Tax Treaty with Germany for Cross-Border Workers

April 2025

The Netherlands and Germany have reached an agreement to amend their bilateral tax treaty, allowing cross-border workers to work from home for up to 34 days per year without becoming subject to income tax in both countries. This marks an important first step toward enhancing remote work flexibility for employees who live in one country and work in the other.

Focus on Taxation – Not Social Security

It is important to note that this agreement specifically concerns income taxation. It does not affect social security coordination, which is governed separately under European Union Regulation (EC) No. 883/2004. This regulation determines in which country a person is socially insured when living in one EU country and working in one or more others. Under these EU rules, social security obligations are coordinated to ensure individuals are covered in one country at a time and avoid double contributions.

Simplifying Taxation for Cross-Border Workers

Bilateral tax treaties are in place to prevent double taxation on income for individuals who live in one country and work in another. Under the current tax treaty between the Netherlands and Germany, income is generally taxed in the country where the work is physically carried out. As a result, employees who occasionally work from home in a different country than their employer may risk being taxed in both countries.

With the amended treaty, cross-border workers may now work from home for up to 34 days per calendar year without altering the taxing rights. During these days, income will remain taxable solely in the employer’s country, regardless of where the work is performed.

This new provision applies to employees in both the private and public sectors.

Key Benefits

This amendment introduces several benefits for cross-border employees and their employers:

• Clarity and certainty: Income will be taxed in one country, reducing uncertainty around net income.
• Administrative ease: The need for dual tax returns and complex calculations is minimized.
• Cost savings: Potentially lowers the need for professional tax advice or support.

A home working day is defined as any day on which more than 30 minutes of work is performed from home.

Limitations and Next Steps

While the amendment is a step forward, it does not yet accommodate all cross-border work situations. For example, employees with a standard hybrid schedule -such as working from home one or two days a week- are likely to exceed the 34-day threshold. To address this, the Netherlands and Germany have signed a declaration of intent to continue discussions aimed at expanding the scope of the remote work allowance and providing more certainty to employers regarding tax implications.

Before the amended treaty can enter into force, it must be submitted to the Council of State in the Netherlands and approved by the Dutch Parliament. Ratification by the German Bundestag is also required.

This development reflects a broader effort to modernize international tax agreements in response to the evolving nature of work and to support cross-border employment in the hybrid era.