In their newly published Administrative Instructions for the 3th quarter of 2018, the Belgian National Social Security Office (NSSO) included their adjusted position regarding whether or not a benefit attributed by a foreign parent company directly to the employees of a Belgian subsidiary is subject to Belgian social security contributions. This adjusted NSSO position applies a very broad – and possibly questionable – interpretation by stating that employees of a Belgian subsidiary only receive a benefit that is granted by the parent company because of their employment with the Belgian subsidiary and that consequently such benefit should always be considered as salary subject to Belgian social security contributions.
Former NSSO position
Social security contributions are due on the salary of employees. The Salary Protection Act defines salary in this respect as any benefit in cash or measurable in cash to which the employee is entitled as a result of his employment and at charge of his employer. A benefit must conform with these conditions cumulatively in order to classify as salary.
Regarding the condition of “at charge of the employer”, the NSSO states that this notion should be understood as both directly and indirectly at charge of the employer. In this respect, the NSSO used to take the position that a benefit should be considered as being indirectly at charge of the employer if – without bearing the financial burden of said benefit – it still acted as a point of contact to which its employees could turn if they did not receive the benefit. The NSSO’s Administrative Instructions for the 2nd quarter of 2018 included the example of a Belgian company that receives a certain amount of cash from its foreign parent company to distribute among its employees to illustrate this scenario. In this example, Belgian social security contributions would thus be due on the amounts attributed to the employees.
The above outlined position should also be read in light of the case-law of the Court of Cassation and notably its ruling of 12 October 2016. In this ruling, the Court elaborated on the notion of “at charge of the employer” and stated that a benefit, although attributed to the employees of a subsidiary by the parent company and financially borne by the latter, is still to be considered at charge of the subsidiary-employer if the employees concerned can claim the payment of the benefit from their employer, based on the conditions of their employment (e.g. because the attribution of the benefit by the parent company is adopted in the employment agreement with the subsidiary-employer, as was the case in the facts underlying the Court’s ruling).
When applying the above interpretation by the NSSO and the Court of Cassation of “at charge of the employer”, one could in the past still argue that, in case of a benefit attributed by a parent company directly to the employees of a Belgian subsidiary without any intervention whatsoever by the latter, such benefit did not classify as salary and no Belgian social security contributions were therefore due.
Adjusted NSSO position
However, in their newly posted Administrative Instructions for the 3th quarter of 2018, the NSSO seems to part from their previous position and takes a significantly more stringent approach in this respect with a very broad interpretation of “at charge of the employer”. It opines that a benefit is indirectly at charge of the employer if the attribution thereof is the result of activities performed in execution of the employment agreement or is related to the position the employee holds with the employer.
In a written clarification we requested from the NSSO on their adjusted position, they stated that – with respect to their example of a benefit attributed by a parent company (as included in the Administrative Instructions of the 2nd quarter of 2018, but no longer present in the 3th quarter version) – in such a situation, the employees of a Belgian subsidiary only receive a benefit that is granted directly by the parent company because of their employment with the Belgian subsidiary and that consequently such benefit should always be considered as salary subject to Belgian social security contributions.
The NSSO’s new interpretation is far more strict than both its former interpretation and the above outlined case-law in this respect. It no longer leaves any room to assert that a benefit attributed by a foreign parent company to the employees of a Belgian subsidiary could be considered not at charge of said Belgian subsidiary and therefore exempt from social security contributions because it does not constitute salary, even without any intervention whatsoever by the Belgian subsidiary in the attribution of the benefit.
It is however important to point out that this new interpretation not only goes above and beyond the NSSO’s former interpretation and the position of the Court of Cassation in this respect, but that we believe that there are arguments to claim that it also violates the provisions of the Salary Protection Act.
As mentioned above, one of the cumulative conditions a benefit must conform with in order to classify as salary in the framework of the Salary Protection Act, is the fact that it has to be at charge of the employer. Question is whether the NSSO’s novel take on this notion is still in keeping with the legal definition thereof.
It will be interesting to see whether the Belgian courts, if presented with the NSSO’s adjusted interpretation, would agree with said interpretation or would rather reject it as not in line with the text of the Salary Protection Act.
Additional remark – upcoming fiscal reporting obligation for benefits attributed by a foreign group company
One of the proposed measures included in the Government’s 2018 summer agreement is the introduction of a fiscal reporting obligation for Belgian group companies for benefits that are attributed by foreign group companies, directly to the employees of the Belgian company.
Under the NSSO’s former interpretation of the notion of “at charge of the employer”, such reporting obligation for the Belgian employer might have constituted sufficient intervention by the Belgian company in order for the benefit attributed by the foreign parent company to be considered as at charge of the Belgian company, inadvertently triggering Belgian social security contributions.
However, the adjusted interpretation of the NSSO in this respect no longer requires any intervention by the Belgian group company in order for a benefit attributed by a foreign parent company to be considered at charge of the Belgian company and thus considered as salary subject to Belgian social security contributions. As a result, whether or not a reporting obligation would exist on account of the Belgian company will have no impact on the classification of such benefit as salary either way.
Nonetheless, this new proposed reporting obligation might again enter into play if the NSSO’s adjusted interpretation of “at charge of the employer” would be declared invalid by the Belgian courts.