Cross-border employment rarely fails on the headline question of where someone works. It fails on proof, on the gap between two separate legal regimes, and on the assumption that a single answer covers both. E.g. an employee working and residing in Belgium who spends part of the year working in the Netherlands faces two distinct allocations that follow different rules and can point to different countries: which state may tax the salary, and which state’s social security system applies. Treating these as one question is the most common and most expensive error.
The tax analysis turns on double tax treaties and Belgian domestic law; the social security analysis turns on EU coordination rules, bilateral treaties, and the local social security legislation. They are kept separate here for the same reason they must be kept separate in advice: a posting can leave an employee in the Belgian social security system while a treaty hands the taxing right to the work state, and nothing about the first answer settles the second.
I. The tax question: which state may tax the salary
The first thing to establish is whether Belgium has concluded a double tax treaty with the state where the work is done. If there is no treaty, Belgian domestic law applies. Under Article 156 of the Income Tax Code (“ITC”), the personal income tax attributable to professional income earned and taxed abroad is reduced by half. This matters in practice only for a short list of states with which Belgium has no treaty.[1]
Where a treaty applies, the work begins by identifying the correct distributive article. The employee article, Article 15, is residual: it applies subject to Articles 16 (company directors), 17 (artistes and sportspersons), 18 (pensions), 19 (government service), and 20 (teachers and students). A Belgian-resident managing director with a mandate in a German company falls under Article 16, not Article 15. Misclassifying the income at this first step contaminates everything that follows, because the articles allocate taxing rights on different criteria.
A. Article 15 and the residence-state rule
Article 15(1) provides that employment income is taxable only in the residence state unless the employment is exercised in the other contracting state. To the extent the work is physically performed elsewhere, the work state may tax the remuneration relating to that work. This is the mechanism behind the salary split: the part of the salary attributable to work abroad is removed from the Belgian tax base, and Belgium exempts it with progression rather than taxing it. There is no election. The split follows the facts.
Belgian residence is the pivot. Where an individual is resident in both states under domestic law, the tiebreaker in Article 4 of the OECD Model resolves it. The administrative position is set out in the Belgian tax authority’s circular of 25 May 2005.
The decisive practical point is physical presence. The work state may tax only what is performed on its territory, and the burden of proving that presence lies on the employee. Belgian courts have applied this strictly. The Liège Court of Appeal, on 16 November 2016, refused exemption because no objective evidence located the taxpayer in Luxembourg, not even telephone records, cash withdrawals, or card statements. The Ghent Court of Appeal, on 8 March 2022, held that remuneration paid by a Singapore company, and already taxed there, could be exempt in Belgium only on proof of actual work in Singapore; evidence of travel and a studio rented by the employer was treated as insufficient. A foreign payslip and a plane ticket will not carry the exemption.
The Belgium-Luxembourg treaty softens the presence requirement through a tolerance agreed between the competent authorities. Under the 2015 mutual agreement, an employee whose work is in principle in Luxembourg is still treated as working there even on days spent working in the residence state or third states, provided those days do not exceed a set ceiling. The ceiling was 24 days under the 2015 arrangement and was raised to 34 days with effect from 1 January 2022. This is broader than a pure home-working rule and should not be confused with one.
B. Termination payments, garden leave, and a recent ruling
Termination payments require care because the characterisation drives the allocation. A payment in lieu of notice compensates a notice period that was not worked; it is taxable where the employee worked at the moment of termination, with a split where relevant. A severance payment calculated on length of service or seniority is different: it is allocated pro rata across the countries where the career, or the relevant period, was spent. Garden leave is treated under Article 15 by a fiction: because the article normally needs a place of work, the taxing right is assigned to the state where the employee would have worked had performance continued, which the OECD Commentary on Article 15 (paragraph 2.16) locates in the state of employment before work ceased.
Advance ruling 2025.0487 illustrates the severance case. A Belgian resident worked under a French-law contract with a French employer; the contract provided no notice period, and the termination payment was calculated under French labour law and the applicable collective agreement on the basis of seniority. Because the payment was not a payment in lieu of notice, it was not tied exclusively to the activity at the termination and had to be split between the countries of employment. Applying Article 11 of the then-applicable Belgium-France treaty, which generally allocates employment income to the state where the activity is exercised, and the approach set out in the circular of 25 May 2005, the ruling allocated 25.81% of the payment to Belgium (95 of 368 months) and 74.19% to France (273 of 368 months).
C. The 183-day exception and the meaning of “employer”
Article 15(2) reverses the work-state rule where three conditions are met together.
- The employee must not spend more than 183 days in the work state;
- the remuneration must be paid by or on behalf of an employer who is not a resident of the work state; and
- the remuneration must not be borne by a permanent establishment of the employer in the work state.
