

Article 5, §1 of the current double tax treaty is consistent with the OECD Model and the authorities of Belgium and the Netherlands consider the OECD Commentary as an important source of interpretation in this respect. In line with the OECD Commentary, the agreement confirms that the mere presence of a home office is not sufficient and that a certain degree of permanence and (factual or legal) obligation to work from home are relevant conditions to consider. This is as such not new. 

The agreement is particularly novel where it provides useful guidance for the application of these conditions in practice. Especially the 50% threshold and the confirmation that certain factual elements are irrelevant in the assessment are welcome clarifications that provide employers with more certainty.  

Although the agreement is concluded only between Belgium and the Netherlands, the Belgian Minister of Finance recently recognized that similar guidelines can be applied in Belgium towards other countries as well. In a parliamentary question published this summer, the Minister of Finance confirmed amongst others that the home office of an employee residing in Belgium who normally carries out his activity in Germany, France, Luxembourg or the Netherlands can only be at the disposal of the employer if that employee works from home continuously (more than 50% of the working time) and if the employee is not given the opportunity to work from another office abroad, or if such office is hardly used in practice. The positions taken in the agreement and by the Minister of Finance are more flexible than the rather prudent approach of the Belgian Ruling Commission which generally applied a threshold of only 45 days per year. 

The Dutch government aims to introduce two measures to address the tax obstacles of cross-border teleworking in relation to its bordering states, Belgium and Germany. One of the measures is concluding bilateral agreements on cross-border home office PEs. With the agreement in place, this measure has been introduced for the Netherlands and Belgium. From a recent communication of the Dutch Ministry of Finance, it can be derived that it is not expected that a similar agreement will be concluded with Germany soon. The other measure is including threshold arrangements in the double tax treaties that allow employees to telework without shifting the right to tax their income. The discussions between the Netherlands and Belgium, and the Netherlands and Germany, on this measure are still ongoing. For the longer term, the Netherlands is actively exploring a cooperation in this regard with a larger group of countries, for example in EU or OECD context. 

The practical approach offered to the Belgian and Dutch employers in this agreement is also largely consistent with the threshold agreed upon for social security purposes in the Framework Agreement on the application of Article 16 (1) of Regulation (EC) No. 883/2004 that applies as of 1 July 2023. Under the Framework Agreement, the employer and the employee can opt in for continuation of the social security legislation of the state of the employer’s registered office or place of business whilst the employee is cross-border teleworking for less than 50% of the time. Belgium and the Netherlands have signed this Framework Agreement.

The agreement does not elaborate on the tax consequences in the hands of the employees. As mentioned above, negotiations are ongoing between Belgium and the Netherlands in this respect. 

Finally, this agreement only applies to the double tax treaty currently in force, and it is not certain yet whether it will also apply to the new double tax treaty recently concluded between Belgium and the Netherlands. This may be apparent from the joint explanatory memorandum to this new double tax treaty that is expected to be published soon. For information on the new double tax treaty see our article of 30 June 2023