New audit wave on wage withholding tax exemption regimes

In the past few weeks, companies benefiting from one or more wage withholding tax exemptions have received a letter from the Federal Public Service of Finance informing them of the upcoming new audit wave. A similar process was followed in 2022 (see our Tax Alert of 30 May 2022). The letter states that 55.24% of the files audited last year resulted in an amendment and encourages companies to self-evaluate their compliance with the applicable laws and regulations, to mitigate financial risks. The letter also reminds companies of the points requiring particular attention further to the legislative changes applicable as from April 2022.

Recommendations for the self-evaluation

The letter provides, among other things, some recommendations to be included in the self-evaluation process:

• Companies should ensure that they have an internal process owner who is responsible for the proper functioning of the process;
• Companies should have a point of contact for the various internal and external stakeholders (legal division to follow up on the amendments to the law, financial division, HR social secretariat, FPS Finance, etc.) to facilitate collaboration between stakeholders;
• Supporting documents must be available as at the date of filing of the (monthly or quarterly) negative wage withholding tax return claiming the partial exemption;
• Companies must determine an internal or external party to file the negative wage withholding tax return claiming the partial exemption; and
• Companies must ensure that shift and night work meet the tax definition of the concept.

Attention points following the legislative changes applicable as from April 2022

The letter reminds companies of some of the points of attention arising from the legislative changes that entered into force as from April 2022, as follows:

• Companies must assess separately the shift and night working conditions for pay paid on or after 1 April 2022;
• The following specific codes per reporting period must be used in the negative wage withholding tax return:

1.  Code 74 for shift work; and
2. Code 75 for night work;

• The specific premium paid in consideration for shift or night work must amount to at least 2% or 12% (respectively) of the base hourly wage per shift/night working hour. As from 1 April 2024, the premium also must be stipulated in an objective social document (i.e., a collective labour agreement, work regulations, or an employment contract);
• The “one-third rule” (i.e., the requirement for an employee to have performed shift or night work for at least one-third of their working time during the relevant month to be eligible for the measure) must be assessed using the hourly basis (and not on a daily basis as previously permitted by the Belgian tax authorities);
• Companies making use of the wage tax partial exemption must maintain a nominative listing of eligible workers every month, containing all the information detailed in annex III of the royal decree of the Income Tax Code; and
• The minimum tax increase amounts to 10% (applicable as from the first infringement) for incorrect negative wage withholding tax returns filed on or after 23 October 2022.

Companies are reminded of the possibility to submit and/or adapt their negative wage withholding tax return related to income year 2022 via the Finprof application until 4 p.m. on 31 August 2023.

“Pain points” frequently identified during audits

Based on Deloitte Belgium’s experience with wage withholding tax exemption regimes, some of the pain points that companies often encounter include:

• Lack of internal control and coordination among the various stakeholders to ensure the correct application and timely compilation of supporting documentation (such as copies of relevant official educational certificates for employees in respect of whom the partial withholding tax exemption for researchers has been applied, time registration, and timesheets);
• No monitoring of legal or regulatory developments or administrative guidance, resulting in delayed (or even absence of) updates to internal processes to maintain compliance;
• Unbalanced successive shifts (i.e., not the same size); and
• Discrepancies between the planned shift or night work schedule and the actual time recorded.

More than ever, having streamlined processes in place is of critical importance when applying for wage withholding tax exemptions. Deloitte Belgium can assist in reviewing existing processes or provide support during an audit.

Please visit our Payroll Incentives web page for more information on the various wage withholding tax exemption regimes and to explore the associated opportunities for your company. Our specialist teams can assist you both in applying for such exemptions and in securing the incentives to which you are legally entitled.