Belgium's tax policies, social security system, and compliance requirements form a comprehensive framework aimed at ensuring transparency and fairness. In terms of taxation, Belgium implements a standard VAT rate of 21%, with reduced rates for specific goods and services. Corporate income tax is levied at a rate of 25% on all companies, with small and medium-sized enterprises (SMEs) potentially eligible for a reduced rate. Social security contributions are shared between employees and employers, safeguarding the rights of workers. Additionally, Belgium has implemented a series of compliance requirements, including BEPS measures aligned with international standards, FATCA agreements, CRS standards, and AML regulations, to combat tax avoidance and money laundering, ensuring the integrity of the financial system. These policies and requirements not only promote economic stability in Belgium but also provide businesses operating in the country with a predictable and fair business environment.

Tax implications

The tax landscape in Belgium is diverse, with key taxes including Value-Added Tax (VAT), withholding tax, and Corporate Income Tax (CIT). Here's a concise overview of each:

Value-Added Tax (VAT):

VAT in Belgium applies to all services rendered for a fee, tangible goods delivered, services acquired for consideration, intracommunity acquisitions, imports, and self-supplies by taxable persons. The standard VAT rate is 21%, but there are reduced rates:

- A 0% rate for specific transactions.

- A 6% rate for essentials like medicine and water.

- A 12% rate for food and restaurant services.

Imports are taxed at the same rate as domestic goods, with exports being VAT-exempt. Foreign companies must register for VAT in Belgium, with European companies able to register directly or appoint a VAT fiscal representative, and non-European companies required to appoint a representative. VAT returns are filed monthly or quarterly, and a new decree in June 2021 updated the rules for cross-border B2C e-commerce and VAT registration by fiscal representatives. For imports under €150, VAT may be exempt with the IOSS, but for imports above €150, the IOSS regime and simplified import procedures do not apply.

Withholding Tax:

In Belgium, withholding tax is deducted from employee wages monthly by employers. This includes:

- Salary Tax with progressive rates from 25% to 50%.

- Tax Reductions that may apply based on personal circumstances.

Dividend withholding tax is generally 30%, with exemptions for qualifying EU parent companies and non-EU/EEA shareholders under certain conditions. Interest paid to non-residents is subject to a 30% withholding tax, unless reduced by a tax treaty or exempt under EU directives. Royalties have a 30% withholding tax, less a standard deduction, with a reduced 15% rate for certain rights and licenses.

Corporate Income Tax (CIT):

CIT in Belgium is levied at a rate of 25% on both Belgian companies and foreign companies' Belgian establishments. There is an exemption for capital gains on qualifying shares under certain conditions. SMEs may benefit from a reduced 20% rate on the first €100,000 of profit, effective from the tax year 2021.

Customs policy

Belgium, as a member of the European Union's customs union, enjoys the benefit of tariff-free trade and the absence of trade barriers for goods moving among EU member countries. However, this privilege does not extend to goods imported from non-EU countries, which are subject to customs duties. The General Administration of Customs and Excise, which falls under the Federal Department of Finance, is tasked with the enforcement of both national and EU customs laws and regulations.

In Belgium, certain products like coffee and non-alcoholic beverages are subject to excise duties. Additionally, there are EU-level harmonized excise duties on energy products, alcohol, alcoholic beverages, and manufactured tobacco.

For foreign entities established outside the EU, importing goods into Belgium under their own brand requires the separate acquisition of a VAT identification number through a local or fiscal representative.

Import restrictions

Regarding import restrictions, Belgium has a comprehensive list of prohibited items. This includes, but is not limited to, counterfeit currency, wine and related products, goods undergoing phytosanitary controls (such as plants and vegetable products), goods with false origin statements, counterfeit or pirated goods, live animals and their by-products, unsafe foodstuffs, narcotics, chlorofluorocarbons (CFCs), waste products, CITES-listed items, furs of wild animals, fish, eggs, poultry, radioactive materials, weapons, explosives, cigarettes (including e-cigarettes with nicotine), alcohol, perfume, certain agricultural products, specific medicines, car radar and detection equipment, items infringing trademarks or copyrights, unregistered pharmaceuticals, and goods containing the biocide dimethyl fumarate (DMF). Tobacco products that are subject to excise regulations cannot be imported via post or courier, with the exception of those without excise that can be sent via post or courier. Additionally, the import of gems, gemstones, and diamonds to Belgian individuals is controlled, with diamonds and diamond powder requiring clearance at Antwerp's Diamond Office.

Customs incentives

To support trade and investment, the Belgian Foreign Trade Agency offers export incentives, including assistance with organizing joint economic missions and providing information on external markets. Although Belgium does not have foreign trade zones or free ports, it does operate customs warehouses where non-EU imported goods can be stored without immediate payment of customs duties and VAT. Furthermore, VAT warehousing procedures exempt imported goods stored in VAT warehouses from VAT. The EU's Authorized Economic Operator (AEO) status, established in 2008, facilitates faster customs clearance and reduced inspections for designated companies, promoting compliance and efficiency in international trade.

