Telework abroad: watch out for the social and tax consequences !

Over the years, telework has become an increasingly popular way of working for both employees and employers. The current COVID-19 crisis has confirmed and strengthened this trend.

Allowing employees to telework from abroad, on a regular basis, has also become a new practice. It is important for both employers and employees to be aware of the social and tax consequences resulting from this new trend.

Teleworking from abroad on a regular basis may have consequences on the law applicable to the employment contract concluded with the employee. According to the applicable rules, the parties to an employment contract may freely choose the law applicable to the contract. However, the choice made by the parties may not deprive the employee of the protection afforded to him/her by mandatory provisions under the law that would be applicable in absence of choice. As a rule, employees teleworking from abroad on a regular basis will benefit from the mandatory provisions under the law of the country in which they telework if it becomes the place from which they habitually carry out their tasks. This is true even if the employment contract provides for the application of another law. Specific rules apply in the situation where there is a simultaneous activity carried out, on a regular basis, in two or more countries (for instance, teleworking from home performed in one country and activity performed at the business place of the employer located in another country).

The country where the work is habitually carried out shall not be deemed to have changed if an employee is temporarily employed in another country. As a consequence, teleworking from abroad in the exceptional context of the COVID-19 crisis should not have any consequence on the law applicable to the employment contract since it is only temporary. 

Teleworking from abroad may also have consequences on the social security scheme that is applicable to the employees. Regulation 883/2004 on the coordination of social security systems – applicable to the citizens of a Member State of the European Union – foresees that only the legislation of a single Member State of the European Union can apply at a time, i.e. the law of the country where the work is performed. This Regulation contains rules on how to determine the legislation applicable to employees who work in more than one Member State. The Belgian National Social Security Office has decided that the increased use of telework directly and exclusively due to the COVID-19 crisis will not be taken into account for determining the applicable social security legislation. This “neutralized” period has been recently extended until 30th of June 2022, subject to modification according to the future COVID-19 measures.

Finally, teleworking from abroad may have consequences on the applicable tax regime both for the employer and the employees. However, Belgian authorities have concluded bilateral agreements in force until 31th of March 2022 with some neighboring countries regarding tax consequences of teleworking taking place in those countries in the framework of the COVID-19 crisis.

We advise employers to carefully examine the potential impact that the teleworking might have on employment, income tax and social security matters, especially in case this kind of situation would become permanent in the future. The temporary or permanent character of teleworking must be appreciated on a case by case basis.