An Act of 11 February 2019 relating to tax, anti tax avoidance, financial and various provisions, published in the Belgian State Gazette of 22 March 2019, provides for a new obligation to mention remuneration and benefits in tax statements and to apply withholding tax if these are granted by a foreign company to employees and company directors of a Belgian subsidiary. The obligation to mention these in tax statements will be applicable for revenue of 2019, while the obligation to apply withholding tax will be applicable to benefits granted as of 1 March 2019.
Employees and company directors that render their professional services in Belgium for a Belgian company are taxable in Belgium on their remuneration and benefits in kind. This also applies to remuneration and benefits that are granted not by the employer but directly by a foreign company (e.g. shares that are granted for free or at a discount by a parent company situated abroad).
Until now, the beneficiary has had to mention this remuneration and benefits in his or her tax declaration, but the employer has not had a similar requirement to mention them in tax statement 281.10 or 281.20 (except for share options within the scope of the Act of 26 March 1999), nor has the employer had to apply any withholding tax.
To rectify this situation, in future, an employer that is subject to corporate income tax or legal entity tax and whose employee or company director, due to his or her professional activities, receives remuneration and/or benefits in kind from a foreign affiliated company is deemed to have granted this remuneration or benefits itself.
This means that from now on, the Belgian employer will have to mention this remuneration or benefits in the tax statement provided to the employee and will have to apply withholding tax, even if the employer does not intervene in the granting thereof nor bears the financial burden.
The obligation for the Belgian employer to apply withholding tax will enter into force on 1 March 2019 and will apply to remuneration and benefits that have been granted to employees and company directors by an affiliated company as of that date. The employer is also obliged to mention this remuneration and benefits on the beneficiaries’ tax statement 281.10 or 281.20 for revenues of the whole of 2019 (i.e. including revenues granted between 1 January and 28 February).
It is of the utmost importance to identify remuneration and benefits that are granted to your employees and company directors by foreign affiliated companies in order to apply withholding tax and to comply with the obligation to mention these in tax statement 281.10 or 281.20.