Labour environment

Belgium's labour environment and social security system are designed to protect the rights and interests of workers while maintaining a business-friendly climate.

Social Security Contributions

Employer and Employee Responsibility: All companies operating in Belgium, including foreign entities, must register with the National Social Security Office (ONSS/RSZ) and declare quarterly social security contributions.

Employee Contribution Rate: Workers contribute 13.07% of their gross salary to social security, without an upper limit.

Employer Contribution Rate: Employers are responsible for contributions averaging around 27% of the employee's salary.

Tax Deductibility: Social security taxes paid by both employees and employers are deductible for income tax purposes.

Variable Monthly Payment: There is a special social security contribution ranging from €9.30 to €60.94 per month, which is not tax-deductible.

Annual Cap for Families: The maximum annual special social security contribution for a family is capped at €731.28.

Self-Employed Contributions

Variable Rates: Self-employed individuals contribute between 20.5% and 14.16% to social security based on their professional income.

Foreign Workers' Considerations

Exemptions: Foreign employees may be exempt from Belgian social security contributions if they provide an A1 certificate (EU) or a certificate of coverage under a bilateral treaty.

Overseas Social Security Scheme (OSS)

Affiliation Option: Employees working overseas or not residing in Belgium can affiliate with the OSS to continue building social security rights.

Contribution Increase: Since 1 January 2022, the voluntary OSS monthly contributions have increased by 2%.

Public Holidays and Leave

Public Holidays: Belgium recognizes 10 public holidays each year.

Annual Leave Entitlement: Full-time employees are entitled to 24, 20, or 16 working days of annual leave, depending on their workweek.

Part-Time Leave: Part-time employees receive proportional annual leave, with a minimum of 10 days off.

Payroll Cycles and Employment Contracts

Blue-Collar vs. White-Collar: There are distinct payroll cycles and wage payment rules for blue-collar and white-collar workers.

Specific Contracts: Specialized employment contracts exist for sales representatives, caretakers, students, paid sportspeople, and domestic workers.

Remuneration and Benefits

Regulated Remuneration: The Joint Committee determines the minimum wage, year-end bonuses, and other benefits.

Additional Benefits: Employers have the discretion to offer additional benefits such as company cars, bonus schemes, meal vouchers, group insurance, and profit shares.

Working Hours and Time Zone

Standard Workweek: Belgian labour law mandates a maximum average of 38 hours per week, capped at 8 hours per day for a standard 5-day workweek.

Four-Day Work Week Option: Introduced in November 2022, full-time workers may opt for a compressed workweek, working 9.5 hours over four days for the same weekly hours but with an additional day off.

Saturday as Business Day: Since 1 January 2023, a neutralisation bill allows Saturday to be considered a business day.

Flexible Working Hours: Negotiable between employers and employees, with a maximum cap of 9 hours per day and 45 hours per week. Overtime is compensated with a 50% increase in hourly pay, or double on Sundays and public holidays.

Night Work Prohibition: Working between 8 pm and 6 am is generally prohibited, except for specific jobs requiring continuous presence or rotating shifts.

Time Zone: Belgium operates on Central European Time (UTC/GMT +1 hour).

Hiring and Retrenchment

Employer Registration: Employers must register with the National Social Security Office (NSSO) to get an identification number.

Employee Verification: It's necessary to check employees' nationality and ensure they have the required work authorizations.

Employment Contracts: Having proper employment contracts and being aware of collective bargaining agreements that may influence work rules.

Declarations: Employers must file a Dimona or Limosa declaration by the start date of the employee.

Insurance and Prevention: Affiliation with a service for work accident prevention and occupational accident insurance is mandatory.

Payroll Setup: Employers are required to initiate a payroll for their employees.

Termination Procedures: The reason for termination affects the process, with specific rules for employer-initiated, employee-initiated, mutual agreement, collective, or urgent terminations.

Notice Periods: Generally based on seniority, with options for individual or company-level agreements on more favorable terms.

Severance Pay: In collective dismissals, workers are entitled to severance pay, calculated as half the difference between their net wage and unemployment benefits.

Foreign Personnel Regulations

EU/EEA/Swiss Nationals: No work permit needed, but a residence permit is required for stays over 90 days within a 180-day period.

Non-EU/EEA/Swiss Nationals: Require both a work and residence permit or a single combined permit, regardless of the duration of stay.

Business Trips: Exempt from work permits for up to 20 consecutive days and 60 days annually, limited to non-productive work.

Work Permits

Non-EU/EEA Work Authorization: Required in advance for non-EU/EEA nationals, with various categories of permits for different worker categories or based on market research.

