Belgium Global Payroll & Tax Information Guide
Belgium, officially the Kingdom of Belgium, is a federal constitutional monarchy with a parliamentary system. It is divided into three highly autonomous regions: Flanders in the north, Wallonia in the south, and the Brussels-Capital Region. Brussels is the smallest and most densely populated region, as well as the richest region in terms of GDP per capita.
Belgium is home to two main linguistic communities: the Dutch-speaking, mostly Flemish Community, which constitutes about 59% of the population, and the French-speaking Community, which comprises about 40% of all Belgians.
Belgium is one of the six founding countries of the European Union and hosts the official seats of the European Commission, the Council of the European Union, and the European Council, as well as a seat of the European Parliament in the country’s capital, Brussels. Belgium is also a founding member of the Eurozone, NATO, OECD, and WTO, and a part of the trilateral Benelux Union and the Schengen Area. Brussels hosts several of the EU’s official seats as well as the headquarters of many major international organizations such as NATO.
Belgium is a developed country with high standards of living, quality of life, healthcare and education. It is categorized as “very high” in the Human Development Index and also ranks as one of the safest or most peaceful countries in the world. The official currency is Euro and digital currencies are not considered as legal.
Here, we have listed some of the key points multinational organizations should consider when setting up business in Belgium from a Global Payroll Perspective.
Payroll in Belgium – 2019 Updates
- Each year in January, salaries are adjusted to the cost of living for employees of companies subject to Joint Industrial Committee 200 (JIC 200). The gross salaries are increased with 2,16% as from January 1, 2019 onwards.
- Net monthly salaries increased on average by 36 euros from 1 January 2019 due to the tax-shift measure.
- On 22nd of March 2019, a Law was published in the Belgian State Gazette introducing a new income tax reporting and a tax withholding obligation for all Belgian employers with regard to remuneration paid or granted by a foreign company linked to the Belgian employer.
- Up until now, Belgian employers did not have a tax withholding or reporting obligation for remuneration granted by a foreign parent or affiliated company, if the Belgian employer was not involved in granting that remuneration. The only exception to this rule was the obligation to report stock options meeting the conditions of the Stock Option Law of March 26, 1999. The employee however was obliged to report the foreign income in his personal tax return.
- As of the 1st of March 2019, the Belgian employer has to withhold taxes on all remuneration and benefits granted by the affiliated foreign company to its employees resulting in a taxable benefit in kind in Belgium. The withholding taxes always have to be withheld even if the Belgian company does not intervene in the allocation of the benefits or the costs related to the grant are not charged to the Belgian company.
- All benefits granted in 2019 have to be reported on the 2019 salary statement (fiche 281.10 / 281.20), which has to be submitted to the Belgian tax authorities in 2020. Taxable benefits granted in the period as from 1 January 2019 up to 28 February 2019 aren’t subject to a withholding tax obligation and only need to be reported on the 2019 salary statement. As of 1 March 2019 all taxable benefits will need to be reported and withholding taxes will be due.
- As a general principle in the Belgian legislation, social charges are due on salary. However, according to the administrative instructions of the National Social Security Office (NSSO), social security contributions are now due on all benefits that relate to the work performed by the employee in the execution of his/her employment contract with the employer or that relate to the function of the employee carried out for the employer. This principle applies even without any intervention of the (Belgian) employer in the payment/grant of the benefit.
Belgium Payroll – Basic Facts
A foreign company is not required to have a legal entity in Belgium in order to process a Belgian payroll, but those who choose to set up an entity in Belgium can establish one of four common company types:
- Foreign Branch Company
- Public Limited Company (PLC)
- Private Limited Liability Company (PLLC)
- Starter-Private Limited Liability Company (S-PLLC)
Companies are not required to set up an in-country bank account in place to make payments to employees and tax authorities.
Taxation in Belgium is one of the highest in Europe. Belgian tax rates amount to an effective rate of more than 50% for the highest earners (including social security), compared to an average 45% in Europe. Belgian income tax and company tax are collected at state level, but the municipal authorities also collect property tax and municipal tax. However, there is a special tax status for some expats whereby resident foreigners are treated as non-residents for tax purposes and enjoy generous tax allowances. Double taxation treaties exist to help relieve a Belgian tax resident from having to pay additional income tax to another country. The Belgian government also offers a range of tax deductions which can help reduce your Belgian tax burden.
The tax year runs from 1st January to 31st December.
Tax and Social Security Considerations
The nominal corporate income tax rate remains 29.58% in 2019. From 1 January 2020, the nominal corporate income tax rate will be 25%.
Residents of Belgium pay personal income tax on their total earning from all worldwide sources on a sliding scale. Belgian income tax is paid on the taxable base, which is determined from salary less compulsory social security contributions (paid either in Belgium or abroad).
