Employer Payroll Requirements in Belgium

Does an employer relocating employees or sending employees on secondment to Belgium have an obligation to register as an employer and pay payroll taxes in Belgium?  If so, what are the filing requirements?

There are 2 separate aspects for which registration or payment in Belgium might be required: social security and withholding tax on salaries.

Social Security

When a foreign employee is posted to Belgium for a period of up to 5 years, the social security regime of the country of the employer can remain applicable, on the condition that the proper preliminary requests relative to posting of employees have been made. In that case no registration is required in Belgium for the foreign employer.

However, if there is so-called “exercise of authority“ in Belgium over the seconded employee (by a Belgian permanent establishment or fixed base of the foreign employer, by a client of the foreign employer for which the foreign employee is working…) then Belgian social security contributions over the salaries paid to the employee become due. In that case, the employer must register and pay for social security over the employee’s salary in Belgium.

The same applies after 5 years of secondment to Belgium, or in case a Belgian permanent establishment of the Irish employer directly hires the Irish employee.

The registration as an employer for social security is most often completed through one of many specialized payroll service providers in Belgium, which is highly advisable given the complexity of the procedures. However, registration can also be completed directly with the federal government.

Withholding tax

To determine whether payment of withholding tax by the foreign employer is due, the double taxation treaty between Belgium and the foreign employer’s country must be considered.

In general terms, any of the following situations make the payment of withholding tax in Belgium (by the foreign employer on the foreign employee’s salaries) mandatory:

• The employee working in Belgium is or becomes a resident of Belgium;
• The employee’s salary is borne by a Belgian permanent establishment or fixed base of the foreign employer;
• The employee works in Belgium for more than 183 days in one calendar year (as is the case for non-resident Irish employees working in Belgium) or any 12 month period.

The registration for paying withholding tax is most often completed through the same specialized payroll service providers in Belgium. A specific company number must be requested, either for the foreign employer or for the fixed base or permanent establishment.

What are the income tax rates in Belgium?

For 2016, personal income tax brackets are from 25% to 50% on annual taxable income as follows:

Annual taxable income                Rate

€ 0-10.860                                       25%

€10.860-12.470                              30%

€12.470-20.780                              40%

€20.780-38.080                             45%

€38.080                                         50%

Various minor exemptions and optimizations can make the effective tax rate somewhat lower.

How would travel and subsistence expenses from home country be treated if employee is required to be in Belgium?

Business related travel and subsistence expenses made by the employee are generally fully reimbursable by the employer. There is no tax impact as long as the expenses are not related to private life.

Are there any exemptions for workers coming from abroad? 

A specific expat regime exists in Belgium for executive positions, specialist employees or researchers coming from abroad.

The employees have to be foreign nationals (preferably without any ties to Belgium), temporarily assigned to Belgium by a foreign company, or directly hired from abroad by a Belgian permanent establishment or fixed base of the foreign company, have specialist knowledge and sufficiently high pay (preferably significantly above €40.000 gross per year).

The employer has to be part of an international group, i.e. Belgian companies under foreign control or companies operating in an international context.

The expat regime offers relatively high exemptions for social security and personal income tax, especially if the employee becomes a resident in Belgium or works for a Belgian fixed base or permanent establishment, thanks to the so-called “travel exclusion”.

To obtain the expat regime a special demand must to be filed within 6 months of starting employment in Belgium. The procedure of obtaining final approval for the regime can take 1-2 years, but generally the foreign employer can start applying the regime immediately with little risk if all proper conditions are met.

For further information, please contact Wim De Blay, De Blay Partners:

E: wdb@deblaytax.be

W: www.deblaytax.be