Short-Term Work: For up to 90 days, a work permit and employment permit are needed.

Schengen Visa Holders: Can stay and work for up to 90 days within 180 days with a specific work permit.

Long-Term Work: For more than 90 days, a single permit with a fixed term is required, which can be applied for immediately for up to three years.

Skilled Worker Requirements: Must hold a higher education degree, with a minimum salary threshold based on the average Belgian gross annual salary, with exceptions for certain age groups or professions.

Special Tax Regime for Expatriates

Amendments and Effective Date: The Belgian government announced changes to the special tax regime for expatriates, effective from 1 January 2022.

Eligibility: The new regime applies to all taxpayers who started working in Belgium from 1 January 2022.

Transition Period: Taxpayers under the old regime can opt for the new one until 31 December 2023. The new regime can be used for 5 years, extendable for another 3 years.

Legal Certainty: The new regime offers more legal certainty and replaces the previous administrative circular-based system.

Taxation on Worldwide Income: Expats are taxed on their global income unless covered by a double-tax treaty. Non-residents must provide proof of tax residency from their home country.

Conditions for the Regime:

  - No Belgian tax residency or living within 150km of Belgium in the past 60 months.

  - Recruited from outside Belgium or transferred within a multinational entity.

Salary Threshold: A minimum annual gross salary of €75,000 applies, with exceptions for researchers.

Compensation Package: Must detail the compensation package, including tax-free allowances, in the employment contract.

30% Rule: Allows a tax-free amount of up to 30% of gross remuneration, capped at €90,000 per year.

Social Security Alignment: The new regime provides clarity on the qualification of the tax-free amount.

Expenses Reimbursement: Employers can reimburse school fees and moving costs on top of the 30% rule.

Application Timeline: The new expat tax regime must be applied for within three months of starting employment.

HR Legislation

Multiple levels: Belgian labour laws are governed by multiple levels, including the Constitution, employment contracts, regional decrees, and collective agreements.

Regulated Matters: These laws cover a range of topics such as notice periods, termination procedures, pay protection, working hours, conditions, minimum holidays, gender parity, equal pay, and social security contributions.

Regulatory Body: The National Labour Council (NLC) is the primary authority overseeing these regulations, ensuring compliance and fairness in the workplace.

Compliance requirements

Belgium has established a comprehensive framework of compliance requirements designed to align with international standards and ensure transparency in financial and business operations. The country's approach to compliance encompasses a range of areas, from tax regulations to anti-money laundering practices.

Base Erosion and Profit Shifting (BEPS)

Implementation: Belgium has implemented transfer pricing documentation and country-by-country (CbC) reporting in line with the OECD's BEPS Action 13 for financial years starting from 1 January 2016.

\Three-Level Documentation:

- Country-by-country report (CbCR).

- Master file for group company information.

- Local file for detailed intracompany transactions.

Penalties for Non-Compliance: Range from €1,250 to €25,000, with increased risk of tax audits.

Multilateral Convention: MLI to prevent BEPS entered into force in Belgium on 1 October 2019.

Foreign Account Tax Compliance Act (FATCA)

Disclosure Requirement: Belgian financial institutions must disclose information about U.S. persons to the IRS through the Belgian Federal Public Service (FPS) of Finance.

Intergovernmental Agreement (IGA): Belgium and the U.S. signed an agreement on 23 April 2014 to implement FATCA.

Common Reporting Standard (CRS)

Adoption: The EU, including Belgium, adopted the CRS for automatic exchange of tax-related information as of 1 January 2016.

Bilateral Exchanges: Despite being a multilateral agreement, information exchanges occur bilaterally between member states.

International Financial Reporting Standards (IFRS)

Domestic Companies: Required to use IFRS in their consolidated financial statements if their securities trade in a regulated market.

Foreign Companies: Required to use IFRS unless their home jurisdiction's standards are deemed equivalent by the EU.

Anti-Money Laundering (AML) and Ultimate Beneficial Owner (UBO) Register

AML Act: Came into force on 18 September 2017, defining roles and responsibilities, including a 10-year legal retention period.

UBO Information: Companies must provide details of their UBOs to a national register.

Broadened Scope: Covers cryptocurrency services, prepaid cards, high-value commodities, and additional beneficial ownership measures.

6AMLD: The Sixth Anti-Money Laundering Directive took effect in December 2020, with a compliance timeline ending on June 3, 2021.

Whistleblowing

Directive 2019/1937: Requires companies with at least 50 employees to establish internal reporting channels for EU law breaches.

Protection Measures: Ensures anonymity and protection from retaliation for whistleblowers.

Effective Date: The new law comes into effect on 1 August 2023 for organizations with 250+ employees and by 15 December 2023 for those with 50-249 employee