Extension of the tax reduction for overtime work

Employees and employers receive a tax relief for working overtime leading to the entitlement to a statutory overtime pay. Until now, the tax benefits applied for the first 130 overtime hours of the taxable period. This limit was raised to 180 overtime hours.

Tax benefits for overtime work

Certain employers are entitled to an exemption from payment of withholding tax for certain categories of employees who work overtime and who are entitled to a statutory overtime pay. The employee, on his part, is entitled to a tax reduction.

The exemption from payment of withholding tax and the tax reduction is equal to a certain percentage of the calculation basis of the overtime pay:

Temporary increase of the overtime limit

The tax benefits for working overtime are only granted for the first 130 hours the employee has worked as overtime during the taxable period. This limit will be temporarily increased to 180 hours in 2019 and 2020.

The effects on the labour market of the increase to 180 hours will be assessed by 30 June 2020 at the latest. After a positive assessment, the measure can be converted into a permanent measure.

Impact on the reduction of withholding tax

Employees eligible for the tax reduction also benefit from a reduction in withholding tax. In order for the increase in the overtime limit to have an effect on the level of withholding tax, the legislation will have to be adapted.

Preservation of existing derogations

The specific overtime limits applicable in certain sectors are preserved:

• 360 hours for the catering industry, provided that the employee is employed by an employer who uses a registered cash register system in every place of business and has declared this cash register system to the tax administration according to the applicable procedure;
• 180 hours for the sector of construction work, on condition that the employee is employed by an employer who uses an electronic attendance recording system on the temporary or mobile construction sites.

Source: Act of 23 March 2019 amending the 'Code des impôts sur les revenus 1992' (income tax code 1992) as regards the tax provisions of the jobs deal, Belgian Official Gazette of 05 April 2019.