elgium will soon require detailed employer reporting and tax withholding for share plans.
Delayed legislation now in force
In our October newsletter (here), we discussed draft tax legislation which was expected to be in force before the end of 2018. Following the collapse of the Belgian government in December, the legislation was delayed (see our newsletter here) and was finally adopted by the Belgian parliament on 1 February.
New withholding and reporting obligations
Belgian employers must now report and withhold income tax on all employee share plan income. This is an important change. The old position was that a Belgian employer was not required to report or withhold income tax if the employer was not directly involved in the payment or the grant of the benefit (i.e. in the absence of a recharge).
The new rules come into force on 1 March 2019. Any share plan income paid from that date will be subject to income tax withholding and monthly reporting. Share plan income received by employees between 1 January and 28 February 2019 will not be subject to withholding but should be reported in the employer annual salary statement which must be filed by 1 March 2020. A provision in the earlier draft of the legislation, which required reporting of equity income paid in 2018, was dropped from the final version of the legislation.
The delay in the introduction of withholding for income tax does not affect the change in policy announced by the Belgian National Social Security Office (NSSO) last year (discussed in the newsletters referred to above). The NSSO’s view is that Belgian social security contributions are now due (and should be withheld) on any benefit that is granted by a foreign entity to a Belgian employee in either of the following situations: (i) where the cost of the benefit is charged back to the Belgian employer, or (ii) if the benefit can be linked to the Belgian employee’s employment.
Companies with employees in Belgium should ensure that their local affiliates comply with the income tax withholding and reporting obligations from 1 March 2019.
As discussed in earlier newsletters, the NSSO’s position on social security (being a change in policy rather than legislation) could be challenged in court. However companies should assume that social security currently applies to (and should be withheld on) all share plan benefits.
Employers should also consider how they communicate the tax reporting and withholding changes, and the application of social security, with employees.
In the meantime, If you have any questions regarding this newsletter or any other topics, or we can provide any further information about how these changes impact your share plans, please do contact us – we would be delighted to help!