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Working in France as a director or employee: new treaty, new rules

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France and Belgium finally agreed on the provisions of a new double taxation treaty (DTC) late last year after lengthy negotiations. This is scheduled to enter into force on January 1, 2023 at the earliest. At first glance, this does not seem to be something that would worry an entrepreneur. However, given that a number of clauses in the new treaty will bring fundamental changes to the tax environment, it may be advisable to already analyze the future impact of this and act proactively to limit the tax consequences. 

The provisions of the new DTC will primarily impact (A) employees/business owners operating in France, (B) investors in French equities and (C) owners of French real estate. In this article, we will take a closer look at the first part. 



Current treaty rules 

If you work in a country other than your country of residence, the question arises as to which country will tax your wages: the state of work or the state of residence? To prevent both countries from levying taxes, many Member States have concluded double taxation treaties with each other. This treaty then determines whether it is the state of employment or the state of residence that is competent to levy tax. 

As a general rule, a DTC provides that professional income is taxable in the country where the professional activity is physically carried out (the work state). But there is an important exception to this general rule: the so-called "183-day rule". This exception ensures that it is still the state of residence that may tax the professional income and not the state of employment.   

In the current DTC between Belgium and France the same logic is applied, with the difference that the 183-rule has a somewhat atypical interpretation compared to other double tax treaties that Belgium has concluded. Today, as a Belgian working in France, you will be taxed on your salary in Belgium and not in France if the following conditions are cumulatively fulfilled:   

  1. You have not worked in France for more than 183 days during the calendar year 
  2. Your professional income is paid by an employer located in Belgium 
  3. Your employer does not have a permanent establishment in France 


New treaty rules 

The new treaty brings the definition of taxability of employee professional income more in line with generally recognized principles and rewrites the 183 rule.  

The generally applicable principle remains: if you work in a country other than your country of residence, it will be the state of employment that will tax your professional income. This general principle is set aside and will make the State of residence the competent State to levy taxes when the following conditions are cumulatively met:  

  1. You do not work more than 183 days in France and this during a period of 12 months  
  2. Your professional income is not paid by an employer established in France </span
  3. Your employer does not have a permanent establishment in France 


Now where is the difference? 

Suppose you live in Belgium and you work for a German employer 120 days in Belgium and 100 days in France. Your employer has no permanent establishment in France.

Under the current treaty, your pay will be taxed partly in Belgium (i.e. the pay relating to services provided in Belgium) and partly in France (pay relating to services provided in France). You do meet condition 1 (less than 183 calendar days) and condition 3 (no permanent establishment in France) but because your employer is not established in Belgium, Belgium will not have full taxing power. 

Under the new treaty, on the other hand, your wages will betotally taxed in Belgium: both condition 1, 2 and 3 are in fact met.



For directors, there may also be a significant change with respect to the taxation of directors' fees to the extent that a director is also physically present in France for the exercise of his professional activity. 

Under the current treaty, directors' remuneration is always taxable in the country where the company is based, regardless of where the activities actually take place. The new treaty also includes this rule but has added an important exception. 

If the remuneration is obtained for the performance of services of daily work of a managerial or technical, commercial or financial nature, then the analysis of the taxing power should be viewed according to the rules of employees (as discussed above). This therefore means that certain directors may have to have part of their remuneration taxed in France. <span


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