The employee who lives in Turnhout and works in Tilburg, or lives in Maastricht and works in Hasselt, is a familiar figure in Benelux commerce and a consistently mishandled one. Employers treat the position as settled by where the payroll is run. It is not. Two separate legal systems decide two separate questions, using different tests, different percentages and different reference periods, and they routinely give answers that point in opposite directions.
The first is the double taxation treaty, which decides which state may tax the salary. The second is European social security coordination, which decides which state’s system the employee belongs to and where the contributions are paid. An employer that gets the first right and the second wrong has an exposure, and so does one that assumes either answer settles the other.
The treaty in force is still the one from 2001
Belgium and the Netherlands signed a new treaty at Brussels on 21 June 2023, published in Tractatenblad 2023 number 77. It is not in force. The Dutch treaty database entry for the 2023 text shows the entry into force, provisional application and retroactive effect fields all empty, and the consolidated text notes that it enters into force on a date still to be determined.
What governs today is the treaty signed at Luxembourg on 5 June 2001, in force since 31 December 2002, in its consolidated form applicable from 1 September 2013 following the 2009 protocol. A policy decree of the State Secretary for Finance of 6 August 2026 still applies it under that name. Employers taking positions on the 2023 text, in which the employment article is renumbered as article 14, are applying a treaty that binds nobody yet.
The rules have not changed. What has changed is how people work, and the treaty was written for a world in which a commuter’s working days were spent at the employer’s premises.
Article 15 and the 183 day rule, read properly
Article 15, paragraph 1, gives the state of residence the right to tax employment income unless the employment is exercised in the other state, in which case that other state may tax the remuneration derived from it. For a daily commuter that means the state where the work is physically done taxes the pay for those days.
Paragraph 2 returns the taxing right to the state of residence, but only where three conditions are met together. The recipient must be present in the other state for periods not exceeding 183 days in any twelve month period beginning or ending in the tax year concerned. The remuneration must be paid by or on behalf of an employer who is not a resident of the other state. And it must not be borne by a permanent establishment or fixed base the employer has there.
The period is a rolling twelve months, not the calendar year, so a pattern that looks compliant on a calendar reading can fail on a rolling one. And the conditions are cumulative. A Dutch resident employed by a Belgian company and working in Belgium fails the second on the first day, whatever the day count. For the ordinary commuter employed by a company in the country where he works, paragraph 2 never applies at all.
In that ordinary case the state of work taxes the salary and the state of residence gives relief, so the commuter is taxed on the schedule of the state where he works. Belgium applies, for income year 2026, 25 per cent up to 16,720 euro, 40 per cent to 29,510 euro, 45 per cent to 51,070 euro and 50 per cent above, plus a municipal tax collected with it at a rate that differs from one municipality to the next. The Netherlands applies, below state pension age in 2026, 35,75 per cent up to 38,883 euro, 37,56 per cent to 78,426 euro and 49,50 per cent above, the first bracket being 8,10 per cent income tax and 27,65 per cent national insurance contributions.
Working from home breaks the arrangement
That rule is simple until the employee stops crossing the border every day. A day worked at the kitchen table in Belgium is a day on which the employment is exercised in Belgium, not in the Netherlands, and the salary for that day is allocated accordingly. One employee’s salary therefore has to be split between two states in proportion to where the days were worked.
There is no relief from this and there has not been since the middle of 2022. The two states agreed a temporary arrangement during the pandemic under which homeworking days were treated as worked where they would otherwise have been performed. The extension of 10 December 2021 carried it to 31 March 2022 and tacitly to 30 June 2022, and the competent authorities then agreed not to renew it. No instrument in force reallocates taxing rights over homeworking days between the two states, and neither consolidated treaty text mentions teleworking at all.
A two day a week homeworker generates a wage tax obligation in the state of residence for those days, and the employer becomes a withholding agent in a country where it may have no other presence. Employers that have carried on withholding everything in the state of the office since 2022 are carrying an exposure in the other state, with interest accruing.
The employer’s own exposure is a separate question
Homeworking creates a second risk, one that attaches to the company rather than the employee. If an employee’s home office constitutes a permanent establishment of the employer in the state of residence, the employer has a taxable presence there, with everything that follows.
