The double tax treaty signed on September 17th 1970 between the Grand-Duchy of Luxembourg and the Kingdom of Belgium (the "DTT") provides in its article 15 that employment income derived by a resident of a contracting State in respect of an employment exercised in the other contracting State is in principle taxable in such other contracting State. However, in case the link between the employee and its State of employment is weak, the exclusive taxing right falls back to the State of residence. Such weak link is deemed to exist, in case three criteria are cumulatively fulfilled:
- The employee is present in the State of employment for less than 183 days in an aggregate 12-month period commencing or ending in the fiscal year concerned;
- The remuneration is not paid by or on behalf of an employer who is established in the State of employment; and
- The remuneration is not borne by a permanent establishment which the employer has in the State of employment.
Further to the so-called "Gäichel VIII" agreement, the Luxembourg and Belgian governments agreed to consider a 24-days tolerance when applying the provisions of article 15 of the DTT, with retroactive effect as from January 1st 2015 onwards.
Where, prior to January 1st 2015, a Belgian resident employed by a Luxembourg company was taxable in Luxembourg only for the days worked physically in Luxembourg and in Belgium for any other days worked abroad, such employee will now remain taxable in Luxembourg on his or her entire employment income, provided he or she works outside Luxembourg for a maximum of 24 days in the relevant calendar year. In case the employee works abroad for 25 days or more during a calendar year, his or her remuneration related to those working days will become taxable in Belgium.