As published on law360.com, Tuesday 26 May, 2020.
Law360 (May 26, 2020, 1:10 PM EDT) -- Germany and France have adapted their bilateral tax treaty to maintain the tax status of workers who would regularly cross the border but are unable to do so because of restrictions in place to stop the spread of COVID-19.
Under an agreement, employees who would normally cross the border but are now working at home to stop the spread of the novel coronavirus will still be considered performing their activities in the country where they normally work. The agreement, dated Monday, is in effect until the end of June.
For affected employees, working days during the effective period count "in the country in which the non-self-employed work would have taken place without the measures," the document said.
The exception doesn't apply to workers who would work from home, or in third countries, independent of the measures enacted to stop the virus' spread. The measures also don't apply to employees who contractually work from home on a regular basis, according to the document.
The text is similar to an agreement worked out between Germany and the Netherlands that was announced in April. Germany's bilateral agreement with Belgium was extended until the end of June, the German finance ministry said Tuesday.
The tax treatment of cross-border commuters is one challenge that tax authorities have faced since countries across the world have thrown up barriers where none had existed, in some cases for decades, as a means to stop the spread of the novel coronavirus, which causes COVID-19, a respiratory ailment.
The virus is also raising issues about whether a company would have a taxable presence, via employees working from a home office, in a country or jurisdiction where it wouldn't normally have it. The Organization for Economic Cooperation and Development recently issued guidance that said the extraordinary measures to combat the pandemic shouldn't create a taxable permanent establishment for an employer.
The French finance ministry didn't immediately respond to a request for comment.