All three are required. If they are satisfied, the residence state taxes the whole amount.
The conditions are not uniform across treaties, and the differences are easy to miss. Some treaties count days in “any twelve-month period beginning or ending in the tax year”; others count by calendar year. Some older treaties, including the Belgium-Germany treaty, count the days of activity rather than the days of stay, a point the 2005 circular flags. The Belgium-France treaties carry their own numbering, with the rule in Article 11 of the old treaty and in Article 14 of the new treaty signed on 9 November 2021 (but not yet entered into force).
The word “employer” is not defined in the treaties. Belgium reads it economically rather than formally, i.e. what counts is who gives instructions, who supervises, who bears the risk of the work and its results, and who bears the cost. The economic employer bears the cost even where the remuneration is buried in a global management or service fee. E.g. in an international hiring-out of labour, where a French temp agency sends an engineer to a Brussels company, the Belgian company is treated as the employer, which can take the case out of the residence-state exception.
D. Home working, permanent establishment, and the 2025 OECD Commentary
The growth of home working has put Article 5 (permanent establishment) back into employment analysis, because an employee working from home in the residence state can, in some cases, create a PE for a foreign employer. The competent authorities of Belgium and the Netherlands addressed this in an agreement of 23 November 2023 on the interpretation of Article 5 for home-working employees. Incidental home working does not create a PE. Structural but optional home working in principle does not, subject to a factual test. Structural and mandatory home working can create one and needs analysis. As a safe harbour, a home workplace used for 50% or less of working time over a twelve-month period is in any event not a PE.
This sits within a broader change driven by the OECD’s base erosion and profit shifting work and the Multilateral Instrument. BEPS Action 7 widened the dependent-agent PE definition, so that an employee who habitually plays the principal role leading to the conclusion of contracts can create a PE; Belgium applies the broadened rule from 1 January 2020. The MLI does not amend Belgian treaties automatically: each treaty depends on ratification and reciprocity, and advisers should consult the synthesised texts treaty by treaty rather than assume the change has taken effect.
The 2025 update to the OECD Commentary on Article 5 adds guidance on cross-border remote work. A home office, or another relevant place such as a holiday or second home, is not a PE where the individual works there less than 50% of total working time over twelve months. Once that threshold is reached, further facts are weighed, and the main additional question is whether there is a commercial reason for the company to have the person work in that jurisdiction. A PE is more likely where the remote work answers a business need than where it reflects personal preference or cost saving.
E. Directors under Article 16
Directors are governed by Article 16, not Article 15, and the distinction has consequences. Income from a company mandate is taxable in the state where the company is resident, and physical presence is not expressly required, unlike Article 15. The defining feature is the capacity of director, not the performance of work. The administrative guidance is the circular of 17 December 2002.
Article 16(2) carves out remuneration for day-to-day management or technical activities, which is allocated under Article 15 principles as if the company were the employer; the 183-day rule normally does not apply here. Where a director also performs day-to-day duties, the remuneration must be split. The circular presumes that the director portion equals the highest fee paid to a director who performs no day-to-day or special role; where the company has no such director, the taxpayer is presumed to receive no director fee at all. The Antwerp Court of Appeal applied exactly this on 14 March 2017: two Belgian residents held executive mandates in a Luxembourg company, there was no director without a day-to-day role to set a benchmark fee, and so the income fell under Article 16(2) and was assessed under the employee article; absent proof of physical work in Luxembourg, the taxing right went to Belgium.
F. Getting the relief right
Identifying the competent state is only the first step. Relief is granted under Article 23 of the treaty, and Belgium grants exemption with progression under Article 155 ITC. In other words, exempt foreign income is left out of the base but still counts toward setting the rate on the remaining income. Exemption does not always mean zero taxes. Many treaties expressly preserve Belgian municipal tax on exempt income, as with the Netherlands and Germany, and the Mexico-Belgium treaty does so in Article 22.
The wording of the elimination article decides what the taxpayer must prove, a point developed in Circular AFZ 4/2010 of 6 April 2010. Where income is “taxable” in the source state under the treaty, no proof of taxation is needed. Where it must be “taxed”, the taxpayer must show subjection to the normal regime there, which can include an exemption, on the principle that exemption is equivalent to taxation (“exemption vaut impôt”), confirmed by the Court of Cassation. Where it must be “effectively taxed”, proof of actual payment is required. The United Arab Emirates is the textbook case: there is no personal income tax for individuals, so the “taxed” condition can never be met, and Belgium taxes UAE-source income, as the Brussels Court of Appeal held on 27 February 2018. For the Netherlands, the Court of Cassation has held, on 25 January 2018 and again on 26 October 2023 and 6 September 2024, that Belgium may not exempt income that was not effectively taxed in the Netherlands.
