The Belgian government has announced new rules for the tax treatment in Belgium of share-based remuneration and other benefits in kind, granted to Belgian employees, who work for Belgian entities of international company groups.
Under the current legislation, there are only general reporting and tax withholding obligations for benefits, granted to employees by Belgian companies or by Belgian branches of foreign companies. Exceptionally, there are also specific reporting obligations for stock options, which are granted under the law of 26 March 1999 by foreign companies to employees of Belgian group companies, working in Belgium.
Due to these restrictions, the reporting and withholding tax obligations were not generally applicable and many situations occurred where tax reporting is often delayed up to the moment when the employee is filing his or her Belgian annual income tax return. This delay in tax reporting also delays the actual payment of the tax by approximately 12 to 28 months after the end of each income year.
Share based remuneration (for example restricted stock units, options outside the option law of 1999, or free or discounted shares) or other taxable benefits are often offered by companies, located outside Belgium to employees of group companies in Belgium. Such benefits most often do not fall under the above mentioned reporting and withholding tax obligations. Consequently, there is no guarantee for the Belgian revenue that such income will properly be reported in a Belgian tax return by the beneficiaries and that the Belgian taxes will be properly paid.
In view of this situation, the government has recently announced the intention to implement new rules. A requirement will be introduced for the formal reporting (after the end of each income year) of such share-based remuneration and other taxable benefits to the Belgian tax authorities. This reporting obligation would be imposed from income year 2018 onwards to those Belgian companies, where beneficiaries of benefits, offered by foreign group companies, are employed. From January 2019 the obligations for the Belgian companies would even be extended to an obligation to calculate Belgian withholding taxes on the benefits and to pay these taxes to the Belgian revenue.
This is a significant change of Belgian tax rules, which is of great importance for international employers. Especially for share-based remuneration, the situation can become quite complex due to the fact that such remuneration is usually spread in time (several years may lapse between the moment of grant of the benefits and the vesting/exercise moment). It may also be challenging to properly allocate taxable income to Belgium for those employees, who work in more than one country during the time period between the granting and the vesting/exercise of the benefits.
At this moment, it is still unclear how the intended changes will actually be implemented in the Belgian tax code and to what extent Belgian companies, which are part of international groups, and their employees will be impacted by the new obligations. We are therefore further awaiting the new legal text, which are expected by the end of this year.