This article will initially discuss several new measures related to employees—a special tax regime for expatriates, allowances for e-workers during Covid-19, and an update on cross-border taxation during Covid-19.
Special Tax Regime for Foreign Executives and Specialists
Belgium has a special tax regime for foreign executives and specialists temporarily employed in Belgium. Under this attractive tax regime, expatriates who meet certain conditions can benefit from a double reduction of Belgian income tax and social security contributions.
Such special tax regime can be obtained only upon on a formal application, followed by an approval by the Belgian tax authorities. The expatriate must file an application, jointly with their (Belgian) employer, within six months following the month of their arrival in Belgium. If such deadline is not met, the special tax regime can still be obtained, but will only take effect as of January 1 of the year following the filing of the application. It is a requirement that the individual should not yet have been assessed as a Belgian tax resident.
On February 9, 2021, the competent tax authorities announced some changes regarding the procedure and the format for the application of the special tax regime for foreign expatriates, with the main objective of harmonizing the application procedure and reducing delay in the process.
What Are The Changes?
- New mandatory information sheet
As of March 2021, an information sheet in new format must be completed and attached to each application request, containing the information that was usually communicated in an application (but without a specific format), mainly:
- identification details of the employer, the expatriate worker and, if applicable, the worker’s partner (spouse/legal cohabitant);
- specific information concerning the personal situation of the expatriate worker, such as university degree, personal and economic links (if any) with Belgium in the past, etc;
- payroll information.
If the new information sheet, in the format defined by the Belgian tax authorities, is not attached to the application, and if the information provided is not complete and accurate, the application will be deemed not to have been filed. It is therefore strongly recommended to ensure that the application meets the new format and that it contains all the requested information.
- Proof of marriage for expatriate households
In order to be able to tax jointly married (or legally cohabiting) persons, the Belgian tax authorities now require the following documents to be attached to the application where neither or only one of the partners resides in Belgium:
- proof of marriage;
- proof of family composition at the start date of the employment in Belgium.
Those documents must be written in French, Dutch, German or English: if this is not the case, an official translation must be enclosed.
- Introducing a pre-filing
The Belgian tax authorities have also set up a new “pre-filing contact point” which allows an expatriate to obtain initial feedback from the tax authorities regarding a specific situation and whether it would be possible to obtain an approval decision to access the special tax regime.
When this pre-filing contact is requested, the Belgian tax authorities have a period of six weeks following the date of receipt to respond. It should be noted that applying for this pre-filing contact does not suspend the deadline within which the request for applying for the special tax regime must be filed.
- Modernization of application procedure
The tax authorities also announced some changes involving future modernization of the filing process via an electronic portal (MyMinFin application). The launch date is not yet known.
Business operating in Belgium with international activities could benefit from the expatriate tax regime. Significant formal changes apply to the filing procedure (without significant changes to the conditions themselves), together with the new possibility of introducing a pre-filing request in specific situations to receive an initial indication whether an employee could benefit from this advantageous tax regime in Belgium.
Allowance for E-working Employees During Covid-19: Update
On February 26, 2021, the Belgian tax administration issued a circular letter (Circular 2021/C/20, “the Circular”) which replaces the circular letter of July 14, 2020 and provides clarifications and guidance on the granting of tax-free cost compensation for e-working to employees.
The Circular foresees that the payment of certain home office allowances and the provision or reimbursement of office furniture and ICT equipment is neither a taxable benefit for employees nor subject to social security contributions.
According to Circular 2021/C/20, an employer may grant a non-taxable home office allowance to an employee who works from home on a structural and regular basis. The definition of “structural homeworking” requires the employee to work from home for the equivalent of one day per week. This can be one day per week, two half-days a week, multiple days each week for a number of hours (e.g., two hours per day), or one week per month. This needs to be assessed on monthly basis.
In principle, the fixed allowance cannot be granted (even on a pro rata basis) if there is no structural and regular homeworking.
