Tax exemption for social security liabilities

The legislation with regard to the single employment status introduced a new tax exemption for the benefit of employers. Part of their profits or gains will therefore, at the earliest as from 2019, be exempt from tax. Recently, a number of changes were made to the regulations.

Context

Due to the introduction of the single employment status, the dismissal cost for an employee has increased in some cases compared to the dismissal cost in the former scheme.

To absorb the higher cost, a tax exemption for social security liabilities had been introduced for the benefit of trading, industrial or agricultural enterprises, practitioners of independent professions, offices or posts, and of another commercial activity, including companies. These taxpayers can exempt part of their profits or gains from taxes.

As far as the employee is concerned, he does not benefit from any tax advantage within the framework of the social security liabilities measure.

Amount exempted from profits or gains

The amount to be exempted from profits or gains per employee amounts to:

• 3 weeks of remuneration, from the 6th to the 20th started year of service after 1 January 2014;
• 1 week of remuneration from the 21st year of service started after 1 January 2014.

To determine the weekly remuneration, the amount of the monthly remuneration shall be multiplied by 3 and divided by 13.

The monthly remuneration is the average gross monthly remuneration, before deduction of the personal social security contribution, calculated over the number of months of the taxable period for which the exemption is applied for.

The remuneration on which the exemption is calculated shall, if necessary, be limited:

Example:

An employer-natural person has 1 employee. His average gross monthly remuneration is EUR 3,000.00. The employee has 5 years of service in 2019 in the single employment status.

The maximum amount of the average gross monthly remuneration is:

The maximum amount of the average gross monthly remuneration taken into account for the calculation of social security liabilities is EUR 1,830. The exempted social security liabilities for the taxable period 2019 amounts to 3 weeks’ remuneration. The exemption therefore amounts to 1,267 EUR, namely (1,830 EUR x 3/13) x 3.

Spreading of the exemption

To temper the budgetary cost of the exemption, it was recently decided to spread the exemption. The amount to be exempted from the profits and gains is thus spread over the taxable period and the following 4 taxable periods at the rate of 20% per taxable period.

Example:

Let’s go back the above example. The exemption from social security liabilities for the sole employee for the taxable period 2019 amounts to 1,267 EUR. The social security liabilities 2019 is spread over 5 taxable periods:

For the taxable period 2019, the employer will be able to exempt from tax an amount of 253.40 EUR of profits.

Departure of the employee

When an employee, for whom an exemption was calculated, leaves the company (for whatever reason), the total amount which has been exempted for this employee must be included in the profits or gains of the taxable period in which the employment comes to an end. The remaining part of the social security liabilities spread for that employee will be lost at that moment.

Example:

Let’s go back the above example. The employee will leave the company on 31 January 2020. We assume that the employer has applied the social security liabilities of the taxable period 2019 (253.40 EUR) to its profits. As the employee leaves the company during the taxable period 2020, the social security liabilities received in 2019 will have to be included in the profits of the taxable period 2020.

List of names

To benefit from the social liabilities exemption, the employer must keep a list of names of the employed workers available for the administration, stating for every worker:

• the full identity as well as the national number if such is the case;
• the employment start date;
• the length of service acquired under the single employment status;
• the gross taxable remuneration paid or granted to the employee including the employee's social security contributions, to be limited to the aforementioned maximum amount of the gross monthly remuneration where appropriate.

We are waiting for further instructions from the FPS Finance regarding these lists of names. As soon as there are new developments, we will inform you.

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