Employees under the new double tax treaty with France

On November 9, 2021, Belgium and France signed a new double taxation treaty. The text still has to be piloted through parliament. In a double tax treaty it is agreed which country may tax which income. The old treaty between Belgium and France dates back to 1964. Apart from a thorough renumbering, the new treaty will not cause a landslide, but you have to watch out for what will change.

183 days

A general rule, which we find in all double tax treaties, is the so-called 183-day rule. If a Belgian employee earns salary in France, then that Belgian employee is in principle taxable in Belgium – his state of residence. If, on the other hand, the Belgian employee also resides physically in France, France (the state of employment) will be allowed to tax him.

There is an exception to this rule – which means that the Belgian employee will be taxed in Belgium – if three conditions are simultaneously fulfilled:
1. The Belgian employee stays in France for less than 183 days.
2. The salary is not borne by a French employer.
3. The salary is not borne by a permanent establishment in France.

The logic behind this is quite simple: if the salary is a deductible expense in France, then France also wants to be able to tax the salary as an income.

The above rule applies in the same way to the Frenchman who works in Belgium.

What's new?

The 183-day rule (point 1 above) also existed under the old treaty, but the 183 days are now calculated differently: under the old treaty you had to make the calculation per calendar year. If someone stayed in France from 2 July 2020 until 29 June 2021, they met the less than 183 days rule under the old treaty. Under the new treaty, you must assess the period per 12-month period. So if an employee leaves for France on 2 July 2020, the total number of days spent there will be checked on 2 July 2021. In other recent double tax treaties, the 183-day rule is already applied this way.

The fact that the salary is paid by, or on behalf of, an employer who is not a resident of the state of employment (point 2 above), is also new. In the past, it was stated that the salary had to be paid by a 'Belgian employer'. Now it is sufficient that the employer is not a French employer. The 183-day rule did not apply to a Belgian who works in France for a German employer, but this is the case under the new treaty.

The third rule – the salary may not be borne by a permanent establishment of the employer in the state of employment – was simply taken over from the previous double tax treaty.

Entry into force

The parliamentary process of a tax treaty is difficult to predict. After all, in Belgium, in addition to the federal government, the regions must also give their approval. Usually, these documents are not on top of the pile of legislative work. But sometimes, when it is really important, it can go fast. In general, we expect the new double taxation treaty with France to enter into force on 1 January 2023.

This gives you as an employer some time to see whether the treaty has an impact on your employees. Just think of a Belgian employee who temporarily works for a German employer in France: he can now suddenly enjoy the 183-day rule, where that was not possible before. It must certainly be examined and calculated whether it makes sense to attract tax to Belgium by applying the conditions of the new 183-day rule, or whether it is more interesting to avoid Belgium becoming tax competent.
Finally, we should not lose sight of the fact that the above also applies to French residents who work in Belgium. Certainly, for groups of companies that have offices in both countries and that regularly allow their staff to cross the border, the new treaty must be thoroughly examined.