As 2019 comes to an end, it is appropriate to look back at changes in 2019 in the field of (international) social security and to look forward to the opportunities and challenges that may continue in 2020.
Salary subject to social security
Beginning July 2018, the Belgian social security authorities modified their interpretation of the definition on “salary subject to social security” in their instructions to the employers. This change in definition followed a court decision in 2018. The new position of the authorities is that social security contributions are due on all benefits that are paid or granted for labour in the framework of the employment agreement concluded with the employer or that are related to the function which the employee executes with this employer—regardless whether the (Belgian) employer is actually paying / granting the benefit and/or irrespective of the fact whether the (Belgian) employer is the legal contact point.
The 2018 court decision was challenged in a case before the Belgian Supreme Court that issued a judgement in May 2019. The Supreme Court affirmed that the benefits that an employee receives as the counterpart for the work agreed between employer and employee are subject to Belgian social security whether or not the benefit is (legally or economically) at the “charge” of the employer.
The decision may have implications for the social security treatment of equity granted by a head of a multinational group to the employees of the Belgian company of the group.
In view of these new developments, taxpayers need to consider a detailed analysis of the conditions for the grant of the benefit, the manner in which the benefit is paid, and whether it is directly or indirectly at charge of the employer. The Supreme Court did not clarify whether the authorities’ adjusted interpretation is fully compliant with Belgian legislation. Nonetheless, the decision settled one point—if the benefits are granted as counterpart of the work agreed between employee and employer, social security contributions are due on this benefit.
Requalifying cross-border activities for social security
At the end of 2018 and the beginning of 2019, a change in the position taken by the Belgian social security authorities was announced with regard to the qualification of activities in a cross-border context. This change applies when Belgium is identified as the competent country on the basis of the social security coordination rules in EC Regulation 883/04, applicable to the Member States of the European Economic Area and Switzerland.
Following the principle of equality of treatment as stipulated in the EC Regulation 883/04, in instances of multi-state employment, Belgium now re-evaluates a person’s social security status according to its own national legislation in order to determine the applicable Belgian social security regime. Previously, the Belgian authorities kept the qualification given by the country where the activity was performed.
Over the past months there have been questions on the practical implications of this new approach, and only recently has clarification been given by the Belgian social security authorities. Instructions were provided on the start date of this new position, the payment (or reimbursement) of social security contributions, and relating benefits and the effect on the procedure for the request for certificates of coverage (A1 documents).
It has been clarified that application of this new approach is mandatory as from 1 October 2018. For situations that started in 2018, there is a possibility to voluntarily “regularize” the situation as from 1 January 2018.
This retroactive start date practically means that companies may need to consider (re-)assessing the social security regime of their personnel who are subject to Belgian social security and who have a corporate mandate abroad.
Read a December 2019 report prepared by the KPMG member firm in Belgium
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.