The coronavirus pandemic has had a major impact on employers and employees. Governments all over the world have taken some drastic measures, such as (temporarily) closing schools and businesses. As a result, a lot of employees are teleworking (working from home). In this article, BDO sets out the most important (international) fiscal measures relating to teleworking due to the coronavirus pandemic.
National fiscal measures in the Netherlands
The following fiscal measures have been taken in the Netherlands:
Reimbursements and allowances
Based on Dutch wage tax legislation, employees may receive a tax-free fixed travel allowance based on their travel pattern. Since a lot of employees are currently teleworking, the question has been raised whether an employer can continue the tax-free travel allowance, as the employee’s travel pattern will have changed.
The Dutch government decided to approve that a change in travel pattern caused by the coronavirus pandemic does not affect the payment of tax-free fixed travel allowances. The tax-free fixed travel allowance can still be paid based on the original (pre-corona) travel pattern regardless of the changed travel pattern. The same goes for other fixed monthly allowances.
However, if the fixed allowance depends on a choice of the employee, the approval is only applicable if the choice was made before March 12, 2020. At the moment, this approval by the Dutch government is only valid until December 31, 2020.
Please note that similar measures may apply in case you are provided with means of transportation (e.g. a public transport card, bicycle, company car etc.). If your travel pattern has changed due to the coronavirus pandemic, the assumption will apply that your travel pattern has remained the same as it was in the “pre-corona” era.
The 30%-ruling allowance is exempt from the aforementioned approval. Teleworking should, in principle, have no effect on the validity or applicability of the 30%-ruling decision. However, note that certain conditions (such as the salary threshold) should be met throughout the entire application period of the 30%-ruling. To the extent the employee’s salary remains taxable in the Netherlands, there is no impact on the 30%-ruling, provided that all the conditions are still met.
The 30%-ruling is only applicable if the salary is taxable in the Netherlands. If teleworking leads to a change in the country from which the employee will work (for example, no longer from the Netherlands), and consequently the right to levy taxes shifts from the Netherlands to another country (or vice versa), this may impact the 30%-ruling.
As a result of the measures, many cross-border workers are unable to physically perform their activities in their country of employment and may have to telework. This raises many tax issues, as the measures have an impact on the right to levy tax and social security contributions between countries. The right to levy tax and social security contributions is currently governed by tax treaties and the EU Directive on social security in EU situations and social security treaties in non-EU situations.
The OECD has issued guidance on the tax issues arising with regard to teleworking due to the coronavirus pandemic. The guidance covers (amongst others) concerns related to the creation of a permanent establishment and concerns related to a change in the state where salaries are taxed.
Considering the extra-ordinary nature, teleworking from home would not create a permanent establishment for an enterprise, either because such activity lacks a sufficient degree of permanency / continuity or because the enterprise has no access or control over the home office.
If a state in which the employer is located would lose its taxing right, additional compliance difficulties could arise for employers and employees. The OECD states that these exceptional circumstances call for an exceptional level of coordination between countries to mitigate the compliance and administrative costs for employees and employers associated with involuntary and temporary change of the place where employment is performed. The OECD has called on the individual countries to reach agreements with regards to the impact of the coronavirus pandemic on the right to levy taxes.
At the moment, the Netherlands has only reached agreements with Belgium and Germany. Based on those agreements, days spent teleworking from home by an employee due to the coronavirus measures taken by the Netherlands, Belgium and Germany, may be considered spent in the state frontier workers would normally have carried out their activities if the measures were not taken by the respective governments (pre-corona). This agreement does not apply to work days that would have been spent either as home office-days or in a third State, independent from these measures. The cross-border workers may also choose not to apply the agreement.
Social security position
According to the European Commission, teleworking from home should not lead to a change in the applicable legislation regarding a teleworker’s social security coverage. An issued A1-form will still be valid in that situation. However, in specific situations working from home will lead to a change in the applicable social security legislation.
According to the European Commission, employees may ask their employer to submit a request to the competent social security authority of the state whose social security the employee wishes to continue to be applied. EU Member States may use the mutual agreement procedure in that case. The Dutch social security authority (SVB) already announced that from a Dutch perspective, the measures taken by the Dutch government will not have an impact on the social security position of cross-border workers within the EU.
As for persons normally working outside the EU, the impact of the measures on their social security position is not clear yet.
Make sure you know how you are impacted
Teleworking impacts the tax-free reimbursements, allowances and provisions an employee in the Netherlands may receive, but it can also impact the tax and social security position of a cross-border employee. Therefore, contacting your employer or tax advisor is crucial in order to check whether you are still entitled to a tax-free reimbursement, allowance or provision, or whether your tax and social security position has changed.
If you have questions about how teleworking impacts you or if you would like more information, please do not hesitate to get in touch with BDO. They are happy to assist!