Tax status of French frontier workers employed in Belgium: new circular letter

The double taxation agreement between Belgium and France foresees a special tax regime for salaries of residents of the French frontier zone who are employed in the Belgian frontier zone.

While the general rule foresees taxation of salaries in the state where the activities are carried out, employees that enjoy this special regime remain taxable in their state of residence, namely France, even though they are employed in Belgium.

This regime was changed by an annex of 12 December 2008 to the double taxation agreement and this annex entered into force on 17 December 2009. The Belgian tax administration has published various circular letters dealing with the regime as its practical concrete application has raised many questions since its entry into force.

A new circular letter dated 21 March 2011 provides clarification on administrative practice for the year 2010, namely concerning the days to be taken into account to calculate the allowed quota of 30 days of working outside the frontier zone (homework, activity paid in France or in third countries, restrictive interpretation of exceptions …).

This circular letter underlines the importance of the year 2011, because as from 1 January 2012 only those employees who lawfully have the status of frontier worker on 31 December 2011 (and who fulfill therefore at that moment all the required conditions, principally concerning the leaving of the zone) will continue to enjoy this regime.

Finally, the circular letter gives interesting clarification concerning the documents that an employee has to deliver to his/her employer if he/she wishes that the employer does not withhold tax on wages.