The impact of the coronavirus on cross-border work

2 april 2020

Do you as employer have employees who cross the border to work and who are forced to work at home because of the coronavirus crisis? This may have fiscal consequences. What should you take into account? Read this article to find out.

General

For employees who live and/or work in a different country, you have to determine in which country they are taxable and socially insured. This depends on the national laws of the country involved, but also on treaties concluded between countries and any international regulations that may be applicable. Different regulations apply to taxation and social insurance obligations. A change in someone’s residential and/or employment situation can lead to changes in their tax and/or social insurance payment obligations.

Tax obligations

An employee’s place of residence and place of work form the baseline for a country’s tax assessment. In order to prevent both the country of residence and the country of work from levying taxes, many treaties have been concluded between countries to prevent double taxation. If there is a treaty, then national laws often offer the possibility of avoiding double taxation. The foundation of many treaties aimed at preventing double taxation is that an employee is taxed in the country where he/she carries out the work. An exception is the 183-day rule, which – in brief – states that if you reside for less than 183 days in the country of employment, the country of residence may, under certain conditions, levy taxes. Because the tax obligation depends on the actual place of work and/or place of residence, suddenly having to work at home due to the corona crisis may lead to becoming taxable in a different country.

Do you have employees, for example, who live outside the country but usually work in the Netherlands? Then in many cases, the Netherlands is entitled to levy taxes on their income. If your employee suddenly has to work at home because of the coronavirus, that employee then works in his/her country of residence. This may lead to taxes being payable not in the Netherlands, but in the country of residence. Do you have an employee who is at home because he/she is sick? The basic principle in that case is that sick days are taxable in the country where the employment would normally be carried out. This means that calling in sick does not as often lead to a change in tax obligations.

Social insurance obligations

The place of residence and place of employment are also important baselines for social insurance payment obligations. Based on the European Regulation, in the EU, EEA and Switzerland the basic principle is that you are socially insured in the country where you work. There are various exceptions, for example if an employee works in several countries or if the work is via secondment or a temporary placement agency.

A change in the expected work situation could lead to a change in social insurance payment obligations. The Social Insurance Bank (SVB), the Dutch social security agency, has posted a communication on its website stating that if employees in the EU, EEA or Switzerland have to temporarily work at home due to measures against the coronavirus, this does not affect social insurance obligations. If the corona crisis measures last for a longer time, the SVB will communicate via its website if this situation will lead to any changes in social insurance obligations.    

Further information

An employee’s tax and social insurance payment obligations must be individually assessed. Because the assessment depends on individual facts and circumstances, and there are a lot of regulations involved, this can be very complicated. If you have any questions about cross-border working, please contact one of our advisers.