To ensure a level-playing field, companies recognized for temporary employment were already equated with companies where shift work is carried out with respect to the withholding tax exemption for night and shift work. To apply the exemption, in addition to the basic conditions, they require prior consent from the client-user that employs the temporary workers. This already implies a close cooperation between the temporary employment agency and the client-user.
In practice, it often turns out during fiscal inspections that this cooperation and alignment are absent in many cases. As a result, the temporary employment agency is often unable to provide evidence that all conditions have been met. This lack of cooperation makes it effectively impossible for temporary employment agencies to properly prepare for an inspection of the application of the exemption. This issue was discussed between the temporary employment industry and the tax authorities and resulted in a newly published Royal Decree that should help resolve the situation.
New regulation regarding “prior consent”
The Royal Decree of 16 September 2024, which will come into effect in January 2025, introduces a new contractual obligation for temporary staffing agencies and client-users. Without a well-developed contractual framework, the temporary employment agency cannot guarantee that all applicable conditions of the exemption are met and thus relies on a non-binding statement from the client-user.
The contractual agreement will consist of three key elements:
- Client-User Declaration: The client-user provides the temporary employment agency with a declaration demonstrating that the specific work performed by the temporary worker meets all applicable conditions.
- Cooperation obligation: The client-user is obligated to do everything necessary to assist the temporary employment agency in proving all conditions are met.
- Liability clause: the liability of the client-user towards the temporary employment agency must also be established for potential damage suffered by the agency if the client-user has incorrectly declared that the conditions were met, but subsequently cannot provide proof.
- Use of option Bis: the recently introduced option Bis also plays a role. In case the client-user decides to apply option Bis with regard to the application of the wage withholding tax exemption, the client-user must communicate the percentage of the deviation.
As with most (contractual) agreements, it will be important to prove the existence, scope and context of the agreement. The temporary employment agency must be able to demonstrate in writing and unambiguously the existence and time at which the client-user agreed to the agreement and its impact.
Impact on both parties
The Royal Decree will impact both temporary employment agencies and client-users. Temporary employment agencies have until January 1st, 2025 to define a fitting process and prepare themselves on the incoming requirements.
Client-users will need to implement processes to ensure relevant information is sufficiently documented and shared with the temporary employment agency when needed.
As no standardized approach was included in the Royal Decree, there is room for differences in interpretation by both parties or during discussions with the fiscal authorities.
As with all wage withholding tax exemptions, it is essential for both parties to define and implement a fitting process that remains in place during a tax audit and suits both actors’ needs.
For further guidance and to discuss how these changes may affect your business processes, please reach out to Bart Van den Bussche, Pierre Demoulin or Florian Paternoster.
