Foreign employers with the intention to hire employees in Belgium have two options: become foreign employer without establishment in Belgium or use services of an employer of record (EOR). Why are they looking at these options specifically for Belgium?
Contents
- 1 Why Start a Business in Belgium?
- 2 How to Register as an Employer in Belgium
- 3 Use of EOR Services
- 4 Foreign Employer Without Establishment in Belgium
- 5 Pay 0 Social Security for Your 1st Employee as Employer Without Establishment in Belgium
- 6 Is an Employer Without Establishment in Belgium taxable?
- 7 Conclusion about Employer Without Establishment in Belgium
Why Start a Business in Belgium?
If you are an entrepreneur operating globally and have developed an innovative product that you want to commercialize outside your home country, how do you begin to internationalize your product?
The first step is to conduct thorough market research, and Belgium can serve as a good test market. Companies like Coca-Cola and Carrefour use Belgium to test their latest products.
Belgium is a compact country of 30,000 km² with a population of 11 million people, making it densely populated. The smaller market allows for quicker product introduction to consumers. Additionally, Belgium is representative of the European market and is often seen as a mini-Europe.
Geographically, Belgium is located in central Europe, making it a strategic location. Brussels hosts the headquarters of NATO, the European Commission, the European Council, the Council of the European Union, and one of the two seats of the European Parliament.
Furthermore, Belgium is in the GMT+1 time zone, facilitating cooperation with global teams.
Approximately 80% of Europe’s purchasing power is within a radius of 800 km around Brussels. This explains why many multinationals have their headquarters in Belgium, such as AB InBev in Leuven and the chemical company Solvay in Brussels.
A distinct feature of Belgium is its cultural diversity with three official languages: Dutch, French, and German. This linguistic diversity makes Belgium suitable as a test market for products intended for launch across Europe.
Regarding labor, Belgium offers a productive workforce, attributed to its diverse culture and excellent educational institutions. Most Belgians speak multiple languages and appreciate high-quality products. And yes, English is one of the foreign languages they speak.
Starting your international expansion in Belgium requires careful organization as an employer. The following section addresses what steps need to be taken to become an employer in Belgium, and evaluates the alternatives of using services of an EOR or become foreign employer without establishment in Belgium.
How to Register as an Employer in Belgium
If you intend to employ personnel in Belgium, it is essential to register as an employer with the National Social Security Office (NSSO) through the online service Wide. This platform enables a company or its representative to complete the registration process with the NSSO. Following registration, authorized company representatives can update information or deregister the company as an employer.
Despite the Belgian NSSO’s assertion that the registration procedure is straightforward, practical experience often shows otherwise. Consequently, almost all employers, including Belgian companies, seek assistance from a representative experienced in personnel administration.
Mahis provides an efficient solution for this challenge. By utilizing Mahis’s online service, you can authorize a payroll provider to manage your personnel matters, make necessary declarations, and handle other administrative tasks. These Belgian payroll providers are highly organized and capable of streamlining the registration process. It is important to note that most operate exclusively in Dutch, French, or German, with only a limited number offering services in English. This linguistic factor can be crucial for foreign companies. We can connect you to some experts if you want.
Foreign employers frequently express concerns about becoming employers in Belgium due to the administrative complexity and time required. However, there are two alternative options available:
- Employer of Record (EOR)
- Employer without establishment in Belgium (non-residential employer)
Use of EOR Services
Many employers consider engaging the services of an Employer of Record (EOR). An EOR is provided by a third party acting as the legal local employer on behalf of the client. This arrangement allows employees to be hired in other countries, with the EOR managing all legal and compliance requirements, enabling the client to focus on daily interactions with the employee.
However, in Belgium, employers encounter a significant issue. The use of EOR services is prohibited due to Belgian legislation. The employment relationship’s subordination aspect ceases to exist when an EOR assumes employment responsibilities, which conflicts with Belgian laws. This is important information few foreign employers are aware of.
Thus, entering into a partnership with an EOR in Belgium poses a risk of legal prosecution. Given that no employer wishes to face such risks, it is essential to be aware of alternatives that fully comply with Belgian legislation. Keep in mind the benefits of being employer without establishment in Belgium.
