Taxing Work Taxing Workers?
Kitty Miv, Editor
07 September, 2020
Having directed our attention to both corporate and indirect tax matters in recent weeks, in this column, we will be looking mainly at tax measures affecting workers and of course, their employers.
We start with the recent announcement from the authorities in Luxembourg and Belgium that they will extend the duration of an agreement that clarifies the tax rules for cross-border workers affected by COVID-19 restrictions.
The agreement concerns cross-border workers working from home due to the restrictions on movement imposed to contain the spread of COVID-19. The agreement was signed on May 19, 2020, and was originally due to lapse on June 30, 2020. It was then extended to cover the period to August 31, 2020.
Luxembourg and Belgium have since, it was revealed, agreed to extend the agreement to December 31, 2020.
The agreement means that, for the purposes of Article 15, paragraph 1, of the Belgium-Luxembourg double tax treaty, remunerated days spent working from home as a direct result of the health crisis, which would otherwise have been spent at a place of work in the other jurisdiction, will be considered to have been exercised in that other state.
Turning now to commuting rather than telecommuting, Finland has announced the introduction of changes to the taxation of employee benefits, with the aim of reducing the impact on the environment of employees commuting.
The Ministry of Finance is holding a consultation (ending on September 9) on the proposals, which were announced in the Budget, and include a temporary tax subsidy to reduce the taxable value of zero-emission electric company cars by EUR170 per month, and an increase in the tax exemption for an employer-subsidized business travel ticket, to up to EUR3,400 a year. Additionally, no tax would be levied on company bicycle benefits up to a total amount of EUR750 per year; currently, a bicycle benefit received from an employer is treated as fully taxable earned income.
In the United States, meanwhile, the American Institute of CPAs and the Council on State Taxation have urged Congress to pass legislation to simplify state tax rules for remote and mobile workers.
In a joint letter to congressional leaders, dated August 27, 2020, AICPA and COST said lawmakers should focus on the Remote and Mobile Worker Relief Act of 2020, and a particular section of the American Workers, Families and Employers Assistance Act, in any final COVID-19 relief package.
Under current law, non-resident employees who visit a state for as little as 24 hours to do work can be subject to certain state income tax laws. Businesses must also comply with states' varying withholding requirements with regards to employees who travel out of state for work purposes.
However, under the Remote and Mobile Worker Relief Act 2020, introduced in the Senate on June 18, 2020, no part of the wages or other remuneration earned by an employee who performs employment duties in more than one taxing jurisdiction would be subject to income tax in any taxing jurisdiction other than the that of the employee's residence; and the taxing jurisdiction within which the employee is present and performing employment duties for more than 30 days during the calendar year in which the wages or other remuneration is earned.
Section 403 of the American Workers, Families and Employers Assistance Act, introduced on July 27, 2020, should also be included in any new COVID-19 economic support package, AICPA and COST have argued. This section would create uniform procedures for assessing state and local income taxes on remote and mobile workers affected by government shutdown orders due to the COVID-19 pandemic. Under the provision, through December 31, 2024, employees who perform employment duties in multiple states would be subject to income tax only in their state of residence and any states in which they are present and performing employment duties for more than a limited time during the calendar year.
Both bills are in the first stages of the legislative process, having been read twice and referred to the Senate Committee on Finance.
Finally, in France, the Ministry of Finance confirmed on August 31, 2020, that several tax agreements applying to cross-border workers during the COVID-19 crisis have been extended.
According to the Ministry, the special tax agreements with Belgium, Germany, Luxembourg, and Switzerland, which clarify the tax situation of cross-border workers unable to travel to their normal place of work, have been extended until December 31, 2020.
In summary, the agreements provide that remunerated days spent working from home as a direct result of the health crisis, which would otherwise have been spent at a place of work in the other jurisdiction, will be considered to have been exercised in that other state.
Until next week!
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