Context

As mentioned in our PTX headlines of 16 April 2003 (*), Belgium and Germany signed on 5 November 2002 an amendment to their Tax Treaty of 11 April 1967. The purpose of the amendment is to abolish the frontier worker system.

A frontier worker residing in Belgium and working in Germany will no longer be taxed in Belgium but in Germany. Germany will pay financial compensation to Belgium for a 6 years period.

News

The amendment (Act of 18 November 2003) has been published today in the Official Gazette (**). The abolition of the frontier worker regime will therefore be applicable as from 1 January 2004.

Appreciation

The frontier worker residing in Belgium and working in Germany should be aware that, in 2004 or 2005 he will have to pay the Belgian income tax liability relating to his income of 2003 to the Belgian State, in a year when the taxpayer has already been subjected to German withholding taxes.

In addition, the frontier worker should be aware that, although he will be taxable in Germany, he will still be liable to pay Belgian communal taxes on his income. On the other hand the income taxes payable in Germany on the German source employment income will be decreased by 8 per cent to compensate for the fact that Belgian communal taxes are payable.

(*) http://news.hrservices.be?200304161750
(**) http://news.hrservices.be?lk200312111

Press Release:
FR: http://news.hrservices.be?lk200312112
NL: http://news.hrservices.be?lk200312113