For years, Belgium has welcomed foreign companies and foreign investment into its country by providing various tax incentives for individuals and corporations – making Belgium a business-friendly destination for global organizations. It may soon get even friendlier, since the Belgian Finance Minister has recently proposed lowering the corporate income tax rate of 33.99 percent (which is currently Europe’s third highest) to 20 percent to help Belgium stay competitive in attracting foreign companies and investment.
Though many organizations can benefit from taking advantage of Belgium’s free-market system and diversified industrial and commercial economy, there are some uncertainties afoot. Recent trade data shows that nearly 9 percent of exports from Belgium went to the UK; if the UK economy suffers from fallout of the Brexit, Belgium’s economy could be negatively affected.
Despite its openness to international business, Belgium’s ever-shifting regulations and burdensome tax and social security systems make it one of the world’s most complex countries for payroll. Read on for a primer on the intricacies of Belgium payroll, but keep in mind that the Belgian government issues frequent legislative changes that impact employers (and issues steep fines for noncompliance). To avoid penalties and other repercussions, working with a trusted international payroll provider with experience in Belgium is the best recipe for success with Belgium payroll.
Foreign companies aren’t required to be legally registered in Belgium in order to deliver a Belgian payroll, but those who choose to set up a format entity in Belgium can establish one of four common company types: Foreign Branch Company, Public Limited Company (PLC), Private Limited Liability Company (PLLC), or Starter-Private Limited Liability Company (S-PLLC).
Each structure involves unique set-up requirements, costs, and regulatory reporting requirements, so companies should carefully assess which entity type aligns with their business goals in Belgium. Companies can generally be set up in 3 days following the submission of all paperwork. All commercial companies in Belgium are subject to corporation tax of 33.99 percent (as mentioned above). Smaller companies are taxed at a lower rate of 25 percent.
Companies are not required to set up an in-country bank account in place to make payments to employees and tax authorities, though it is advisable. Following business set-up, foreign companies should register with the social security authorities and obtain a VAT number (both done through Belgium’s online ‘Ondernemingsloket’ system) then work with an insurance agency to register for mandatory workplace insurance.
Belgian labour law stipulates different entitlements and protections depending on whether the employee is a “blue-collar” or “white-collar” worker. For example, probations periods (if elected) must be between 7 and 14 days for blue-collar workers. For white-collar workers, they must be between 1 month and a maximum period of 6 or 12 months, depending on the level of salary. The blue collar/white collar distinction is an evolving area of Belgian policy that multinational companies should monitor for changes.
Employers in Belgium can offer different kinds of employment contracts depending on worker type, contract length, compensation, and other considerations. (The contracts are known as Contrat de travail/Arbeidsovereenkomst in Belgium.) Employment contracts must be in French, Dutch or German. As soon as an employee is hired, the employer must register him or her with multiple government authorities, and insurance agency, a health provider, and with Dimona – an electronic system used to track social security. (Fines can result if employers fail to declare starters and leavers via Dimona.)
Most workers from outside the European Union will need both a work permit and visa to legally work in Belgium. Foreigners transferring or being appointed in a company may require a special ‘Professional Card’ tied to their visa and residency status in order to work in Belgium.
The legal minimum wage in Belgium, which stands at €1,502 ($1,608, £1,302) gross per month, is the second highest in Europe, just behind Luxembourg. In general, overtime to ‘day work’ employees is paid at time and a half (50 percent above the normal rate), or double pay (twice the normal rate) on Sundays or public holidays. The laws do not generally apply to night work in the hotel or entertainment history.
The general work week in Belgium is Monday through Friday, with a maximum 8-hour workday and 38-hour workweek. It is generally forbidden in Belgium to work outside the regular working hours, on Sundays, bank holidays and at night.
|Date||Belgium's Public Holiday Schedule|
|January 1st||New Years Day|
|Monday after Easter Sunday||Easter Monday|
|May 1st||Labour Day|
|40 Days After Easter||Ascension Day|
|7th Monday after Easter||Pentecost Monday|
|July 21st||Independence Day|
|August 15th||Assumption Day|
|November 1st||All Saints Day|
|November 11th||Armistice Day|
|December 25th||Christmas Day|
Tax & Withholding Considerations
Employers in Belgium are required to deduct withholding taxes from employee wages to maintain payroll compliance. They must pay withholding taxes (quarterly or monthly) to tax authorities, file withholding tax returns (form 274), and to prepare an individual yearly tax slip (form 281) that is sent to employees and tax authorities. It is the responsibility of the employee – resident or non-resident – to file a yearly tax return. Tax returns are generally due in June (for residents) and September (for non-residents) for the previous year.
Income tax rates range from 25 percent to 50 percent based on income. Belgium has variable tax rates that change annually at the local and national levels, and the social security contribution rates change every quarter. Companies must pay employer and employee contributions to the National Social Security Office quarterly, with employer contributions averaging between 32-38 percent and employee contributions amounting to 13.07 percent of gross salary.
There are 10 public holidays on the Belgian calendar and vacation time off is generally determined by the length of time worked by an employee. In the private sector, the employee will receive 20 days (4 weeks) of holiday if the person was employed the previous year. Vacation time is different in the public sector, where time off is given due to age. Those under the age of 45 are entitled to 26 days of vacation, increasing to 28 days at age 50.
Notably, white-collar employees receive their holiday pay directly from their employer, while blue-collar employees receive it from a social security fund financed by their employer’s social security contributions. Sick leave is available to employees in Belgium, with 30 days of pay for white collar employees. Blue collar employees receive full sick pay for the first seven days. If the illness persists, a blue-collar employee will get 85 percent of pay from days 8 to 14, with further reductions for lengths of time.
Employers are entitled to pay 15 weeks of maternity leave pay. The National Health Service pays about 82 percent of full pay for the first month, then three quarters of full pay for the remainder of the leave. Workers can request up to four months of paternity leave.
The Belgian tax authorities continue to keep a close eye on how payroll is administered and how to assess non-compliance of payroll taxes. Beginning in 2016, the government started to bring penalties to companies that were late or incomplete with “payroll formalities” like on-time filing of salary slips, accurate and timely payroll withholding tax returns, or payment of withholding taxes for payroll matters. The penalties could range anywhere from €50 to €1,250 ($53.57-$1340, £43.37- £1084). Prior to this new regulation in 2016, the government was more lenient, only assessing penalties in ‘exceptional’ circumstances.
Because of the complexity involved with setting up employees and payroll in Belgium, many global companies look to outsource their payroll details to a global payroll management company. This helps the company to know that their payroll administration is being handled professionally, efficiently, and well within the limits of Belgian laws.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.