Belgium and the Netherlands have addressed this, and the instrument is in force. A competent authority agreement of 23 November 2023, concluded under article 28, paragraph 3, of the 2001 treaty and published in Staatscourant 2023 number 33856, interprets article 5 for home-working employees. It states as a practical application that the home workplace does not in any event constitute a permanent establishment where the employee works at home for 50 per cent or less of his working time for that employer over a twelve month period beginning or ending in the tax year concerned.
That is a genuine safe harbour. It says nothing about where the salary is taxed, which remains a day by day allocation, but it removes the corporate exposure for most hybrid arrangements. Employers whose staff work from home more than half the time are outside it, and should treat the permanent establishment question as live.
Social security follows a different rule entirely
Nothing above determines where contributions are paid. That is governed by Regulation (EC) 883/2004, and the outcome frequently differs from the tax outcome for the same employee in the same month.
Article 13, paragraph 1, provides that a person who normally pursues an activity as an employed person in two or more member states is subject to the legislation of the state of residence if a substantial part of the activity is pursued there, and otherwise to that of the state in which the employer’s registered office or place of business is situated. The basic regulation gives no percentage. Substantial part is defined in article 14, paragraph 8, of the implementing Regulation (EC) 987/2009 as a quantitatively substantial part of all the activities, without necessarily being the major part, assessed on working time or remuneration, and a share of less than 25 per cent is stated to be an indicator, in an overall assessment, that a substantial part is not pursued there.
An employee working two days a week from home in Belgium for a Dutch employer is at 40 per cent, well above the indicator, and becomes subject to Belgian social security on his entire remuneration while the Dutch state continues to tax most of his salary. The employer must register and contribute in Belgium. That is not an anomaly to be argued away; it is the design of the system.
The framework agreement, and its two percentages
Because that outcome was disruptive at scale, member states concluded a Framework Agreement on cross-border telework, in force from 1 July 2023 and applying to Belgium and the Netherlands from that date. It was concluded for five years and extends automatically.
Article 3 provides that, on request, a person carrying out habitual cross-border telework will be subject, on the basis of article 16, paragraph 1, of the basic regulation, to the legislation of the state in which the employer has its registered office, provided the cross-border telework in the state of residence is less than 50 per cent of total working time. The wording is less than, not up to and including, and the difference matters at exactly the point where a three day office week becomes a two day one.
The lower end is set by cross-reference rather than by the agreement itself. Article 2 covers persons to whom the legislation of the state of residence would apply as a result of habitual cross-border telework under article 13, paragraph 1, letter a, of the basic regulation read with the implementing provisions, and the official explanatory memorandum states that the agreement applies to persons teleworking 25 per cent or more of total working time in the state of residence. Below that, nothing is needed: the employer’s state remains competent under the ordinary rule.
The agreement is not automatic. It applies on request, so an application has to be made and an A1 certificate obtained. An employer assuming it operates by itself has employees who are, as a matter of law, insured in the wrong country.
What an employer should actually do
Three records make the difference between a defensible position and an expensive one. The first is a day count per employee showing where each working day was physically spent, kept contemporaneously rather than reconstructed at year end. Both the tax allocation and the social security assessment depend on it, and neither administration accepts an estimate.
The second is a written homeworking policy that fixes the pattern rather than leaving it to the employee. A policy specifying office days keeps the arrangement inside the 50 per cent safe harbour for permanent establishment purposes and inside the framework agreement threshold at the same time, converting an unpredictable exposure into a managed one.
The third is a payroll registration in the state of residence where days are worked there, and an A1 application where the framework agreement is relied on. Neither is optional, and both take time to put in place.
Employers who treat the commuter as an administrative detail discover the position when the other state’s inspectorate writes to them, which in this region it does. The employee, meanwhile, has been filing in one country and living in another on the assumption that his employer had it under control. That assumption is the one thing here with no legal basis at all.
This article is informational and does not constitute tax or legal advice. Rules of this kind evolve and their application depends on the facts of each structure. Each engagement is subject to scope and applicable regulation.