- Belgian tax rates 2019
Belgian income tax bands Belgian tax rate
Up to €13,250 25%
Social security tax in Belgium is paid on top of earned income. The Social Security Rate is a tax related with labor income charged to both companies and employees. If you’re employed your employer pays part (currently around 25%) and you pay another, smaller part (around 13.07%) of your salary.
There are two kinds of social security contributions, the ordinary social security contributions and the special social security contributions.
Under the Belgian tax system, residents also pay municipal and regional taxes that typically range up to 9%. For non-residents, there is an average 7% municipal tax.
In Belgium, VAT is called Taxe sur la Valeur Ajoutée (TVA) or Belasting over de Toegevoegde Waarde (BTW) and is payable on most goods and services. The standard rate is 21%, while there are lower rates for certain categories of goods and services. A rate of 12% is applied to food served in restaurants and social housing, while a rate of 6% applies to most basic goods, such as food, water supply, books, and medicine. Daily and weekly publications and recycled goods are typically rated at 0%.
Compensation and Benefits
Minimum Wages and Wage Payment: The minimum wage is €1,593.81 per month for workers at least 18 years old with wage payments being made monthly.
Overtime: As a rule, an employee cannot work for more than 11 hours per day and 50 hours per week. Overtime worked on Sundays and holidays is paid at double time. Employers are forbidden to permit pregnant employees to work overtime.
Hours of Work: In Belgium, working time may not exceed eight hours a day and 40 hours a week.
Holiday: Employees are entitled to 10 national holidays per year. An employee who is required to work on a holiday is entitled to overtime pay and compensatory time.
- Annual leave: The length of paid holiday will depend on the number of months during which an employee was paid in Belgium in the previous year. The legal minimum amount of holiday entitlement in Belgium for people working full-time is 20 days.
- Sick leave: Workers are entitled to take up to 30 days of sick leave.
- Maternity/ Paternity Leave: Parents are entitled to take parental leave of up to four months per child before that child turns 12. The employee receives a monthly allowance.
Bonuses and Special Benefits: A common practice is employees to make a 13th month payment as a bonus during Christmas.
Termination Pay: Since 2014, all employees with more than six months of seniority have the right to be informed of the reason for their dismissal. If the employer fails to inform the employee of the reason for dismissal, the employee can require the employer to give an explanation. If no (timely) explanation is provided, the employer owes a lump-sum civil fine of two weeks of salary. The employee is entitled to dispute the reason for dismissal before the labour court.
Workers’ Compensation: Employees who are totally incapacitated during their work are eligible for compensation equivalent to 90% of their average daily pay.
Foreign Workers in Belgium
Employing foreign workers in Belgium is subject to a set of very strict rules. Until recently, employing foreign workers in Belgium was subject to a dual procedure: the foreign worker concerned required both a residence permit and a work permit. In accordance with EU Directive no 2011/98/EU, it has become mandatory to issue a single permit which covers both the right of residence and the right to work and requires a single application. This Directive has been implemented in Belgian law with the entry into force on 24 December 2018.
Visas: Visa requirements vary based on individual travel intentions and the duration of the visit. There are short stay and long stay visa. For business travelers visiting Belgium for less than 90 days EU/EEA nationals are not required to possess a visa and may move freely through the region. For most non-EU/EEA nationals, visas are required to enter Belgium for less than 90 days—although travelers may move freely across the Schengen Area after arrival.
With a valid US passport, US citizens can stay up to 90 days for tourism or business during any 180-day period. They must wait an additional 90 days before applying to re-enter the Schengen area. To stay longer than 90 days,US citizens must have a visa. They should apply for a visa through the embassy of the country where they will spend most of their time.
Payroll Taxes: Non-residents with Belgium-sourced income are liable to taxation only on that income and the same rates as residents apply—between 25% and 50%.
Belgium has a network of treaties for the prevention of double taxation with 88 countries, including an income tax treaty with the United States. Belgium has a totalization agreement with the United States for social tax coverage purposes.
Belgium generally uses the exemption-with-progression method for avoiding double taxation in its treaties.
With one of the highest taxation rates within the European Union and several different local and national rules, paying your staff in Belgium can be complex. Contact our team to learn how Payslip global payroll management software will help you reduce costs and minimize risk and liability.
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- Belgium, Wikipedia
- BDO Tax News, “BELGIUM – New reporting and withholding tax obligations for benefits granted by foreign companies”
- ProPay, “Indexation January 2019 JIC 200”
- ProPay, “New reporting and withholding obligations”
- PwC, Evi Geerts: “Belgian tax reform – Recap of corporate income tax measures applicable from 1 January 2019”
- GPMInstitue, Dee Byrd: “What You Need to Know About Payroll in Belgium”
- Taxation.be, “Double tax treaties”
- Expatica, “Belgian tax guide: Understanding taxes in Belgium for foreigners”
- Avalata Vat Live, “2019 European Union VAT rates”
- Eubelius, “Single Permit: new rules for the employment of foreign workers in Belgium”