The Circular excludes (i) employees who only work from home outside normal working hours (for instance, only evenings or weekends), (ii) company directors, and (iii) workers subject to special regimes, such as foreign managers or employees working under a “salary split” agreement (they could however benefit from an allowance, to be determined on a case-by-case basis; for certainty, a request for an advance decision can be filed).
Fixed Home-office Indemnity
The employer can grant a fixed office allowance of up to 129.48 euros ($155) per month (increased to 144.31 euros for the months of April, May and June 2021). This amount may also be paid during normal annual leave. This amount is not to be reduced for part-time work.
In addition, the employer can make a distinction in the amount on the basis of the category of staff to which the employee belongs, provided that there is sufficient justification for a higher cost allowance for specific staff members.
The Circular details what expenses the fixed indemnity covers. In brief, these are expenses incurred in the course of working from home (use of office space at the employee’s home, printer and computer equipment, office supplies, utilities such as water, electricity and heating, etc.) with the exception of the costs related to the purchase of office furniture and computer equipment. The fixed indemnity can no longer apply if any of the office expenses, such as ink cartridges or electricity, are already subject to reimbursement.
Reimbursement of Purchase Price of Office Furniture
The tax administration accepts that some expenses can be reimbursed in addition to the fixed indemnity: this concerns reimbursement for the following items:
- office chair;
- office table;
- office cupboard;
- functional desk lamp;
- second computer screen;
- printer and/or a scanner;
- mouse or a touchpad;
- telephone headset;
- specific equipment needed by employees with a disability in order to be able to work easily with a personal computer.
The Circular specifies that the expenses should be reasonable and necessary for the normal performance of the professional activity. The expense for the equipment can also only be reimbursed if there are supporting documents. The employee will always have to provide an invoice to the employer for the reimbursement.
The Circular lists what is the normal useful life for certain appliances and furniture in order to avoid any abuse in the application of this measure.
Provision of Equipment for Working from Home
The Belgian tax authorities also accept that certain goods are made available to the employee in addition to the fixed office expenses allowance without this making the provision of the goods give rise to a taxable benefit in kind. The Circular refers to the same list of equipment and the same conditions for reimbursement of office equipment as well as for the provision of such office equipment itself.
The Circular provides that no benefits in kind are to be considered with regard to the provision of equipment itself. Therefore, no withholding tax or social security is due (some exceptions are listed). If the employee leaves the employment position and has permission to keep the equipment, the employee will then be taxed on a benefit-in-kind equivalent of the equipment’s residual value.
Fixed Allowance for Professional Use of Other Equipment
The Circular also lists some other flat-rate indemnities, including:
- a current internet package of 20 euros per month;
- a new flat-rate allowance of 20 euros per month for the use of a private computer for professional purposes within the framework of teleworking;
- a new flat-rate allowance of 5 euros per accessory (such as a screen or printer) used for professional activity, with a maximum of 10 euros per month.
Of course, the employer may not intervene in the same costs in any other way. All these allowances are considered as reimbursements of costs specific to the employer, made in the context of working from home and must also be justified by individual documents.
E-workers are eligible for specific allowances, even for part-time homeworking. The lump sum amount is tax free (and not subject to social security contributions), with an increased amount for April, May and June 2021 for the home-office indemnity.
On one hand, of course such allowances are not cumulative with any reimbursement of cost or with any other indemnity covering the same expenses: a detailed check of the business’s allowance policies is required. On the other hand, other expenses are not covered and can additionally be reimbursed, or equipment for working from home can be provided free of tax and social security contributions.
The recently updated Circular will provide important clarity for any adjustment of policies to support employees in their professional activity conducted from home.
Extension of Agreements Regarding Cross-Border Taxation During Covid-19: Update
Belgium’s mutual agreements with Luxembourg, France, Germany, and the Netherlands to address cross-border worker taxation during pandemic-driven restrictions, have recently been further extended until June 30, 2021, as the Covid-19 pandemic continues to impact public health.
