Belgium | Recent employee tax developments
Published on 17th Jan 2019
There have been a number of recent employee tax developments in Belgium, including the taxation of company cars and more on the new rules for Belgian companies when income is granted by a non-Belgian related company.
Reduction of the 2019 benefit in kind for company cars compared with 2018
In Belgium, when an employer makes a company car available to its employees and the car can be used for their private purposes, the employees are taxed on a lump sum benefit in kind (subject to the payroll tax).
Such benefit in kind is determined based on a formula which takes into account the catalogue price of the car, the CO² emissions of the car (based on a CO² emission of reference) and the age of the car. The fiscal computation of the lump sum benefit in kind represents a financial advantage for the employee, as the annual real value of the car made available to them is often much higher than the taxed lump sum benefit in kind.
The CO² emission of reference is reviewed annually depending on the fuel used (diesel, gasoline or LPG). Over the last year, the CO² emission of reference decreased resulting in an increase in the lump sum benefit in kind (due to the mechanism of the computation formula). For 2019, the CO² emission of reference is increasing, which will mean a decrease in the lump sum benefit in kind (lower tax cost) compared with 2018.
The decrease of this lump sum benefit in kind for 2019 also has a positive impact for the employer as the latter is taxed (at corporate tax level, as disallowed expense) on a portion (1/7) of the annual value of such granted benefit in kind.
Tax shift: Belgium reduces its competitive disadvantage compared with other EU countries
Over the last year, the Belgian government has initiated a "tax shift", by shifting taxes on work to other domains (including an increase in taxes on alcoholic beverages and tobacco, fuels, VAT application or an increase on some non-essential goods and services and certain corporate tax changes).
The third and last step of the tax shift entered into force on 1 January 2019. In 2019, the first bracket of tax-exempted professional income is increased, the bracket of income taxed at 40% (instead of 45%) is also increased and social security contributions decrease. These measures will have a positive impact on the final take home amount for workers as they will benefit in 2019 from a higher net income with an unchanged gross salary.
These measures will have a positive impact on Belgian employers and enterprises as their competitive disadvantage compared with other EU countries has been significantly reduced.
New rules for Belgian companies when income is granted by a non-Belgian related company
As explained in our Autumn 2018 Update, the Belgian government decided to strengthen the rules for stock options (and other benefits in kind or remuneration) received by the Belgian workers of a Belgian entity which is part of an international group, where such workers receive the grant from a foreign company in the same group.
For income (stock options) received as of 1 January 2019 by a Belgian worker of a Belgian entity from a foreign company of the same group, the Belgian entity would be obliged to:
- Set up a specific tax form before 1 March 2020 (this specific tax form has not been published yet). In the absence of such tax form, a fine equal to 10% of the received income would have to be paid by the Belgian entity (the employer). However, an exception to escape this fine has been provided.
- To report and to pay the withholding (payroll) tax. The Belgian entity of the group will have to report and pay this payroll tax within 15 days of the month following the grant of stock options or a benefit in kind.
These new rules (which introduces a new legal fiction in the Belgian law) have been incorporated in a draft bill of 18 December 2018 which has not been voted on yet, as the Belgian Government has only been dealing with routine matters since its collapse in December 2018 and will continue to do so until the election of May 2019. Hence, the date of vote and entry into force of the measures contained in this draft bill remain unclear for the moment. Some specific and transitional measures applicable to income received in 2018 would not be applicable as the draft bill was not been voted on before 31 December 2018.