Many companies, which are established in Belgium, have board members, who are residing outside Belgium. In case they are remunerated for their board membership, their director fees will be subject to income taxation in Belgium and also to Belgian social security contributions (in the self employed social security scheme).

The social security status of foreign board members of Belgian companies, who are not remunerated,  has been subject to several legal disputes, which have been brought before the highest levels of jurisdiction. On the basis of the disputes is the practice of Belgian social security authorities to suddenly claim the quarterly minimum social security contributions for a number of years, increased with interest charges and a 10% penalty.

The resulting claim for payment of social security contributions is often not enforced towards the individual director (where it can most often not be collected efficiently), but is addressed to the Belgian company. Indeed, under Belgian law, the company is jointly liable for payment of the social security contributions of it’s directors.

The basis of the disputes is article 3 § 1, fourth paragraph of the Royal Decree nr. 38 of 27 July 1967 on establishment of the social status of self-employed persons. This provision contains an irrefutable presumption that a representative of a Belgian company (subject to corporation tax) pursues a professional activity as a self-employed person.

This legal provision, however, holds an intrinsic defect because it constitutes an unequal treatment of various categories of persons, who are subject to Belgian self employed social security contributions. The article has therefore already been the subject of two leading disputes up to the level of the highest courts.

In a first decision (No. 176/2004 of 3 November 2004), the Court of Arbitration ruled that the articles 10 and 11 of the Constitution were violated because board members of companies were subject to an irrefutable presumption, where other categories of self-employed persons are subject to only a rebuttable presumption.

Although the aforesaid article 3 makes no distinction on the basis of the domicile of the representative, the Court of Arbitration in 2004 limited the possibility to deliver evidence of a non remunerated activity (and therefore exemption from social security) to individuals, who are residing in Belgium. The distinction, which was made based on domicile goes back to the report to the King that preceded the Royal Decree.

The Court of Arbitration therefore only solved the unequal treatment between a subgroup of corporate representatives and other self-employed persons. This continued unequal treatment of foreign directors has given rise to a second dispute, this time at the level of the Court of Justice of the European Union.

In the decision of 27 September 2012 (Partena ASBL vs. Les Tartes the Chaumont-Gistoux SA) this unequal treatment was challenged by the court in the case of a non remunerated director, who was residing in Portugal (a Member State of the European Union).

The recent court decision solves the issue for many foreign directors, but this still leaves an unequal treatment of those directors, who are residing in a country outside the European economic area and also not in a treaty country (bilateral social security Convention).

It is quite illogical that exactly this group of unpaid directors remains subject to claims for the payment of social security contributions, especially since it is quite unlikely that a director, living outside Europe, would secretly be engaged with the management of the Belgian company with the purpose of avoiding the payment of social security contributions. The justification for such unequal treatment therefore appears to be quite weak.

One can note that for unpaid directors of companies, the internal Belgian legislation offers a second method for claiming exemption from Belgian social security contributions. This is the case when the director has another activity, such as being an employee or a retired person in combination with the non remunerated mandate. Unfortunately, the Belgian social security authorities also refuse this exemption to individuals, who are not residing in the European Union or in a treaty country. One can therefor expect new court cases to be upcoming in the future against the remaining discriminations.