Working abroad: the consequences in a nutshell
If you live in Belgium, but you work in another country, you risk being taxed twice on the same income. The first time in Belgium, since the worldwide income of all Belgian citizens is taxed. And a second time in the country where you work, since most countries tax the income earned on the territory, irrespective of the beneficiary being resident there or not.
Avoiding 'double taxation'
In theory both Belgium (country of residence) and the country where you work (country of employment) can levy taxes. In order to avoid that you should indeed pay taxes twice, states have mutually agreed to split the competence to levy taxes. In other words, they agree upon which country can levy the taxes by entering into double tax treaties.
The international organization OECD has drafted a model of a double tax convention in order to help countries in drafting such treaties. Belgium has entered into a number of double tax conventions in order to avoid double taxation.
Article 15 of the OECD model tax convention states how the competence of levying taxes on income from employment (employees and blue collar workers) is split between the country of residence and the country of employment with respect to the private sector.
Income from employment is in principle taxable in the county where you live. However, if you perform your activity in another country, then that country can levy taxes. Your physical presence in the country of employment is crucial.
Exception: 183 days-rule
The general rule is rather complex and makes it less attractive to work in another country. Therefore an exception applies. Belgium remains competent to tax your income if:
your presence in the country of employment does not exceed 183 days during the income year, the taxable period or any twelve months period. In order to determine whether the presence has been 183 days, the physical presence in the country of employment is regarded, both for professional as for private purposes. Are taken into consideration: day of arrival and departure, weekends, public holidays and vacation, illness;
the remuneration is paid by, or on behalf of, an employer who is not a resident of the country of employment;
the remuneration is not borne by a permanent establishment which the employer has in the country of employment.
These three conditions should be fulfilled simultaneously.
The conventions with our neighboring countries initially foresaw in a special arrangement for cross-border workers. Cross-border workers are employees working in the border region of one country, but living in the border region of another country to which they usually return daily (and at least weekly). These special arrangements are currently almost completely abolished.
Directors' fees derived in your capacity as a member of the board of directors of a company are taxed in the country where the paying company is established. Other income you receive as a director for activities next to this mandate are taxed according to article 15.
Do you work for the government? In this case the country paying the salary can tax the income. This goes for salaries paid by the (Federal) State as well as for salaries paid by subdivisions or authorities of that State.
The rules set out above are based on the OECD model double tax convention, in numerous conventions exceptions to the above rules apply. It is therefore of key importance to refer to each specific applicable convention.