Since 1 January 2019, a reporting obligation arises in the hands of Belgian companies for benefits granted/paid by a related foreign company to employees and company directors by reason of or at the occasion of their professional activity exercised on behalf of such a Belgian company (e.g. typically share-related remuneration but it also concerns other remuneration such a for example bonus payments).
It was already clear that this reporting obligation is due irrespective of any recharge of costs from the foreign group entity to its Belgian subsidiary, and irrespective of any intervention or involvement of the Belgian subsidiary in the attribution/payment of the benefit. As of 1 March 2019, wage withholding taxes must also be withheld by the Belgian subsidiary on any benefit granted/paid by an affiliated foreign company to employees and company directors by reason of or at the occasion of their professional activity exercised on behalf of such a Belgian company. These taxes withheld at source by the Belgian subsidiary must also be reported on the tax forms, notably fiches 281.10 (for employees) and 281.20 (for company directors).
Last year, following the introduction of the new legislation and throughout 2019 – despite an initial and rather limited Circular of 2 October 2019 – there was still a lot of uncertainty with respect to the interpretation of these new provisions and the practical application of the wage withholding tax and reporting rules. Unfortunately, upon drafting of the Belgian tax forms for reporting the remuneration paid or granted in 2019 (which needed to be lodged electronically towards the Belgian tax authorities before 1 March 2020), no further clarification was available, and a more extended FAQ was anticipated.
Circular (FAQ) published by the Belgian tax authorities
On 7 April 2020, the long-awaited Circular (including a first FAQ) was published by the Belgian tax authorities. It is now clear that a very broad interpretation should be given to these new withholding and reporting tax rules in Belgium. This can be a game changer for a lot of companies. It mainly concerns all remuneration received by employees or company directors (resident or non-resident taxpayers) from a related or affiliated foreign company for or at the occasion of their professional activity (to be interpreted in a very broad sense) exercised on behalf of a Belgian company. The Belgian tax authorities point out that it is not required that the concerned professional activities are exercised in Belgium. Moreover, a formal Belgian employment agreement is also not required, meaning that the new rules can also apply if an employee is actually working for the benefit of a Belgian company, but under a foreign employment contract (e.g. secondment to Belgium or simultaneous employment / split taxation). Please note that a formal salary split should in principle not be impacted by these new rules. Depending on the factual circumstances, the professional income which must be reported by the Belgian company is ‘broader’ than the portion of that income which is actually subject to Belgian wage withholding taxes (as the international double tax treaties still prevail). These reporting and wage withholding tax obligations are also relevant in relation to individuals who are no longer working on behalf of a Belgium company (for example expats who returned to their home country or moved to another territory) but who still have trailing income which relates to their employment period on behalf of a Belgian company.
In case of any further questions, please do not hesitate to contact Sandrine Schaumont or Philip Maertens or reach out to your regular PwC contact persons in this respect.
