The Belgian ruling service limits the award of bevek/sicav options and warrants to 20% of the gross wage

In an efficient remuneration policy financial products can be an alternative for cash bonuses. For work performances as from 1 January 2018 you should limit the value of bevek/sicav options and warrants to 20% of the annual gross wage.

Bevek/sicav options and warrants

Many employers offer their employees bevek/sicav options and (stock exchange-listed) warrants. Financial institutions then play an intermediate role between employer and employee. The fact is that these bevek/sicav options and warrants do not give the right to the employer’s stocks.

Awarding stock options is fiscally attractive and social security contributions are not due. However, stock options are subject to market risks during a 1-year blocking period.

The market risks for warrants are much more limited because the employee can sell them to the financial institution shorty after their award. On the other hand, attractiveness of warrants is only limited to social security. Warrants are exempted from social security contributions based on their stock option qualification.

The Belgian ruling service: conditional agreement

In recent years several financial institutions obtained a preliminary decision from the Belgian ruling service with regard to the tax treatment of bevek/sicav options and warrants. The ruling service agreed with the application of the stock options legislation but also stipulated conditions to prevent abuse.

Bevek/sicav options must for instance be awarded in proportion to the remuneration that is commonly granted to the employee. This proportionality condition applies to the amount as well as to the frequency of the award (see for instance the preliminary decision No. 2015.697 of 2 February 2016).

Neither can the employer award the bevek/sicav options and warrants to replace a benefit the employee is entitled to and to which he has renounced at a time the benefit was already due by the employer.

Proportionality: up to 20% of the gross wage

Recently the Belgian ruling service developed the proportionality condition. The value of the bevek/sicav options and warrants awarded in the course of 2018 and having regard to the work performances from 1 January 2018 cannot be higher than 20% of the annual gross wage.

- The gross wage consists of the sum of

1. the monthly remuneration (gross), with the exception of the benefits of all kind (e.g. car, mobile phone);
2. the single and double holiday pay (gross);
3. the end-of-year bonus (gross);
4. the variable remuneration (gross).

- You must take into account the real value of the bevek/sicav options and warrants.

Consequences

If you do not meet this proportionality condition for the bevek/sicav options and warrants that you award in the course of the year 2018, the qualification as stock options will be jeopardized. This has consequences not only on a tax level. Also the exemption of social security contributions will no longer apply.

Source: preliminary decision No. 2015.715 of 16 January 2018, preliminary decision No. 2017.934 of 16 January 2018.