The special tax status of foreign executives: an additional social security exemption

The ONSS/RSZ has approved an additional exemption from social security contributions for foreign executives based on the percentage of the so-called 'travel exclusion'.

According to a Tax Administration's circular of 8 August, 1983, foreign executives may, under certain conditions, benefit from a favourable tax regime.

Accordingly, they may benefit from a tax exemption:

• for costs proper to the employer (living costs, housing costs, tax equalization) calculated on the basis of the Tax Administration Technical Note and the exemption for which is limited to 11.250 EUR per year (if the executive is occupied by an operational company) and to 29.250 EUR per year (for executives who are researchers or who have coordination functions); and
• for the part of the salary that corresponds to work accomplished outside Belgium. That is what is called the 'travel exclusion' or 'exemption for days spent abroad'.

The ONSS/RSZ very recently confirmed to us in writing that it grants, since 1 January 2012 (!) an additional exemption based on the percentage of the 'travel exclusion'.

The additional ONSS/RSZ exemption consists of an increase in the exempted costs calculated on the basis of the Technical Note, starting from the maximum cap of 11.250 EUR. Researchers and executives working in a coordination centre are, therefore, excluded from this additional exemption.

For instance: A foreign executive has a travel exclusion of 30%. He benefits from the exempted amount of 11.250 EUR. The total exemption from social security contributions is, in this case, equal to 11.250 EUR / 70% x 100% = 16.071,43 EUR.

> Action point:

In the calculations of the payroll for foreign executives, account must be taken of the additional exemption from social security contributions that will increase along with the 'travel exclusion' percentage.