These distinctions are where tax audits concentrate. The administration scrutinises use of the foreign-income exemption code, much of the case law goes against taxpayers for want of sufficient evidence, and the proof required is double: physical presence and the professional character of the days claimed.
II. The social security question: which country is competent
Social security follows a different logic and must be analysed on its own. The sources rank in order: the EU Regulations, with a protocol under the UK Trade and Cooperation Agreement; bilateral social security treaties; and Belgian national law. Within the EU, Regulation 883/2004 coordinates, it does not harmonise. National systems remain different; the coordination rules only appoint which (member) state is competent, on the basis of territorial elements such as residence, the place or places of work, and the employer’s seat. As a rule, one state’s legislation applies at a time, and the answer always rests on a factual analysis.
The default is the work-state principle. The main exception is posting: a worker sent abroad temporarily stays in the sending state’s system, subject to conditions that include prior subjection of one month, a maximum of 24 months (extendable by agreement), a prohibition on replacing a posted worker with another, substantial activity of the employer in the sending state so that it is not a letterbox, and the continued authority of the sending employer.
When someone works simultaneously in two or more member states, Article 13 applies and the threshold concept is substantial activity in the residence state, meaning at least 25% of working time or remuneration over twelve months. With a single employer, the residence state is competent if there is substantial activity there, and otherwise the employer’s seat state is competent. With two employers, the analysis turns on whether at least one employer sits in the residence state and whether a substantial part of the work is done there. Directors’ mandates add a further layer: the activity (employment or self-employment) is qualified under each state’s social security law, not its labour law, a point traceable to the Court of Justice in de Jaeck (C-340/94, 30 January 1997), and Belgium’s own position on this has shifted since 2018.
Telework for one employer has its own regime. Under the Framework Agreement in force since 1 July 2023, an employee can remain subject to the social security regime of the employer’s seat state when the telework does not exceed a maximum of 49.90% of the total working time. Twenty-four states have signed the agreement, including Belgium’s neighbours, but the United Kingdom is absent, and business trips outside both the seat and the residence state remain a watch point because they can break the “habitual” pattern. The tax consequences are not covered by the agreement, which is precisely why it cannot be relied on as a one-stop answer.
Where the EU Regulations do not (only) apply, bilateral social security treaties may, and they differ in ways that matter: the posting article is often optional, the posting period can run from 24 to 60 months, etc. National law is the residual layer: Article 3 of the Belgian social security Act of 27 June 1969 applies Belgian social security to employees working in Belgium for a Belgian employer or attached to a Belgian operating seat.
A provisional agreement reached on 22 April 2026 among EU states, (not extending to the EEA or Switzerland) would improve coordination and verification, tighten the rules against letterbox companies, move the prior-subjection period from one month to three, add a business-trip exception, and clarify the allocation of social benefits. It still requires formal approval by the Parliament and the Council before it takes effect.
Takeaways for clients
The single most useful discipline is to run the two analyses separately and in order. Decide, treaty by treaty, which state may tax the salary, then decide, regulation by regulation, which social security system applies, and expect the two answers to diverge. A posting that keeps an employee in Belgian social security says nothing about where the salary is taxed.
For tax, three things repay attention before a position is taken. Confirm the distributive article of the double tax treaty first, because a director’s mandate under Article 16 is not an employee’s salary under Article 15. Build the evidence of physical presence and the professional character of foreign workdays at the time, not at audit, because the case law is unforgiving on proof. And read the elimination article in the specific treaty, since whether income must be “taxable”, “taxed”, or “effectively taxed” decides whether Belgium will exempt it at all.
For social security, test the 25% substantial-activity threshold deliberately for anyone working across borders, check whether the telework Framework Agreement is available and whether both relevant states have signed it, and treat business trips and days worked outside the coordinated area as facts that can change the competent state rather than as incidental.
With the home-working PE guidance now settled between Belgium and the Netherlands and reinforced by the 2025 OECD Commentary, employers should also test whether remote working in an employee’s residence state risks creating a permanent establishment, and keep the 50% threshold and the commercial-reason test in view when designing remote-work policies.
Do you have questions about the tax or social security treatment of cross-border employment arrangements? Please feel free to contact the authors, Alexis Ceuterick or Rik Strauven.
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This newsletter does not constitute legal advice or a legal opinion. Please consult with a legal counsel of your choice before taking any action based on the information provided.
[1] such as Somalia, South Sudan, Vanuatu, or Afghanistan.