Belgian salary tax on benefits granted by foreign affiliated companies

In a previous newsletter, we already mentioned the new position that was taken by the Belgian social security authorities in respect of the liability to Belgian social security contributions of benefits granted by a foreign parent company to employees working in Belgium for a local subsidiary.

Also the tax authorities now formally introduced a new withholding and reporting obligation through payroll for remunerations and benefits received by a Belgian employee from a foreign affiliated company of his Belgian employer. 

 

What is this about?

In an international context, it is very common that employees of a Belgian company receive benefits from the foreign parent or other affiliated company of the Belgian employer.  These benefits are then granted on the basis of a foreign plan.  In this respect stock options or free shares (RSU) immediately come into mind but of course also other benefits are envisaged.

The benefits thus received by the Belgian employee are  undeniably ‘taxable’ benefits.

In the past the Belgian employer was only required to withhold salary tax on these benefits if he actively intervened in the granting of the benefits, which was in practice often not the case.  Consequently, no salary tax was deducted from the benefits and it was up to the employees to declare the benefits in their tax return. The latter however was sometimes ‘forgotten’ by the employees concerned.

 

Remediation

To meet the oblivion of the employees, a legal fiction has now been introduced whereby the Belgian employer is deemed to have granted the benefits (and possibly other remuneration) himself.  Therefore he is required to withhold salary tax.

The new obligation applies for salary paid and benefits granted as from March 1, 2019.  In this context, the term ‘granted’ must be understood as ‘becoming taxable’.  This means that every amount that becomes taxable as from March 1, 2019 must be reported through payroll even if the actual grant took place before that date.  For instance, in case of stock options and RSU granted, every exercise or vesting as from March 1, 2019, also from a prior plan, should be reported.

This means that as from March 1, 2019, all benefits must be reported through payroll on a monthly basis.

The question has arisen whether the reporting obligation in the Belgian payroll should be seen as an ‘involvement’ of the employer, automatically leading to Belgian social security contributions (see our previous newsletter). This does not seem to be the case.

 

What does this mean in practice?

As from March 1, 2019, it is therefore important to include the information regarding remuneration received from and benefits granted by foreign affiliated companies on a monthly basis in the payroll.

So please, make sure that you receive this information in time!  In case the Belgian employer does not fulfil the obligation to withhold salary tax, he will risk penalties and fines.

This also means that the taxable amounts are automatically included on the employees’ salary form 281.10.

Please note that salary paid/benefits granted by foreign group companies for the period from January 1, 2019 until February 28, 2019, will need to be reported on a special salary form before March 1, 2020. The format of this form is yet still to be determined.