The tax treaty between the Netherlands and Germany will be amended to allow frontier workers to work at home for up to 34 days a year without having to pay tax on their income in both countries. It is a first step to improve opportunities for frontier workers to work from home.
Tax treaty
A tax treaty prevents frontier workers from paying tax on the same income in both the country of residence and the country where the employer is located. Usually, for employees, it is arranged that income tax is levied in the country where the work was physically performed. If frontier workers work from a country other than where the employer is based, then taxing rights may also be given to that other country. For example, tax must then be paid in both the country of residence for the part worked from home and the country of the employer for the remaining part of the income.
Home working scheme
The amendment to the tax treaty with Germany allows frontier workers to work from home for up to 34 days a year, with the right of taxation remaining entirely with the country where the employer is based. This applies to both employees within business and government.
The tax treaty amendment has several advantages for frontier workers. The frontier worker's income will be taxed only in the country of the employer, reducing uncertainty about the final net income. In addition, additional administrative burden can also be avoided, for example for doing complex calculations for tax returns in both countries.
It has been agreed with Germany that a homeworking day exists if more than 30 minutes per day is worked from home. The tax treaty amendment is a first step to improve the situation around homeworking for frontier workers.
Letter of intent
Not all frontier workers benefit from the new homeworking scheme. For example, people who have an employer in Germany and structurally work from home 1-2 days a week. The Netherlands also wants to find a solution for them, which is why a declaration of intent has been signed with Germany in which it has been agreed to continue discussing a homeworking scheme with more than 34 working days per calendar year in due course. In doing so, where possible, both countries also want to offer more certainty to employers about the tax consequences of cross-border workers working from home.
Note: Before the tax treaty amendment enters into force, the treaty will first be submitted to the Council of State, after which it will be sent to parliament for approval. The German parliament must also agree to the amendment.
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