Next to the impact on human health and lives, the COVID-19 pandemic also has a worldwide economic impact. Businesses are being impacted, the economy slows down and families have less purchasing power. In Belgium, the latter is compensated to a certain extent by temporary employment due to force majeure.
This week, various measures have been approved within the Parliamentary Committee of Finance to give both employees and self-employed persons a more financial breathing space in these challenging times.
The first of the tax measures, recently approved in the context of the Corona crisis, relates to benefits for temporary unemployment.
What was in place?
The amount of the temporary employment benefit was already increased to 70% of the last monthly salary (with a maximum of EUR 2.754,76). Additionally, employees are entitled to an amount of EUR 5,63 per day (paid by the RVA/ONEM). Up to now, a withholding tax of 26,75% was applicable to these temporary unemployment benefits. This withholding tax has a direct impact on the net amount of the benefit, while the current monthly income level does not justify such a withholding tax rate. Admittedly, it is possible that the persons concerned can recuperate the excessive withholding tax via their personal income tax return, but now they miss out on temporary unemployment benefits, precisely when it is welcomed during this period of crisis.
What will change?
The withholding tax rate will be (lowered to) 15% until the end of the year 2020, instead of the usual 26,75 percent. By reducing the rate to 15 percent, persons under the regime of temporary unemployment will have more (net) income at the end of the month, as from the month of May onwards. By lowering the withholding tax now, these people can have a higher income today instead of getting it back from the tax authorities two years later. In case of a rather limited period of temporary unemployment (e.g. one or two months in 2020) potentially additional tax may become due upon assessment.
Furthermore, the beneficial scheme for advance payments made by self-employed persons and companies in the third and fourth quarters of assessment year 2021 was also approved by the Commission. By increasing the tax benefit associated with timely prepayments for the last two quarters of this year, some financial room will be given to self-employed workers and businesses should (see also our newsflashes of 6 April 2020 (companies) and 7 April 2020 (individual taxpayers).
If you have any further questions, please do not hesitate to contact Sandrine Schaumont or Philip Maertens.