New tax incentive for employers affected by a natural disaster

Employers who are affected by a natural disaster will be entitled to a new incentive in the form of an exemption from payment of withholding tax. The legal framework has been outlined but further steps are needed before the exemption can be applied.

Exemption from the payment of withholding tax

Employers who have suffered damage due to a natural disaster at an establishment where one or more of the company's activities were being carried out at the time of a natural disaster will be able to enjoy an exemption from payment of withholding tax in the future.

The floods of 14 July 2021 were the direct reason for the development of this exemption. However, this measure will also be applicable in case of other disasters. 

Natural disaster

Natural disaster refers to an earthquake, avalanche, landslide, flood, tornado, hurricane, volcanic eruption or wildfire with a natural cause.

Only a natural disaster that has occurred since 1 July 2021 and that the region in question formally recognizes as a natural disaster qualifies for the exemption.

The region concerned must also apply to the Minister of Finance for federal tax assistance for employers affected by the natural disaster. If the federal council of ministers gives its approval, the natural disaster will then be included in a royal decree.

The floods of 14 July 2021 floods must still be recognized as a natural disaster under this exemption.

Amount of the exemption

The exemption is 30% of the withholding tax on the remunerations of employees employed in an establishment that has suffered damage due to the natural disaster.

Only remunerations paid or granted during a 40-month period starting from the first day of the month following the month in which the natural disaster occurred are eligible for the application of the exemption.

Remunerations of employees refer to:

• wages, salaries, commissions, gratuities, premiums, allowances and all other similar remunerations, including tips and allowances obtained, even accidentally, by reason or in consequence of the performance of the professional activity in any way other than as reimbursement of the employer's own expenses;
• benefits of any kind obtained by reason or in consequence of the performance of the professional activity.

The double holiday pay, the end-of-year bonus and arrears of remuneration do not qualify, nor do payments received by reason or in consequence of the termination or ending of the employment contract and payments received for the full or partial compensation for a temporary loss of remuneration.

Limitation of the exemption

The total amount of the exemption granted per employer and per natural disaster shall not exceed 25% of the difference between, on the one hand, the costs arising from the damage and, on the other hand, the aid and compensation granted to the employer by the Region, another government or by an insurer to compensate for such damage.

Moreover, the exemption may not be applied to the withholding tax deducted in addition to the minimum withholding tax due according to regulations.

In addition, the exemption may not be granted if other exemptions from payment of withholding tax are applied to the same remuneration. However, a combination with the exemption from payment of withholding tax for overtime and/or the structural exemption from payment of withholding tax (IPA discount) is possible.

Procedure

An employer who wants to obtain the exemption must file a form no later than the 30th month following the month in which the natural disaster occurred. The model of the form has yet to be published.

Then, the region concerned will have to submit a certificate to the FPS Finance.

Upon receipt of the certificate and no later than the 41st month following the month in which the natural disaster occurred, the FPS Finance shall notify the employer by letter of the possibility of applying the exemption.

Application for the past/future

Since this incentive will never be able to be set up from the start of recognition as a natural disaster, the exemption shall:

• on the one hand, be applied in part to remunerations paid or granted during the preceding months and for which the withholding tax has long been forwarded to the Treasury;
• on the other hand, be applied in part to remunerations that will be paid or granted to employees in the coming months and from which withholding tax has yet to be deducted.

When the employer is informed of the possibility that he can actually apply the exemption, a letter will clarify how to apply for the exemption for each of the cases.

The exemption from payment can be applied to remunerations paid or awarded as of 1 August 2021 at the earliest.

Source: Law of 26 December 2022 amending the Law of 15 May 2014, implementing the Pact for Competitiveness, Employment and Recovery, regarding the second extension of the application period of support zones and introducing an exemption from payment of withholding tax for employers affected by a natural disaster, Belgian Official Gazette of 13 January 2023.