On March 24, the Belgian parliament voted new legislation introducing a number of changes with respect to the night – and shift labor wage withholding tax incentive (and some changes to the other wage withholding tax incentives).
Below we list the most important changes (The amendments will apply to remuneration paid or awarded as from 1 April 2022, if no specific deviation exists):
Night and shift labor
General changes
The wage withholding tax incentive for night and shift labor will be treated as two separate exemptions. In order to apply the exemption for shift labor, all conditions that apply to shift labor should be met. The same applies to the exemption for night labor.
Minimum premium
In order to be able to claim the exemption, a minimum premium of 2% for shift labor and 12% for night labor must be paid to the employees.
Moreover, from 1 April 2024, this premium must also be explicitly included in the collective labor agreement, the employment regulations, or the individual employment contract between the employer and the employee.
Calculation of the exemption and the ⅓ norm
One of the conditions of the exemption is that the employee must have been employed in such a scheme for at least 1/3 of their working time during the month in question. This is the so-called 1/3rd norm. In the past it was possible to calculate this standard on an hourly or daily basis. The new legislation states, in accordance with Circular letter 2021/C/99, that this 1/3rd standard must be compulsorily calculated on an hourly basis, and a calculation on a daily basis is no longer possible.
No more cumulation
It will no longer be possible to combine the exemption for shift labor in the building sector with the exemption for shift or night labor.
Specific change for temporary employment agencies
Temporary employment agencies wishing to apply an exemption scheme must, for taxable wages of temporary employees paid or awarded from October 1, 2022, have formal permission from the company where the temporary employees are employed to apply the exemption.
On top of that, temporary employment agencies themselves must provide the evidence that they have met all the conditions (instead of the enterprise in which the temporary workers are employed). In fact, this was already the case in the past but has now been explicitly included in the law.
Finally, the exclusion of the “tax voluntariat” from the exemption’s calculation base will have a major impact on employment agencies (see below for more on this exclusion).
Ongoing discussion: same work in terms of scope
In order to speak of shift work, the following definition must be met:
“Work performed in at least two shifts of at least two workers, doing the same work, both in content and in scope, which succeed each other in the course of the day without a break between the successive shifts and without the overlap exceeding one-fourth of their daily workload.”
One of the persistent points of discussion remains, despite the new legislation, namely the criterion of the same work in terms of “scope”. The Minister of Finance previously stated that the scope should be determined by the number of members of the teams and this number should be the same. Only minor deviations were accepted here. The Antwerp Court of Appeal did not agree with this and stated that the scope only had to be comparable and not necessarily the same and allowed for several methods of interpretation.
A provision has been submitted to the Court of Cassation by the tax authorities against the aforementioned judgments of the Antwerp Court of Appeal as they do not find support in the text of the law. Following that, recent audits show that the tax authorities have again tightened up their position. The tax authorities dispute that the scope of shifts must only be comparable and reiterate their previous positions. Companies must therefore (again) demonstrate that the size of the successive shifts is the same, whereby only limited deviations are accepted.
We recommend companies to review and critically assess the application of the exemption as there is a risk of applying the exemption without a thorough analysis.
General changes withholding tax exemptions
Voluntarily withheld higher withholding tax
Voluntarily higher withholding tax withheld (the so-called tax voluntariat) may not be included in the basis for the calculation of the exemption. This measure applies explicitly to the following (partial) exemptions from withholding tax:
- Research and Development (art. 275/3 ITC 1992)
- Sportspeople (art. 275/6 ITC 1992)
- Assisted areas (art. 275/8 and 275/9 ITC 1992)
- Small start-ups (art. 275/10 ITC 1992)
Please note this exclusion is not mentioned in the law for night – and shift labor.
Combination Tax credit for research and development and withholding tax exemption
For taxable periods ending as from April 1, 2022, it will no longer be possible to fully combine the research and development tax credit and the partial exemption from withholding tax for research and development.
When the acquisition value or investment value of assets includes remuneration that has been taken into account for the withholding tax exemption for scientific research, this amount of exemption from withholding tax cannot be included in the calculation basis of the tax credit.
Several new procedural conditions are introduced:
- A new fiche obligation will be introduced where additional information with regard to the applied exemption must be included.
- There will be a shorter period for a tax claim. At this moment this is 5 years from the first of January of the assessment year. This will now be 3 years after the first of January from the year after the assessment year.
- There will also be an automatic extension of the assessment and audit period in that case with a maximum of 6 months.
- A tax increase from 10 to 200% will apply following an incorrect declaration of the exemption.
The new procedural rules have a planned entry into force of 1 April 2022, whereby the fiche obligation will apply to remuneration paid or awarded from 1 January 2023.
For more information on this topic, please don’t hesitate to contact Thomas Goemaere.
