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Starting in Belgium
All foreign companies looking to expand operations into Belgium examine tax in Belgium beforehand. Establishing a business in Belgium will likely necessitate the transfer of employees from the home country to operate locally. Given the intricacies of the Belgian tax system, it is understandable that there might be limited familiarity with it. This scenario presents specific challenges that must be addressed to ensure that your administration adheres fully to Belgian labor regulations. Additionally, it is imperative to ensure that your employees’ personal administrative matters are in complete compliance with Belgian law.
Payroll-Related Taxes in Belgium
The Belgian General Administration of Taxation, poses distinct challenges for employers, especially concerning payroll. Navigating these intricacies requires a thorough understanding of the Belgian tax regulations to ensure compliance and optimize tax efficiency for both the business and its employees.
Payroll tax in Belgium encompasses several key components, including social security contributions, income tax withholding, and various regional taxes. Employers must diligently manage these elements to avoid legal pitfalls and financial penalties.
Income Tax in Belgium
Employers in Belgium are required to withhold personal income tax (PIT) from their employees’ salaries. The withholding rates are progressive from 25% to 50%, meaning they increase with the employee’s income level. The withheld amount is then remitted to the Belgian tax authorities.
It is crucial for employers to accurately calculate and withhold the correct amount to ensure compliance and avoid discrepancies during the annual tax filing process.
Social Security Contributions
Belgium’s social security system mandates significant contributions from both employers and employees. Employees pay 13.07% of their gross salary, while employers contribute approximately 26%. These social security contributions are often considered by foreigners as payroll tax in Belgium.
These contributions fund various employee benefits such as healthcare, pensions, and unemployment insurance. Employers are responsible for withholding the employee’s share and remitting the combined amount to the National Social Security Office (NSSO). The rates for these contributions can vary, but they typically represent a substantial portion of the overall payroll costs.
Additional Deductions
Employers may also need to withhold additional amounts for specific deductions, such as child support payments, student loan repayments, or any other court-ordered garnishments.
Employer Contributions
In addition to withholding employee contributions, employers must also make their own contributions to the social security system. These contributions are paid at the same time as the employees’ contributions.
On average for a white collar employee there is a employer’s social security contribution of 26% on top of the employee’s gross salary. For new employers, there are interesting reduction for first hired employees if you meet certain conditions.
13th-Month Salary
Although this is not considered to be tax in Belgium, employers must foresee budget to pay a 13th-month salary, which is typically paid at the end of the year. This is often included in collective bargaining agreements.
VAT (Value Added Tax)
Belgium also imposes a VAT on most goods and services, known as Taxe sur la Valeur Ajoutée (TVA) or Belasting over de Toegevoegde Waarde (BTW). The standard VAT rate is 21%, with reduced rates for certain goods and services.
Municipal and Regional Taxes
In addition to national taxes, Belgium’s regional governments (Flanders, Wallonia, and Brussels) impose their own taxes and surcharges, which can affect payroll. Residents pay municipal and regional taxes, which typically range up to 9%.
Employers must be aware of these regional variations and adjust their payroll practices accordingly. This includes understanding any regional tax incentives or benefits that may apply to their business or employees.
Double Taxation Treaties
Belgium has double taxation treaties with many countries to prevent residents from being taxed twice on the same income. These treaties help to relieve Belgian tax residents from having to pay additional income tax to another country.
Tax Year in Belgium
The tax year in Belgium aligns with the calendar year, running from January 1st to December 31st.
Most Common Questions Related to Tax in Belgium
Is a work permit and residence visa required in order to have employees legally work / reside in Belgium?- Which social security system will apply? The home country system or Belgian social security? Will Belgian income taxes be due? Which tax benefits are available for the company and expats?
- Is the set-up of a payroll in one country or a salary split payroll in multiple countries required?
- Can a split taxation be applied in order to reduce the overall tax burden on behalf of the employee?
- Is the employee eligible for the beneficial special tax status applicable to foreign executives temporarily assigned to Belgium?
- Will Belgian labor law be applicable? Do I need to draft a Belgian employment contract or will an assignment letter be sufficient?
- Is the creation of a Belgian legal entity the best option to start doing business in Belgium?
- Is it legitimate to work with an EOR to avoid Belgian taxes?
- Where to find an advisor that can assist me with tax in Belgium?
Importance of Choosing the Right Tax Advisor
An upfront and well planned set up of the Belgian assignment will undoubtedly be a crucial factor in the success of your business in Belgium.
Using a tax specialist is recommended. They can help you navigate requirements and can guide you set up your local administration as well as assist you in fulfilling all formalities.
Contact us if you need help about tax in Belgium. The contact sheet can be found at the bottom of this page.
