Wage withholding tax exemption – Constitutional court has introduced a strict interpretation of the application requirements for the wage withholding tax exemption for shift work


Executive Summary

In a request for preliminary ruling, the Belgian Constitutional Court was asked to rule on the discriminatory character (or not) of one of the conditions to apply the withholding tax exemption for night and shift work. Said condition requires that the shifts perform the same work in terms of content and magnitude of work. In short, the Court judged that the tax regime is not unconstitutional and that the condition is not discriminatory.

With this ruling, the Constitutional Court keeps the door open for a very restrictive application of said incentive scheme, potentially putting the application at risk as soon as there is some degree of variation in the activities or the size of the teams working in shifts. Especially in sectors where shifts are based on peak and non-peak hours, the authorities may seek to challenge the applied exemption.

The ruling comes at a moment where the government continues to tighten the screws on the withholding tax exemptions, as illustrated by the recently published requirement to embed the required shift premiums in a formal agreement.


The partial tax exemption for night and shift work was called to life in 2003 to compensate for the gap in workforce costs in the industrial sector in comparison with the surrounding countries. The purpose of the incentive was to avoid relocation of industrial players and enhance the competitiveness of our country for the industrial sector. To align with European state aid regulations, the concept of ‘enterprises engaged in shift labor’ was defined broadly, creating a measure (rightfully) applied in a multitude of sectors. 

As the number of companies applying the tax exemption has significantly increased over the years, the Belgian tax authorities have increased both the number of tax audits as well as the severity of their positions these last years. 

Concept of shift work

In brief, the notion of  “shift work” is legally defined as followed: 

  • companies where work is carried out in at least two shifts, each consisting of at least two employees;
  • performing the same work in terms of content and magnitude;
  • and where these shifts succeed each other throughout the day without any interruption between them, with the overlap not exceeding one-fourth of their daily workload.

The validity of the requirement of ‘performing the same work both in terms of content and magnitude’ gives rise to many discussions with the tax authorities in the context of tax audits. The judgment rendered by the Constitutional Court was meant to clarify this notion. 

Summary of the Constitutional Court’s judgment

The recent judgment of the Constitutional Court (February 8th, 2024) confirms the legality regarding the strict scope of application for the partial exemption of withholding tax for night and shift work. 

The Constitutional Court has ruled that a law cannot be considered discriminatory if the difference in treatment is based on an objective criterion, even if the strict interpretation of this criterion de facto leads to the exclusion of certain sectors. 

The Court has notably judged it is not unreasonable that companies where the content and the magnitude of the work carried out is the same benefit from the tax exemption, whereas companies where the team work varies according to peak and off-peak hours are excluded from the exemption. Idem for companies where the scope of the work is comparable, but not (exactly) the same. 

The Court notably motivates its judgment by the fact that the intention of the legislator was to reduce the budgetary costs of the tax measure and avoid having companies restructuring their way of working in order to benefit from the regime.

As a result of this strict interpretation, not every form – as accepted in the past – of work organization involving shifts is eligible for the exemption anymore.

What does the future hold?

With its latest decision, the Constitutional Court significantly challenges the practical implementation of partial exemption from payment of withholding tax for night and shift work for companies. The particularly strict interpretation of the Court regarding the similar activities different shifts should execute creates an important gap between legislation and the goal of the exemption to boost employment in Belgium.

What follows from this judgment is added ambiguity and legal uncertainty for applicants of the measure. This ambiguity and uncertainty is reinforced by the fact that the Court has also judged in a cryptic manner “that the teams must perform the same work as regards its scope cannot be reduced, in the context of such an analysis, to performing the same work by the execution of rigid and routine tasks”.

Eventually, it remains to be seen how tax authorities will convert this decision into practice and whether the tax authorities will take further measures regarding all companies with atypical shift work that make use of the exemption. 

But as illustrated by the recently introduced cumulation limit between night and shift labor and the additional requirements called to life such as embedding of the required shift premiums in the collective labor agreement (CLA) or individual employment contract, as well as adjusting the registrations to distinguish shift and night work, it’s obvious that the authorities are tightening the screws on the application of the withholding tax exemptions. 

For now, it is important for the applicants of the measure to thoroughly analyze their fiscal situation taking into account the recent case-law and for the companies for whom the tax authorities have decided to launch a tax audit to scrutinize whether other legal arguments (such as procedural arguments) cannot be successfully developed.

For more insights on partial withholding tax exemptions, fiscal audits and further assistance with the application thereof, please reach out to your regular PwC contact, Pieter Nobels (pieter.nobels@pwc.com) or Pierre Demoulin (pierre.demoulin@pwc.com).