Belgium Introduces New Reporting and Withholding Laws

Employers must comply with new income tax rules relating to remuneration granted to their employees from foreign affiliated companies.

As a strategy to attract and retain new talent, Belgian companies are increasingly offering their employees performance bonuses in the form of stock options and shares. If an employee’s Belgian company is part of a larger international affiliation, it’s common for those stock and share options to be paid by the foreign parent company. Under previous legislation, that form of remuneration, was not subject to withholding and reporting legislation: under the new legislation, however, those rules have changed.

On 22 March 2019, the Belgian State Gazette published the new Law regarding the reporting and withholding of remuneration paid by foreign affiliated parent companies to employees. The Law changes employers’ tax obligations: specifically, it introduces a requirement to withhold tax on that income at source, and report it to the Belgian Tax Authority. 

If you are an employer in Belgium, now is the time to make sure your company and your payroll, are compliant with the new rules.

What are the new withholding rules?

The new legislation retroactively affects all taxable remuneration (paid by foreign affiliates or parent companies) from 1 March 2019. From that date, employers must withhold and tax that category of remuneration via their payroll, and declare it on a monthly basis. The rules apply even if the Belgian company does not allocate the relevant benefits or remuneration itself.

Foreign remuneration paid prior to 1 March 2019 is not affected by the new withholding rules, but foreign taxable benefits will need to be reported for the 2019 tax year.

What are the new reporting rules?

All remuneration received by employees in 2019, including foreign affiliated granted benefits and remuneration, must be reported on the 2019 salary statement by employers - specifically via Form 281. Employees use Form 281 to file their own annual returns to the tax authority.

What about social security on foreign remuneration?

Up to Q3 2018, Belgian law did not define employee’s benefits as ‘salary’ if they were not chargeable to employers in a legal or financial sense - and therefore did not charge social security on them. Since benefits from foreign affiliates effectively ‘bypassed’ employers, they were similarly exempt from social security charges.

From Q3 2018, Belgium’s National Social Security Office (NSSO) has ruled that social security is due on all benefits received by employees, including those granted by foriegn affiliates, regardless of any intervention (or lack of) from their Belgian employer.  While some observers argue that the law is poorly defined, as of March 2019 it remains in effect and employers must ensure compliance.

What are the penalties for non-compliance?

The Belgian Tax Authority will enforce the new withholding and reporting rules in 2019. The penalty for employers not in compliance is 10% of all incorrectly reported remuneration and benefits. That penalty is waived, however, if employers can prove that the remuneration has been included in the employee’s income tax return (and has therefore been taxed).

It’s worth bearing in mind that double taxation agreements may prevent Belgium levying taxes on certain foreign benefits and remuneration.

What should I do now?

Since the new law relates to foreign affiliates or parent companies, employers in Belgium should make sure those entities are aware of the changes, and factor that into their bonus payments. Steps should be taken to ensure internal payroll departments are also up to speed and, if employers use a payroll company, it’s important to make sure they are also aware of remuneration granted to employees by foreign affiliates.

To learn more about Belgian tax and social security laws, browse our dedicated Global Insight Guide to Belgium.