The broad outlines of tax reform

The Minister of Finance has put his proposal for the first phase of a broader tax reform on the table. This reform aims to shift the tax burden from labour to capital and consumption. Below we briefly explain the most important measures with an impact on HR.

This reform should enter into force on 1 January 2024. Please note that the various measures have yet to be discussed within the federal government. Therefore, they may be subject to change.

A higher net amount for everyone who works

The tax-free allowance, i.e. the part of income that is not taxed, will be increased from €10,160 to €13,500.

The ceiling of the 45% tax bracket will be raised from a net taxable income of €46,440 to €60,000. In this way, fewer people will end up in the highest 50% tax bracket and a smaller proportion of the wages of people with above-average incomes will be taxed at the highest rate.

The tax work bonus will be extended. In this context, efforts will be made for a slower phase-out.

Forms of cohabitation

In recent decades, forms of cohabitation have changed dramatically. That is why the aim is to create as few differences as possible in personal income tax depending on the form of cohabitation.

The tax distinction between singles, cohabitants and married people will therefore be reduced. The marital allowance scheme will be phased out over a 20-year period.

The tax benefit for actually single parents will be reformed.

The ceilings for all income received for children will be brought on equal footing and increased to allow these children to remain dependent on their parent(s) for longer. Income from maintenance contributions, orphan’s pensions, student work and income as a student entrepreneur will not be taken into account.

Option plans and shares

The stock option plan system will be reformed. The system will be maintained but it will be simplified and its use will be limited to shares of the employer or of an associated company.

In addition, a new tax scheme will be developed to allow employees to participate in their employer's equity in a tax-efficient way.

Supplementary pension

A more transparent and simplified tax friendly supplementary pension scheme will be introduced. The second pension pillar will be reformed to make the system more widely accessible. The existing 80% limit will be removed without changing the accrual options that exist today. A scheme based entirely on the gross annual wage of the year itself will be introduced.

Benefits of all kinds

A number of benefits that are currently being valued at a flat rate will be taxed on the basis of their actual value. The aim of this measure is to harmonise the social and tax wage concepts as much as possible. This includes providing company executives with free accommodation, heating, electricity and domestic staff.

The tax regime of benefits of all kinds related to company cars remains unchanged.

Exemption from advance payment of withholding tax within the framework of scientific research

The division of competences between the various government departments will be more clearly marked out and the modalities of application will be better defined.

For colleges and universities, clear criteria will be established that are required to qualify as a researcher for the use of the exemption from advance payment of withholding tax.

Source: News item - The first phase of broader tax reform, Deputy Prime Minister and Minister of Finance Van Peteghem, in charge of the Coordination of the Fight against Fraud and the National Lottery. (only available in French and Dutch)