Benefits granted by a foreign company: New obligation with regard to tax statements and withholding tax

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Date:
22 Mar 2019

The Act of 11 February 2019 with regard to tax, anti tax avoidance, financial and various provisions, published in the Belgian State Gazette of 22 March 2019, provides for a new obligation to mention remuneration and benefits in tax statements and to apply withholding tax if these are granted by a foreign company to employees and company directors of a Belgian subsidiary. The obligation to mention these in tax statements will be applicable for revenue of 2019, while the obligation to apply withholding tax will be applicable on benefits granted as of 1 March 2019.

Employees and company directors that render their professional services in Belgium for a Belgian company are taxable in Belgium on their remuneration and benefits in kind. This also applies to remuneration and benefits that are granted not by the employer but directly by a foreign company (e.g., shares that are granted for free or at a discount by a parent company situated abroad).

Until now, the beneficiary has had to mention such remunerations and benefits in his tax declaration, but the employer has not had a similar requirement to mention these in tax statement 281.10 or 281.20 (except for share options within the scope of the Act of 26 March 1999), nor has he had to apply any withholding tax.

To rectify this situation, in future, an employer that is subject to corporate income tax or legal entity tax and whose employee or company director, due to his professional activities, receives remuneration and/or benefits in kind from a foreign affiliated company is deemed to have granted this remuneration or benefits himself.

Therefore, from now on, the Belgian employer will have to mention this remuneration or benefits in the tax statement that he provides to his employee and will have to apply withholding tax, even if he does not intervene in the granting thereof nor bears the financial burden.

The obligation for the Belgian employer to apply withholding tax will enter into force on 1 March 2019 and will thus apply to remuneration and benefits that have been granted to his employees and company directors by an affiliated company as of that date. The employer is obliged as well to mention this remuneration and these benefits on tax statement 281.10 or 281.20 of the beneficiaries for revenues of the whole of 2019 (i.e., including revenues granted between 1 January and 28 February).

> Action point

It is of the utmost importance to identify remuneration and benefits which are granted to your employees and company directors by foreign affiliated companies in order to apply withholding tax and to comply with the obligation to mention these in tax statement 281.10 or 281.20.