The Act of 11 February 2019 (with regard to tax, tax avoidance, financial and other provisions), published in the Belgian State Gazette of 22 March 2019, provides for new obligations for all Belgian employers.
From 1 March 2019, a Belgian employer that is subject to corporate income tax and whose employee or director receives (by reason of their professional activities) remuneration and/or benefits in kind from a non-Belgian affiliated company is deemed to have granted such remuneration or benefits itself. This would include stock options granted by a non-Belgian affiliated company to such individuals.
This represents the introduction of a new legal fiction. Therefore, the Belgian employer will have to:
- mention this remuneration and/or benefits in specific Belgian tax forms that the employer provides to its employee; and
- withhold the wage taxes on all the remuneration and benefits granted by the affiliated foreign company to its employees (being taxable in Belgium), even if the Belgian employer is not involved in the grant.
All benefits granted in 2019 will have to be reported on the 2019 specific tax forms (tax forms known under n° 281.10 and n° 281.20), which must be submitted to the Belgian tax authorities by 1 March 2020 (for 2019 income). This obligation already existed for stock options granted by an affiliated foreign company taxable on grant (but was rarely applied, as no withholding tax obligations were linked to that obligation, until now) and will now be expanded to all benefits and remuneration. Withholding taxes for employees are to be reported on a monthly basis and to be paid on a monthly basis (at the latest before the 15th of the month following the payment of the revenue).
Given that the new Law entered into force on 1 March 2019, there is no withholding obligation for any foreign remuneration granted in January and February 2019. Such benefits will only need to be reported on the 2019 specific tax forms (tax form known under n° 281.10 and n° 281.20), which will need to be submitted to the Belgian tax authorities in 2020.
In principle, all benefits mentioned on the specific tax forms (281.10/281.20) need to be taken into account by the relevant employees or directors when preparing and filing their Belgian resident or non-resident income tax returns.
This new legal fiction may create new issues both for the employer and the employees, as the Belgian company is not always aware of the granting of such remuneration or benefit to its employees by a foreign affiliated company. Furthermore, this new fiction may create complex tax pre-financing and reimbursement issues.