New Enclosure to the French-Belgian Double Tax Treaty
We refer to our previous HRS Headlines nrs 164 and 196 regarding the French-Belgian frontier workers regulation.
As announced, Belgium and France have been negotiating a new enclosure to the French-Belgian double tax treaty on the changes to be made to the French-Belgian frontier workers regulation. On 12 December 2008, the final version of the new enclosure to the French-Belgian Double Tax Treaty was signed by both tax administrations. The text of this enclosure has finally been approved by both the Belgian (26 March 2009) and the French Parliament (24 November 2009) and was published in the French "Journal Officiel" on 3 December 2009. The text was published in the Belgian Gazette on 8 January 2010.
The enclosure provides for the following:
- a (retroactive) abolishment of the Belgian-French frontier workers regulation for Belgian residents working in France as from 1 January 2007
- municipal taxes (gemeentebelastingen/taxe communale) will become due on French exempted earned income as from income year 2008 (not only for frontier workers!)
- a "phase-out" of the Belgian-French frontier workers regulation for French residents working in Belgium is provided for as from 1 January 2012
- a "45-day rule" becomes applicable for income years 2003-2008 (and will be used to settle all pending litigation)
- a "30-day rule" becomes applicable as from income year 2009
- as from calendar year 2012, no new (French) frontier workers will be allowed into the existing system (as from that date, the work state principle will apply unless the 183-day rule provides for the contrary)
- Belgian residents who move to the French frontier area after 1 January 2009 (to work in the Belgian frontier area) can no longer be subject to the frontier workers system in order to avoid any abuse.
The Belgian tax authorities have published a Practice Note on 17 December 2009 and an addendum on 8 January 2010 containing mainly practical examples (31!) of how to implement this modified French-Belgian frontier workers regulation.
The enclosure provides for an exceptional deadline of 6 months, starting at the publication date of the new enclosure in the Belgian Gazette (8 January 2010) to regularise the tax status of the income years 2003-2007 already expired. An exceptional 1-year deadline (as from 8 January 2010) is also provided to enable the Belgian tax authorities to assess the Belgian municipal taxes over French (exempted) income over income year 2008, whereas this possibility normally expires on 30 June 2010.
From a practical point of view, the Practice Note explains in detail:
- how the 30/45 days are to be calculated in practice (it is to be noted that the way the number of days is to be calculated differs between the period 2003-2008 and 2009 and subsequent years)
- how the notion "exclusive permanent abode" is to be applied (only residents having their exclusive permanent abode in France can still qualify for the French-Belgian frontier workers regulation)
- the reporting obligations of employers and employees who make use of the frontier workers regulation with the related penalties in case of non-compliance with these obligations.
