There are multiple things that the Belgians are known for apart from their impeccable taste in chocolate, waffles, and beer. One of these is their business acumen which is why this country is an attractive destination for foreign companies.
Apart from navigating the French and Dutch dialects spoken in Belgium, it can seem like an overwhelming experience to do business here. The following is a guide to Belgium payroll and taxation for those who’re interested in enjoying the state’s attractive tax structures.
Payroll and Taxation Rules in Belgium
It’s always a good idea to do your research before you consider doing business in a foreign country to avoid getting on the wrong side of the law. You might want to look into the process of getting a Belgium work permit as well.
On the 22nd of March this year, a new law was passed in the country that requires a new income tax reporting and tax withholding obligation applicable to all Belgian employers. This law applies to the payroll and remuneration of employees by a foreign company that’s tied to a Belgian employer or parent company. Here are some tips to help you navigate this and other regulations:
1. Mind your p’s and q’s
All these technical terms can be confusing but for the sake of simplicity we’ll clarify a few of the important ones. Withholding tax refers to a tax imposed on the employer as the income payer, as opposed to the employee who is the recipient of the income. The term ‘withhold’ refers to the amount (tax) that is being withheld from the employee’s income.
The withholding tax is imposed on remuneration and benefits conceded by the foreign company. This translates to a taxable benefit in Belgium. Despite your involvement or lack thereof in the allocation of these benefits you are still liable for withholding tax.
Before this law was passed, employers didn’t have to report remuneration or withholding tax for foreign companies if the Belgian employer/company had no ties to the payroll. The only legal obligation they had was to report on stock options and report the foreign income in their own personal tax capacity and documentation.
2. Report your income tax on time
Any benefits that were granted in a financial year need to be reported on that particular year’s salary statement and submitted to the tax authorities the following year.
3. Get your payroll in order
The payroll should be executed in a timely and accurate manner. Several companies will choose to appoint a global payroll management company in order to guarantee efficiency, professionalism, and lawfulness. This makes the dreaded ‘brown-enveloped’ time of the year easier and less stressful.
Other companies would rather establish a company in Belgium and have a payroll provider. If this sounds more like your kind of option, you would have to set the company up and register with the relevant authorities to obtain a VAT number.
Alternatively, you could run your payroll as a solo mission with no third party. The latter is the most daunting as you would have to hire practitioners within the company to ensure a smooth payroll administration, as well as payment of tax and social security that adheres to all the statutory requirements.
There’s no need to open a Belgian bank account to make the necessary payments to your employees and tax authorities. Just keep in mind that lack of compliance with these laws can result in penalties for late or incomplete filing and submissions.
4. Sort out your social security
If your company has employed Belgian citizens then you have to register with the Belgian social security administration and adhere to its regulations. This will enable benefits such as retirement, family providence, and health insurance. This also applies to self-employed people too.
Belgium is known for being a foreign investment-friendly country. This is evident in the tax incentives they offer to businesses and individuals. This welcome should be met by adhering to laws and doing your research on the business culture of the country.
This includes knowing the standard of living for employees and the minimumBelgium salary. For example, you must understand how salaries are adjusted every year according to employees’ cost of living. This is overseen by the Joint Industrial Committee of Belgium.
Understanding the business culture of a country will, in turn, make it easier and more profitable to conduct business there.