Foreign Employer Without Establishment in Belgium
Did you know you can employ staff in Belgium without establishing a company there? A foreign company can legally hire staff in Belgium without an entity within the country. Being employer without establishment in Belgium (also called non-residential employer) is a practice that a lot of foreign companies follow.
A foreign entity can as foreign employer without establishment in Belgium:
- Obtain an enterprise number in the Crossroads Bank for Enterprises
- Register with the NOSS
- Enroll in workers’ compensation insurance
- Enroll in an external service for prevention and safety
- Register with the Belgian tax authorities
- Enroll in a meal voucher provider
- Affiliate to any other service, just like any company with a Belgian entity
Becoming an employer without establishment is straightforward. With the right partner, this process takes only two to three weeks and offers an excellent alternative without the disadvantages associated with an EOR.
Pay 0 Social Security for Your 1st Employee as Employer Without Establishment in Belgium
The Belgian government provides a framework that includes reductions in social security contributions, various employment incentives, and flexible working arrangements such as temporary unemployment and flexible working hours. Consequently, labor costs are competitive compared to other locations in Europe. This also applies to employers without establishment in Belgium.
Since January 1, 2024 , an employer without establishment in Belgium who hire a first employee can benefit from a target group reduction in employer contributions. The conditions to meet are very simple for most foreign enterprises:
- Your company has not been subject to the Belgian social security scheme for the 4 quarters preceding the employment of your first employee;
- Your company is or was not linked to another company which already employs or employed personnel in Belgium over the past 12 months (a shared shareholder, director or member of management and similar location, activities, Clients, etc.).
For the fist employee, this amounts up to €3,100 per quarter, with no end date. This totals to an annual reduction of €12,400. The target group reduction starts from the quarter of employment.
For the second employee, there is an NOSS reduction for thirteen quarters, totalling €13,750 (€1,550 for five quarters, €1,050 for four quarters, and €450 for the next four quarters). Employers have a reference period of twenty quarters to apply these reductions.
When hiring a third employee, a maximum NOSS reduction of €11,250 can be obtained (€1,050 for nine quarters and €450 for four quarters). Again, there is a reference period of twenty quarters, and the target group reductions start from the quarter of employment.
Employee | Reduction per Quarter | Total Reduction | Reference Period | Start Quarter |
First Employee | €3,100 | €12,400 per year | No end date | From the quarter of employment |
Second Employee | €1,550 (5 quarters), €1,050 (4 quarters), €450 (4 quarters) | €13,750 | 20 quarters | From the quarter of employment |
Third Employee | €1,050 (9 quarters), €450 (4 quarters) | €11,250 | 20 quarters | From the quarter of employment |
It is important to note that the first, second and third employee reduction is not available through an Employer of Record (EOR). This is because your company has no employees in Belgium as the employer status has been transferred to another existing employer in Belgium, the Employer of Record. Therefore, the use of employer without establishment in Belgium is an attractive option in view of the continuing financial advantage.
Is an Employer Without Establishment in Belgium taxable?
A key question, of course, is whether an foreign employer without establishment is subject to Belgian corporate tax, which you obviously would like to avoid.
Article 5 of Belgium’s double tax treaties defines a tax permanent establishment as a fixed place of business where an enterprise’s activities are carried out wholly or partially. This includes a place of management, branch, office, factory, or workshop (material permanent establishment).
Additionally, employees in Belgium who act on behalf of an enterprise and have the authority to conclude contracts and habitually exercise that authority create a permanent establishment (personal permanent establishment). This is the case when the employee of an employer without establishment is authorised to sign contracts.
However, no permanent establishment arises if the foreign enterprise’s activities in Belgium are limited to preparatory or auxiliary activities. By consequence in most times, an employer without establishment in Belgium doesn’t pay corporate taxes in Belgium. A tax advisor can guide you if you have doubts.
Conclusion about Employer Without Establishment in Belgium
It is an incredible advantage that it is so easy to hire staff in Belgium. Unfortunately, the business model with an Employer of Record is not usable because EOR is prohibited in Belgium.
With an employer without establishment in Belgium, there exists a solid alternative:
- Quick start: with the right payroll provider, your staff can start working in 2 to 3 weeks
- 100% legal: no worries about prosecution or fines
- Cost-effective: for the first employee, you can save up to €3,100 per quarter for an unlimited period of time
Complete the contact sheet below if you have any questions.