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: 

If an employee works from home only incidental or occasionally so that teleworking is not part of a regular work pattern, the home office is not considered to be at the disposal of the employer for lack of continuity. According to the agreement, teleworking is considered to be part of a regular work pattern if the employee is working from home for a fixed number of days per week or month. This position is as such not new: for a place of business to be “fixed”, a certain degree of permanence is clearly required.

Oftentimes, teleworking arrangements are however more structural in nature. In such case, the agreement distinguishes between the situation where the employee also avails of a place of work made available by the employer and the situation where the employee is (factually or contractually) required to work from home.

In the first case – where the employee makes a free choice to work from home even though the employer makes a centralised place of work available in the employer's residence state – working from a home office should in principle not lead to a home office PE. In such case, the home office is not at the disposal of the employer since the latter does not oblige the employee to work from home. 

However, if it would be apparent from the employment contract and/or from the factual circumstances of the case that the employee has an obligation to work from home, the home office is in principle considered at the disposal of the employer. Such an obligation can exist, for example, if:

  • The employee is contractually required to work from home;
  • No place of work is made available (or is not intended to be frequently used) in the employer’s residence state as a result of which the employee is required to work from home; and/or
  • The employee cannot unilaterally terminate the use of the home office, for example because the activities cannot adequately or in accordance with the employment contract be performed outside the home office.

The facts should be assessed at the level of each individual employee. For this analysis, it is irrelevant how much, on average, the employees of an employer work from home or whether a workplace is permanently made available by an employer for each employee (or for example, structurally less than one workplace per FTE). Similarly, it is irrelevant whether or not the employer has provided resources (for example financial support or ICT) to enable teleworking, or whether social law protection is available in the home office state.

As a practical guideline, the agreement clarifies further that a home office should in any case not constitute a PE if the employee teleworks during 50% or less of its working time over a 12-month period beginning or ending in the relevant tax year. The authorities of Belgium and the Netherlands appear to consider that the home office cannot be at the disposal of the employer with a sufficient degree of permanence if this 50% threshold is not exceeded.

The agreement finally confirms, in line with article 5, §4 of the double tax treaty and the OECD Commentary, that a material PE does not exist if the activities performed by the employee at its home office are only preparatory or auxiliary to the employer, even if the home office would constitute a fixed place of business at the disposal of the employer. According to the agreement, an auxiliary activity could, depending on the circumstances, include secretarial and internal accounting, human resources (HR) or ICT support activities. 

From a Belgian perspective, it is also important to note that this agreement does not impact the (rather broad) definition of a “Belgian establishment” under Belgian domestic tax law, which for example does not exclude activities of a preparatory or auxiliary nature. If a home office would constitute a Belgian establishment, an annual filing obligation exists in Belgium, even if the home office does not meet the threshold for a treaty-based PE (no Belgian taxation should however occur in such case).

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


We will keep you informed on further developments. Should you have any questions, please contact the authors of this newsletter or your trusted Loyens & Loeff advisor.