Belgium Global Payroll & Tax Information Guide

October 4, 2021 | Yana Todorova 5 Mins read

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.

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Payroll in Belgium – 2021 Updates

Due to covid-19, the following measures were taken by the Belgian authorities:

    • Corona unemployment scheme– extension to December 31, 2021.
    • As from 1 July 2021 telework is no longer mandatory, but highly recommended. The teleworking declaration no longer has to be submitted.
    • Extension of the temporary increase office costs – Employers have the possibility to grant their employees who work from home on a structural and regular basis a monthly lump sum indemnity of € 144.31 for office costs. This temporary increase was extended to the 3rd quarter of 2021 (from 01.07.2021 to 30.09.2021).
    • Extension quota 475 hours for students in Q3 in 2021.

See all the Belgium measures for business here.

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 runs from 1st January to 31st December.

Tax and Social Security Considerations

Corporate Tax

The Belgian corporate tax rate in 2021 is 25%, having been reduced from 29%. A surcharge tax of 2% was previously payable on top of corporate tax, but this was abolished in 2021. A lower rate is applicable for companies that are more than 50% owned by individuals or have smaller profits.

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 tax rates 2020

Belgian income tax bands        Belgian tax rate

Up to €13,540                                25%

€13,540–€23,900                           40%

€23,900–€41,360                           45%

€41,360+                                       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. If you’re employed your employer pays part (currently around 27%) and you pay another, smaller part of your salary (around 13.07%). 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. Employers and employees each pay 6.2% of wages up to the taxable maximum of $142,800 (in 2021), while the self-employed pay 12.4%.

The monthly contributions payable under Belgium’s voluntary Overseas Social Security Scheme (OSS) are increased by 2% as from 1 September 2021, and employers that contribute to the scheme through methods other than direct are debit may need to adjust their contributions.

The amended monthly contributions applicable as from 1 September 2021 available on the Deloitte website here.

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%.

Due to Covid-19 pandemic crisis, deliveries, intra-community acquisitions and imports of vaccines against Covid-19 and of in vitro diagnostic medical devices for this disease, as well as the provision of services related to these vaccines and medical devices are exempt from VAT for two years, from January 1, 2021 to December 31, 2022 included.

Compensation and Benefits

Minimum Wages and Wage Payment

In 2021, the national minimum wage in Belgium remained fixed at 1,625.7€ per month, that is 19,508€ per year, considering 12 payments per year. Accordingly, the national minimum wage has remained stable, while the CPI of 2020 which was 0.4%, so workers have lost purchasing power in the last year. This is one of the highest legal minimum wage rates in Europe.

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 38 hours a week.

Holiday

Employees are entitled to 12 national holidays in 2021. 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 2021.

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.

In Summary

With one of the highest taxation rates within the European Union and several different local and national rules, global payroll in Belgium can be complex.  Contact our team to learn how the Payslip’s Global Payroll Control Platform can deliver a scale-up advantage for your multinational business.

 

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