The models of salary slips (“Fiche 281.10” for employees and “Fiche 281.20” for company directors) to be used to report remuneration paid or granted in 2020 are now available on the Federal Public Service (“FPS”) of Finance’s website. The fiches 281.10 and 281.20 must be lodged electronically (via Belcotax-on-Web) with the FPS before 1 March 2021. A copy of the tax form should be provided to the beneficiaries so that they can complete their personal income tax return or the tax of non-residents.
In this respect, we would like to draw your attention to the fact that, already since 1 January 2019, a new reporting obligation arises in the hands of Belgian companies for remuneration and benefits granted/paid by an affiliated foreign company to beneficiaries 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). There are specific instructions for mentioning and detailing this remuneration on the tax forms.
Law of February 2019: a Game Changer for companies in Belgium
The law of 11 February 2019 introduced a new fiction into Belgian tax legislation. Due to this fiction, a taxpayer (usually a Belgian resident company within an international group) is deemed to have granted remuneration or benefits that a beneficiary (an employee or a company director) receives from a foreign company associated with the Belgian company, because of or as a result of the beneficiary’s professional activity for the benefit of that Belgian company. The Belgian company then owes withholding tax, it must submit a withholding tax return and draw up individual tax forms.
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 remuneration or benefit. As of 1 March 2019, wage withholding taxes (calculated according to the normal legal and regulatory provisions) must also be withheld by the Belgian subsidiary on this “foreign” remuneration and ‘foreign’ benefits. The taxes withheld at source must also be reported on the individual tax forms.
Despite an initial circular of 2 October 2019, there has been a lot of uncertainty throughout 2019 and even during the first quarter of 2020 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, the necessary clarification was not yet available. This changed in April 2020.
FAQ of April 2020
On 7 April 2020 the Belgian tax authorities published a new circular. It contains a first set of frequently asked questions about the law of 11 February 2019. It is now clear that according to the Belgian tax authorities, a very broad interpretation should be given to these new withholding and reporting tax rules in Belgium.
The new rules actually concern “all remuneration” (including bonuses, incentives, year-end premiums etc.) 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 exercised on behalf of a Belgian company. The notion ‘on behalf of’ is ultimately a factual matter and refers, in the broadest sense, to the exercise by the employee or the company director of any ‘professional activity’ which is part of the normal activities or corporate purpose of the Belgian company.
It is not required that the concerned professional activities are exercised in Belgium. A formal Belgian employment agreement is also not required. This means that the new withholding and reporting tax 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. seconded to Belgium or in a situation of simultaneous employment).
The reporting and wage withholding tax obligations are also relevant for individuals who are no longer working on behalf of a Belgium company but who still have trailing income which relates to their employment period on behalf of a Belgian company.
Please note that, and this is particularly important, depending on the factual circumstances, the professional income which must be reported by the Belgian company may be ‘broader’ than the portion of that income which is actually subject to Belgian wage withholding taxes (as the international double tax treaties still prevail).
From a pragmatic perspective, there are still some uncertainties. Indeed, companies and tax practitioners would welcome additional explanations in relation to several practical points. It is therefore (desirable and) possible that there will be some further clarification in the future.
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.