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Belgium – New Position on Notion of Salary Subject to Social Security

Belgium – New Position on Notion of Salary Subject to

This report covers a new position taken by Belgium’s social security authorities that could impact bonuses and other benefits that are attributed to employees.

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Belgium’s social security authorities have modified their stance with regard to the qualification of salary subject to Belgian social security. 

According to the new administrative instructions of the National Social Security Office (NSSO)1, social security contributions are due on all benefits that relate to the work performed by the employee in the execution of his/her employment contract with the employer or that relate to the function of the employee carried out for the employer.  This principle applies even without any intervention of the (Belgian) employer in the payment/grant of the benefit.

WHY THIS MATTERS

This new interpretation by the NSSO might have an impact on the bonuses and other benefits that are attributed to employees which were until recently not considered as salary subject to social security contributions.

Background

In accordance with Belgian legislation2 concerning the protection of workers’ pay, salary subject to social security can be described as any benefit (i) in cash or (ii) measurable in cash terms:

  • that the employer grants to its employee in return for the services provided under the employment contract, as well as
  • to which the employee is entitled in the framework of his/her employment and which is at the charge of the employer.

The aforementioned benefit can be directly at the charge of the employer, i.e., situations in which the employer pays the benefit directly to the employee, but can also be indirectly at the charge of the employer.  The latter entails situations where a benefit is granted to the employee by a third party (e.g., a parent company) and for which the third party charges the financial cost of the benefit to the actual employer.

The NSSO also envisaged situations where the employer did not bear the financial cost of the benefit but was nevertheless the (legal) contact for the employee, e.g., on the basis of an (employment) agreement between the parties. Furthermore, the Belgian Court of Cassation previously ruled3 that in case the employer has the (contractual) obligation to attribute a benefit on the basis of the employment agreement of the employee, this benefit is considered to be at the charge of the employer, qualifying as salary subject to Belgian social security. 

What Has Changed

Recently a new interpretation was published in the instructions of the NSSO.  In its new interpretation (considered to be retro-actively applicable as from July 2018 and also for all newly introduced cases), the NSSO now considers all benefits that relate to the work performed by the employee in the execution of his/her employment contract with the employer or that relate to the function of the employee carried out for the employer. 

Example: Bonus Granted by Foreign Parent Companies

On the basis of this new interpretation, the NSSO may argue that a bonus paid by a (foreign) parent company to the employees of a (Belgian) subsidiary company qualifies as a benefit at the charge of the employer, and that this is subject to Belgian social security, in cases where the benefit relates to work performed in the framework of the employment contract with the employer or relates to the function of the employee carried out for the employer.  This is also the case for equity-based compensation that is granted by a foreign parent company without a recharge to the Belgian subsidiary.

KPMG NOTE

This new interpretation broadens the notion of salary that is subject to social security and that discussions may rise whether this is in line with the legal definition.  While the final decision will eventually have to be taken by the Belgian courts, it is clear now that going forward the NSSO will apply the new definition.

FOOTNOTES

1  To see the instructions (in Flemish) on Belgium’s Sociale zekerheid - Onderneming / Sécurité sociale - Entreprise website, click here.

2  Belgian Salary Protection Act of 12 April 1965. 

3  Court of Cassation, 12 October 2016, AR S.15.0118.N, JTT 2016, afl. 1263, 463. 

The information contained in this newsletter was submitted by the KPMG International member firm in Belgium.

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