For more information about these Covid-19 measures, we refer to our previous article.
Place of Supply of Training, Conferences and Seminars: VAT Position
The value-added tax (VAT) place of supply of “services in respect of admission to events” in a business-to-business (B2B) context is a recurrent subject of debate within the EU.
The localization rule foreseen by the VAT Directive is clear; it is the place where the events take place (Article 53 of the VAT Directive 2006/112/EC). An Implementing Regulation (Implementing Regulation no. 282/2011 dated March 15, 2011) further defined the essential characteristics of these services as being the granting of the right of admission to an event in exchange for a ticket or payment. The Regulation also listed examples of the type of events covered by the exemption (shows, concerts, sporting events such as matches or competitions, conferences and seminars, etc.).
The source of the debate, and what creates the risk of double or non-taxation, is the lack of harmonization between the EU member states as to what characterizes an “event.” What makes the occasion so special and important that it becomes an “event” that is localized according to a specific localization rule (Article 53 of the VAT Directive) instead of the general B2B place of supply rule?
The distinction is particularly difficult in the field of educational and scientific events (conferences and seminars).
In the past, the Belgian VAT authorities adopted a strict interpretation of the concept of “event.” According to the Belgian VAT authorities, an event could only relate to gatherings or occasions taking place over a full day maximum. Other member states adopt other duration criteria, use other elements to characterize an event (elements related to the content, the organization, etc.) or exclude certain transactions from the notion (“in-house trainings”).
In its decision in the Konsulterna case (C-647/17, March 13, 2019), the Court of Justice of the European Union decided that a five-day course on accountancy and management, solely supplied to taxable persons, qualified as a service “in respect of admission to event.” The decision was justified by the need to tax supplies of goods and services as far as possible at the place of consumption.
New Position of Belgian VAT Authorities
Further to the Konsulterna decision, the Belgian VAT authorities adapted their position on the place of supply of educational events such as training, seminars or conferences (administrative Circular 2021/C/19, dated February 26, 2021). The new position will take effect as from July 1, 2021.
In Circular 2021/C/19, the Belgian VAT authorities confirmed that the duration cannot be considered as the only decisive element and that the following elements should also be taken into account: topic of the course; course taking place at predetermined place and time. As for the duration criteria, the Belgian VAT authorities now set the limit at seven days. For events exceeding that limit, the qualification as an “event” is not excluded, but a case-by-case analysis will have to take place based on all factual elements, including the content of the course and its location.
In view of preventing cases of double or non-taxation where an event takes place in another member state, the Belgian VAT authorities give priority to the member state where the event is taking place to rule on the place of supply of such event. If there is a risk of double taxation, the Belgian VAT authorities will take a decision on a case-by-case basis and could make contact with their counterparts.
In the case of events taking place in several member states, each member state will be invited to rule on the place of supply, knowing that if the occasion qualifies as an “event” it is in principle deemed to take place in each member state proportionally to the duration of the event in every member state.
The position adopted by the Belgian VAT authorities is significantly inspired by the Guidelines from the VAT Committee (see Guidelines resulting from the 114th meeting of December 2, 2019).
Conferences and seminars taking place in Belgium for a duration of less than seven days will in principle be considered by the Belgian VAT authorities as “events” taking place in Belgium for VAT purposes. For conferences and seminars taking place in Belgium and exceeding the seven-day limit, the Belgian VAT authorities recommend a case-by-case analysis based on all the (factual) elements. Among these elements, the program and content of the course will more than probably influence the decision of the VAT authorities.
Remuneration policies and procedures for businesses in Belgium have to integrate the recent changes discussed above. Where the business generates conferences and seminars in Belgium (B2B), the specificities of the Belgian VAT localization rules are updated.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Laurent Donnay de Casteau is a Partner, Lionel Wellekens is a Counsel and Nawel Benaisa is an Associate with Advisius, Belgium.