Key upcoming developments affecting the tax incentive for shift work

This alert provides an update on two upcoming changes to the Belgian tax incentive for shift work and night/shift work—a proposed transitional measure to mitigate the potential effects of a Constitutional Court ruling on the partial wage withholding tax exemption for shift work, and an additional condition for the night/shift work premium as from 1 April 2024.

Proposed transitional measure addressing tax incentive for shift work

In response to two preliminary questions raised by the Belgian Court of Cassation, the Constitutional Court (“the court”) published judgment No. 21/2024 (Dutch | French) on 8 February 2024 with respect to the application of the partial wage withholding tax exemption for shift work (see our Tax Alert of 13 February 2024).

Although the court decided that the favourable regime is not considered discriminatory and may continue to exist, it refined the definition of shift work, stating that only shifts performing the same work in both purpose and magnitude may apply the tax incentive. This decision caused significant uncertainty for companies applying the tax measure.

The minister of finance has now proposed to provide legal certainty via a transitional measure until the end of 2026, with companies having the choice between the existing application and an alternative application.

Under the alternative application, the condition that succeeding shifts must perform “the same work in terms of size” would be excluded from the shift work definition. The size condition would be moved to the calculation of the exemption. This means that the exemption could also be applied where the size of the work between succeeding shifts is not the same. However, in this case the exemption would need to be reduced in proportion to the difference in size between the successive shifts. This is particularly important for companies where the volume of work is asymmetrically distributed between successive shifts.

For example, if the morning shift regularly comprises 60 people and the afternoon shift 80 people, the exemption can apply to 120 people (instead of 140 people) meaning a reduction of 14% in the exemption (i.e., a difference of 20 people on a total of 140 people). This percentage is calculated by reference to the shift with the smallest size.

This transitional measure would provide the next government with time to work on a necessary reform of the measure.

A more detailed alert will be issued when the necessary amendments to the legislation have been approved by the Belgian parliament.

Additional condition for tax incentive for night and shift work as from 1 April 2024

Since 1 April 2022 the night/shift premium is required to have a minimum substance (see our Tax Alert of 11 May 2023).To qualify for the tax incentive, a minimum premium of 2% for shift work and 12% for night work must be paid on top of the contractual gross hourly wage.

As from 1 April 2024 an additional condition applies to the tax incentive for night/shift work. The night/shift premium must be explicitly formalised in a collective labour agreement, work regulations, or an employment contract concluded between the employer and the employee. If this is not the case, the premium is considered invalid and the tax incentive may not be applied.

This additional condition is not applicable to the tax incentive for shift work on location when performing works in real estate.

Employers who benefit from the tax incentive for night/shift work are advised to ensure that their premium documentation is up to date. The documentation should reflect accurately the specific conditions related to the grant of the night/shift premium and the premium must be differentiable from any other premium provided by the company.

For further information, register for Deloitte Belgium’s webinar Tax incentive for shift work: application in challenging times on 28 March 2024 from 11:00-12:00.