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StephenHurner.com

StephenHurner.com

Fiscalité, non-résidents, expatriés, Commission,tax, taxes.

Open thoughts on the impact of the undefined employment's concept in the France / Belgium tax treaty.

Through examples.

I. Let’s assume we have a (a) French tax resident with family in France having an employer / employee contract and relation with a French company who is transferred (see note) to a (b) Belgium subsidiary to work in Belgium (c) as a sales' manager for the Belgian company heading a team of, say, five local Belgian employees (d) three days per week in a picture where (e) the executive returns regularly in France, on a yearly base (f) staying less than 183 days in Belgium and (g) his remuneration related to the work carried out on Belgian soil is billed to the Belgian company.

Who has the right to tax the executive’s « Belgian source earned income » ?
In the context of facts (a),(b),(c),(d),(e),(f) & (g) the French executive is only taxable in Belgium (at least «directly ») as :
1)    He works physically in Belgium.
2)    He has, following the Belgian common law, an employer in Belgium (see please point 4.2.1 & 3.2 of the 25.05.2005 Belgian Circular).

3)    Assuming the French tax people consider the executive has only a French employer which would be opposite to the 21 November 2017 OECD Model Tax Convention on Income and on Capital – see points 3, 8.1 up to and inclusive 8.27 and 13, the 25.05.2005 Belgian Circular and from my point of view section 13,1,b,iii) of the 883/2004 European Directive) the fact that the remuneration paid by the French « employer » is billed to the Belgian company makes that the executive’s Belgian source earned income is (also) taxable in Belgium as the section 11.2,a),2° exception of the Belgium / France doesn’t apply so that we return to the section 11.1 tax treaty general rule.

II. Let’s assume we have the same picture as under I. above with the main exception that (g) the remuneration related to the work carried out on Belgian soil is not billed to the Belgian company.
In the context of facts (a),(b),(c),(d),(e),(f) & (g) the French executive is definitely only taxable in Belgium (at least « directly ») as :
1)    He works physically in Belgium.
2)    He has, following the Belgian common law an employer in Belgium (see please point 4.2.1 & 3.2 of the 25.05.2005 Belgian Circular) and from my point of view section 13 of the 883/2004 European Directive. As a result the exception implemented by section 11,2,a),2° of the tax treaty does not apply as there is no employer in France for the work carried out on Belgium soil.

3)    Assuming the French tax people consider the executive has only a French employer which would be opposite to the 2007 November, 21st OECD Model Tax Convention on Income and on capital – see points 3, 8.1 up to and inclusive 8.27 and 13, the 25.05.2005 Belgian Circular and, from my point of view, section 13,1,b,iii) of the 883/2004 European Directive we would face a problem as the executive’s Belgian source earned income will be taxable in Belgium by the Belgian tax people as there is a Belgium employer (consequently section 11.1 general rule of the tax treaty applies and not section 11.2,a),2° exception) while it will also be taxable in France by the French tax people as, for them, will play the section 11.2,a),2° exception.

III. Let’s assume we have the same picture as under II. above with the main exceptions that (g) the remuneration related to the work carried out on Belgian soil is or not billed to the Belgian company and that (f) the executive stays more than 183 days in Belgium (be careful they are counted a specific way !).
In the context of facts (a),(b),(c),(d),(e),(f) & (g) the French executive is definitely only taxable in Belgium on his Belgian source earned income (at least « directly ») as :
1)    He works physically in Belgium.
2)    He is present in Belgium 183 days or more. This mere fact avoid any further considerations.

IV. Let’s assume we have a (a) Belgian tax resident with family in Belgium having an employer/employee contract and relation with a Belgian company who is transferred to a (b) French sister subsidiary to work in France (c) as a sales' manager for the French company heading a team of, say, five local French employees (d) three days per week in a picture where (e) the executive returns regularly in Belgium, on a yearly base (f) staying less than 183 days in France and (g) his remuneration related to the work carried out on French soil is billed by the Belgian company to to the French company.

Who has the right to tax the executive’s « French source earned income » ?
In the context of facts (a),(b),(c),(d),(e),(f) & (g) the Belgian executive should only be taxable in France on his French source earned income (at least « directly ») as :
1)    He works physically in France.
2)    The French tax people should consider he has an employer in France (which would be in line with the 21 November 2017 OECD Model Tax Convention on income and on capital – see points 3, 8.1 up to and inclusive 8.27 and 13 and, from my point of view, section 13,1,b,iii) of the 883/2004 European Directive).

3)    Assuming the French tax people do not consider the executive has a French employer the fact that the remuneration paid by the Belgian « employer » for the work carried out in France is billed to the French company makes the executive’s French source earned income taxable in France as section 11,2,a),2° of the France/Belgium tax treaty exception doesn’t apply. So we return to the section 11.1 general rule.

V. Let’s assume we have the same picture as under IV. above with the main exception that (g) the remuneration related to the work carried out on French soil is not billed to the French company.
In the context of facts (a),(b),(c),(d),(e),(f) & (g) the Belgian executive should only be taxable in France (at least « directly ») as :
1)    He works physically in France.
2)    He should have, following the November 2017 Model Convention on income and on capital an employer in France.

3)    Assuming the French tax people consider the executive has not a French employer (which would be opposite to the 21 November 2017 OECD Model Tax Convention on income and on capital – see points 3, 8.1 up to and inclusive 8.27 and 13 - we would face a problem as the executive’s French source income will not be taxable in Belgium by the Belgian tax people as there is a French employer (consequently section 11.1 general rule of the tax treaty applies and not the section 11.2,a),2° exception) while it will not be taxable in France by the French tax people as, for them, will play the section 11.2,a),2° exception.

VI. Let’s assume we have the same picture as under V. above with the main exceptions that (g) the remuneration related to the work carried out on French soil is or not billed to the French company and that (f) the executive stays more than 183 days in France (be careful they are counted a specific way !).
In the context of facts (a),(b),(c),(d),(e),(f) & (g) the Belgian executive is definitely only taxable in France on his French source earned income (at least « directly ») as :
1)    He works physically in France
2)    He is present in France 183 or more days.This mere fact avoid any further analyses.

Stephen G Hürner


Note
The 883/2004 European Directive in Social Security Matter makes a clear cut distinction between a secondment (Section 12 of the Directive) and working simultaneously for two companies in two member states (Section 13 of the Directive). On the website of the CLEISS (France - Centre des liaisons européennes et internationales de sécurité sociale) it's mentioned, however only in case of a secondment, that an organic link must stay with the French company who seconds. It's said, if my reading is correct, there is only one hiring contract, a French one.

Is the requirement of an organic link and some other constraints (see point 1 of the June 12, 2009 A2 Decision of the Administrative Commission for the Coordination of the Social Security Systems) compatible with the situation where an executive residing in France working for a French company which seconds him to a Belgian company for which he will work (so at 100% of his time) as a sales' director to the exclusive direct benefit and risk of this latter company under the daily supervision of the local managing director, this latter one having the possibility to ask the French company to end the mission of the executive, and giving instructions to five local employees ? Our answer is yes it's definitely compatible as we face a split of the initial labour relation between the executive and the French company with the Belgian company. However am not quite sure the French tax administration will agree.

If this French executive works simultaneously for a French company and a Belgium one we are no longer in the context of a secondment so the requirement of the upholding of an organic link with the seconding company is void (by the way there is no secondment any more). My understanding of section 13,1,b,iii) of the European Directive 883/2004 in the contemplated case is that the French employee must have a local hiring contract with the Belgium company.

 

 

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