Favourable tax arrangements for overtime: increased cap

The social partners decided, under the 2021-2022 interprofessional agreement, to increase the number of hours of overtime subject to favourable tax arrangements from 130 to 180 for the period from 1 July 2021 to 30 June 2023 inclusive.

What does this mean?

The working of certain overtime hours may result in a tax benefit for employers, in the form of a partial exemption from payroll withholding tax. Workers may benefit from tax relief which results in a reduction in payroll withholding tax.

These tax benefits are, notably, capped at a certain number of overtime hours per year and per worker.

Indeed, subject to compliance with the conditions provided for by the legislation, the exemption and relief are only granted for the first 130 hours of overtime with supplementary pay worked during the year, per worker.

By way of reminder, in certain sectors and subject to compliance with specific conditions, specific caps apply (360 hours for the hotel and catering sector and 180 hours for the building works sector if electronic attendance control is used).

130 to 180 hours

Under the 2021-2022 interprofessional agreement, the social partners decided to increase the number of overtime hours subject to favourable tax arrangements from 130 to 180 (general scheme for all sectors) for the period from 1 July 2021 to 30 June 2023 inclusive. For the hotel and catering and building works sectors, which already benefit from an increased cap under certain conditions, this increase in the general cap is of no effect.

For the 2021 income year

The increase from 130 to 180 hours only takes effect from 1 July 2021. Consequently, the additional 50 hours of overtime for which an exemption from payment of payroll withholding tax and a reduction in payroll withholding tax may be granted must therefore be worked during the period from 1 July 2021 to 31 December 2021 inclusive. It is not therefore necessary to take into account any overtime worked between 1 January and 30 June 2021 above the cap of 130 hours and which has not given rise to any tax benefit.

In 2022, 180 hours

From 1 January 2022, the tax benefit will be linked to working a maximum of 180 hours of overtime subject to compliance with the legal conditions. These hours of overtime must be worked between 1 January and 31 December 2022 and will, in principle, entitle the employer to a partial exemption from the payment of payroll withholding tax and the employee to a reduction in payroll withholding tax. The current caps specific to the hotel and catering and building works sectors remain, for the time being, applicable.

What about 2023?

For 2023 income, the cap has been increased until 30 June 2023. It will therefore only apply to the additional 50 hours of overtime worked during the period from 1 January to 30 June 2023.

Sources: Law Project implementing the social agreement in the context of inter-professional negotiations for the period 2021-2022, Royal Decree of 19 December 2021 amending Annex III of the Royal Decree/CIR-WIB 92 on the reduction of overtime, Belgian Official Gazette of 27 December 2021, and Royal Decree of 17 December 2021 amending Annex III of the Royal Decree/CIR-WIB 92 on the reduction of overtime, Belgian Official Gazette of 28 December 2021.