Abolition of tax exemption when terminating the employment contract

After a partial abolition of the measure in 2014, the tax exemption on the termination of the employment contract will be permanently abolished in 2019.

Context

Since 1 January 2012, employees or company managers who received payments liable to taxes within the framework of the termination of an employment contract have benefited from a tax exemption. 

The exemption was partially abolished on 1 January 2014 but continued to apply in two cases:

• if the dismissal was notified to the employee before 1 January 2014;
• if the dismissal was notified by the employer as from 1 January 2014 to the employee who met the following conditions:
  • the employee was subject to projected collective redundancies which, pursuant to article 66, § 2, first paragraph of the 13 February 1998 Act containing provisions in favour of employment, was notified no later than 31 December 2013;
  • the employee falls within the scope of a collective agreement which provides the framework for the consequences of the collective redundancies and which was deposited with the Clerk’s Office of the Collective Labour Relations Service of the FPS Employment, Labour and Social Dialogue no later than 31 December 2013.

Permanent abolition of the exemption

In order to apply the 2019 exemption, the dismissal must have been notified to the employee before 1 January 2014 or the collective dismissal procedure must have been initiated by 31 December 2013 at the latest.

Given that such cases are almost non-existent, it was decided to permanently abolish the exemption on 1 January 2019. Severance payments, compensations and indemnities granted as from 1 January 2019 can no longer be exempted.

Source: Law of 11 February 2019 containing fiscal, anti-fraud, financial as well as various provisions (1), Belgian Official Gazette of 22 March 2019.