Cross-Border Work: Avoid Double Taxation
If you live in the Netherlands but work in Belgium, or vice versa, avoid having to pay tax twice. Be aware that both countries are entitled to levy taxes on your income. To prevent this from happening, the Netherlands and Belgium have certain agreements laid down in a tax treaty. These agreements will help you determine which country is entitled to levy taxes on your wages.
If you have a position with an employer in Belgium, you will generally be subject to the principle of the country of employment. Under this principle, you will generally be required to pay tax in the country where you perform your duties, i.e. Belgium.
You will be exempt from the rule if, during a 12-month period, you spend less than 183 days in Belgium on behalf of your job. And if you do not perform your duties on behalf of a permanent establishment of your employer’s in Belgium. If you do not meet these two requirements, you will be required to pay tax in Belgium.
Even if you pay tax in Belgium and are covered by Belgian social security insurance, you will have to file a tax return in the Netherlands, which will allow you to claim the interest on your mortgage as a deduction. You will be entitled to a reduction of the amount of income tax owed. So that you will not have to pay tax twice.
If you are employed by a government agency or an education organisation, you may be exempt from having to pay tax in Belgium under the Dutch-Belgian treaty. Likewise, if you perform freelance services, or if you are an artist or speaker performing in Belgium, your tax situation may be unclear. If you have any queries on this matter, please contact WePayPeople.
The treaty also contains compensatory arrangements, designed to ensure that you do not miss out on tax refunds and social security premium refunds. In other words, if you are not eligible for a tax refund, or only eligible for a very small tax refund from the Belgian taxation service due to your lack of deductions (e.g. the interest on your mortgage or specific health- or study-related deductions). You will be required to pay more tax than you would if you were employed in the Netherlands. A general compensatory arrangement was incorporated into the treaty to offset this loss.
Here, too, the principle of the country of employment applies. In other words, you will pay tax in the country where you perform your duties, which in this case is the Netherlands. The 183-day rule applies here too. And you will be required to file tax returns in both countries, so as to be able to claim the deductions to which you are entitled under Belgian law. Compensatory arrangements apply here, too.
Although the Dutch-Belgian tax treaty goes a long way towards clearing things up. It may not always be clear in which country you are required to pay tax and which country offers you the most favourable conditions. Therefore, it is important that you seek well-informed advice. If you wish to know what the Dutch Umbrella Company can do for you, please contact us.
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