Belgium: Tax Efficient Bonuses, Flexi-work, Ecommerce and Pensions all Reformed as “Summer Pact” Comes into Force
On January 1, 2018, many of the provisions of the so-called “Summer Pact” came into force, introducing a number of tax and employment law measures. It is expected that the implementation of the remaining measures will follow swiftly.
The main changes introduced by the Summer Pact are:
1. Profit Bonus
A new tax-efficient profit bonus scheme is introduced for employees (apart from certain executive-level employees). Certain criteria need to be met for the scheme to benefit from the favorable tax rates. The scheme must either be an identical profit bonus (meaning that all employees receive the same amount or percentage of the remuneration) or a so-called categorized profit bonus (depending on objective criteria, such as seniority, function, etc.). The total profit bonus must not exceed 30 percent of the total gross wage bill. Note too that to qualify for the favorable tax treatment the profit bonus cannot be used to replace existing remuneration or benefits.
The profit bonus is very attractive for both employers and employees, because: (i) no employer’s social security contributions are due (normally 27 percent); (ii) a reduced employee solidarity contribution of 13.07 percent applies; and (iii) the bonus is, in principle, taxed at a mere 7 percent (instead of the normal 50 percent).
2. Expansion of Flexi-jobs Beyond the Hotel and Catering Industry
Flexi-jobs are flexible jobs with a favorable tax and social security regime, which were originally created by the government to avoid the problem of people failing to declare their work in the hotel and catering industry.
The flexi-jobs regime is now expanded in two ways: (i) more industries can benefit from the regime (foreign exchange, trade in food products, independent retail, hotel business, large retail stores); and (ii) retired persons (with a statutory pension or equal benefit) can also do flexi-jobs.
As from January 1, 2018, more employers will be able to employ more flexi-workers, which will lead to a reduction in labor costs for these employers.
3. Non-recurring Result-related Benefits Now Excluded from Social Plans on a Lay Off
Back in 2007, the government introduced the so-called “non-recurring result-related bonus,” which was a bonus exempt from taxes (although security remained due). The amount of the bonus is limited to a maximum of Euro 3,313 (approx. USD 4,096 : GBP 2,947) gross per year.
As of January 1, 2018, these bonuses can no longer form part of the social plan package (redundancy terms) in the context of a collective dismissal with closure of a company, which had become a common practice in Belgium.
4. Doubling of the Special Social Security Contribution for Supplementary Pensions (Wijninckx-Contribution)
In 2012, the government introduced a special contribution of 1.5 percent on supplementary pension contributions—being contributions that exceed the threshold of EUR 30,000 (approx. USD 37,088 : GBP 26,689) (indexed, and EUR 31,836 (approx. USD 39,361 : GBP 28,322) in 2017) per employee per year.
As from January 1, 2018, this special contribution is doubled to 3 percent.
Following criticism that Belgium’s employment laws had not kept up with the growth in e-commerce, the government has taken a number of measures aimed at making it easier for employers in this sector. In companies with a trade union delegation, it will become possible to introduce night shifts by signing a collective bargaining agreement (CBA) with only one trade union instead of all trade unions represented in the trade union delegation (which was the previous rule). In addition, an employer will always be able to introduce Sunday work where the work concerns e-commerce, which will become an autonomous ground for Sunday work. A procedure will still have to be respected, and an employer who wants to continue Sunday work after 2019, will have to sign a Sunday work CBA.
Belgium was rather late in embracing e-commerce. As labor legislation was not adapted to attract e-commerce, many commentators believe that Belgium lost many e-commerce jobs to the Netherlands to avoid Belgian restrictions on issues such as night work and Sunday work, which are often crucial for e-commerce.
Written by Alexander Vandenbergen of Lydian