Tax Consolidation

Partial exemption of wage tax for reemployment of staff put on temporary unemployment

Bart Apers
Tax Consolidation

Following the Covid-19 lockdown, a lot of employees became temporarily unemployed.  Employers that reemploy those employees or hire new ones, are entitled to a 50% exemption of their excess wage tax for the months of June, July and August 2020.


Each employer who made use of the system of temporary unemployment between March 12, 2020 and May 31, 2020 for at least one month for one employee is entitled to the exemption.  This must not even be the same employee.

The total cost of the wage tax for each of the months of June, July and August will be compared to the total cost of the wage tax for the month of May 2020whereby the increase will be exempt for 50%.


Total cost of wage tax for the month of May 2020 = EUR 1.000

Total cost of wage tax  for the month of June 2020 = EUR 1.500

The difference is EUR 500.  

The exemption therefore amounts to EUR 250.

In case the total cost of the wage tax for the month of July 2020 would be EUR 1.800, 50% of the difference with the month of May, being EUR 400,00 will be exempt.

‘Exemption’ means that the normal tax is withheld from the salary but is not paid to the authorities, thus generating a cash benefit for the employer.


Cumulating with other wage tax exemptions is possible.  In this respect we think amongst others of the exemptions for starters, in the catering industry and for night and shift work, for scientific researchers, …  but these must be applied first before the new exemption can apply. Any balance of the exemption can be carried forward to subsequent periods in the same calendar year. The exemption only applies to the wage tax on ordinary salaries and benefits in kind, not including holiday pay, end-of-year bonuses, termination payments, overdue remuneration ...

The total exemption for the three months should not exceed EUR 20 million per employer.

Further conditions

Companies wishing to qualify for the measure should not, in the period from 12 March 2020 until December 31,2020:

  • Distribute dividends in any form

  • Implement capital reductions

  • Buy back own shares

  • Directly hold shares in companies in tax havens or do payments to such companies that exceed EUR 100.000 without legitimate economic or financial needs.  


The measure is certainly to be welcomed, as it will improve the employer’s cash-flow. It is however recommended to permanently monitor any employment cost savings.