Although already on 24 June 2009 a protocol to the existing tax treaty was signed between Belgium and the UK, this protocol only recently entered into force (on 24 December 2012).
For employees, attention needs first of all to be paid to changes to the definition of ‘international traffic’, which has an impact on the allocation of the taxation between both countries for certain professional activities in this sector of business.
In general (applicable to all employees), the protocol also explicitly indicates that the place where professional activities are actually performed (physical presence in the work state) is of importance in order to determine the right of taxation in the work state (this will only take place on salary for duties, performed on the territory of the work state).
Important changes were also made to the article 16, which covers income, earned by directors of companies. In line with the contemporary OECD approach, a distinction is now made between income for specific director activities and income for other activities (such as management or technical duties). Company directors will need to review their situation in order to ensure that taxation actually occurs in the right country.
Another important change relates to the Belgian communal taxes (‘gemeentebelasting’). This will now also be due for employees and directors, who are tax residents of Belgium, and who earn income, which is taxable in the UK. The treaty exemption does not cover the communal taxes, which in such cases will be due in Belgium, resulting in an increase of the overall tax burden for these individuals.
The new rules will be applicable (for Belgium) on income, which is earned from 1 January 2013 on.