Belgium Global Payroll & Tax Information Guide

March 20, 2023 | 5 Mins Yana Todorova

Last Updated March 2023

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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.

Payroll in Belgium – 2023 Updates

Starting 1 January 2023, new corporate income tax rules will enter into force for Belgian companies or Belgian branches.

With the intention to strengthen the fight against international and complex tax fraud, the statutes of limitations for both income tax and value-added tax (VAT) were recently reformed and aligned with international standards.

As part of the recently approved federal budget for 2023, Belgium will impose restrictions to the existing foreign tax credit (FTC) regime for royalty income and the limitation rule for certain tax attributes. Furthermore, the notional interest deduction will be eliminated.

From 1st of January 2023, the salaries of all their Belgian white-collar employees have been increased by 11.08% and changes were applied in the payroll of January 2023.

Effective 1st of January 2023, the minimum immigration salary threshold for foreign employees increased in Belgium. This increase impact new and pending applications, as well as valid permits.

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 global payroll 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 is the same as the calendar year – it runs from 1st January to 31st December.

Tax and Social Security Considerations

Corporate Tax

The Belgian corporate tax rate in 2023 is 25%. A lower rate is applicable for companies that are more than 50% owned by individuals or have smaller profits.

Small and medium-sized enterprises (SMEs) are able to benefit from a reduced rate of 20% on the first bracket of EUR 100,000 profit.

Capital gains on qualifying shares realized when meeting all conditions are fully exempt, while non-qualifying shares are subject to the 25% rate.

For tax years 2022 and 2023, the surcharge is 6.75%.

A special assessment of 100% is applicable to so-called ‘secret commissions’, which are any expenses of which the beneficiary is not identified properly by means of proper forms timely filed with the Belgian tax authorities.

The secret commissions tax can be limited to 50% if certain conditions are met. In some cases, no secret commissions tax applies.

Income Tax

For residents of Belgium personal income tax has progressive tax rates. This means that the higher your income is, the higher the rate of tax you pay. Personal income tax is calculated on all taxable income, even if some of it was realized or received abroad.

Belgian income tax rates 2023

Belgian income tax bands        Belgian tax rate

Up to €13,870                               25%

€13,870–€24,480                          40%

€24,480–€42,370                          45%

€42,370+                                      50%

Social Tax

Belgium has a very extensive social security system. Foreigners also are entitled to certain allowances and to social services.

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. There are two kinds of social security contributions, the ordinary social security contributions, and the special social security contributions.

Social Security is financed through a dedicated payroll tax. Social Security Rate in Belgium is 48.07 % in 2023 – 35% for companies and 13.7% for employees.

Net employer contributions will be automatically reduced by 7.07% in the 1st and 2nd quarters of 2023 for compliant companies.

For the 3rd and 4th quarters, companies can request for a deferral of 7.07% of net employer contributions.

Employers who want to make use of this postponement must submit a request to the Social Security Service (RSZ-ONSS) for each quarter concerned. The contributions covered by this postponement will be collected by the RSZ-ONSS during the year 2025 in four equal instalments, spread over the four quarters of the year.

Other Taxes

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%.

Belgium has introduced significant changes to VAT for 2023, including the reverse-charge, interest on late payments, retention periods and the statute of limitations.

here systems is summary of the major rules provided under Belgian VAT rules.

Compensation and Benefits

Minimum Wages and Wage Payment

The current minimum wage in Belgium is €1,954.99 per month in 2023.

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.

Working hours

In Belgium, working time may not exceed 38 hours a week.

Holiday

Employees are entitled to 12 national holidays in 2023. An employee who is required to work on a holiday is entitled to overtime pay and compensatory time. Here is the full list with public holidays in Belgium for 2023.

Leave

    • 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.

Severance pay is only applicable when an employer terminated an employment agreement without notice.

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%.

Non-resident taxpayers (including those benefiting from the expatriate tax concession) are not entitled to any personal exemptions unless if at least 75% of the individual’s earned income is subject to income tax in Belgium. Some taxpayers may be able to claim partial or full personal exemptions based on the tax treaty signed between Belgium and their home countries/jurisdictions.

Treaties

Belgium has concluded a double tax treaty with more than 150 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.

 

For more information about how our Global Payroll Control Platform integrates with local payroll solutions in Belgium, contact our global team today.

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