Spending review on withholding tax exemptions

The Belgian Federal Government, at the request of the European Commission, commissioned a comprehensive spending review on withholding tax exemptions and was published on 31 August 2026. Conducted by a working group comprising the FOD BOSA (Federal Public Service Policy and Support), FOD Finances, and the Inspectorate of Finance, this review was mandated for completion by Q4 2026. The research questions were formally established by the Council of Ministers on 18 July 2025. This review builds upon previous spending reviews from 2021 and 2023, providing an updated assessment of three critical tax exemption regimes.

Topics analysed

The spending review examined three withholding tax exemption regimes, representing a combined tax expenditure of EUR 4.4 billion in 2024:

1. Research & Development (O&O)- EUR 1.6 billion - Exemptions for researchers and research-dedicated working time in companies and scientific institutions.
2. Night and Shift Work - EUR 2.0 billion - Exemptions for employees working night shifts, continuous operations, and shift-based arrangements.
3. Overtime - EUR204 million - Exemptions for compensated overtime work under various labour law provisions.

General and other exemptions further add on to ca. EUR 530 million

Key findings and recommendations

The review identified significant challenges across all three regimes:

• Unclear objectives: Many measures lack SMART (Specific, Measurable, Achievable, Relevant, Time-bound) goals, complicating effectiveness evaluation.

• Administrative fragmentation: Multiple FOD Finance services handle these exemptions without coherent coordination, creating inefficiencies and inconsistent outcomes.

• Ambiguous legal frameworks: Vague statutory language creates excessive interpretation space, leading to disputes and control delays.

• Productivity concerns: While companies using exemptions show higher labour intensity, evidence suggests this reflects a shift toward labour-intensive production rather than genuine job creation.

In addition, a three-tiered approach was formulated with specific suggestions per exemption regime and can holistically be summarised as:

• Quick Wins: Standardize documentation requirements, clarify key legal concepts, reform sanction policies, and increase thresholds where appropriate.

• Medium-Term Reform: Conduct impact analyses on potential abolition, redefine policy objectives, and consider alternative support instruments better aligned with stated goals.

• Long-Term Strategy: Build a data-driven risk analysis and control system leveraging eGovernment 3.0 integration and standardized time registration data.

The following indicative examples of some medium-term reform recommendations that may be an important difference as to the current frameworks include:

• To reflect to what extent there is a need to claw back the R&D wage withholding tax exemption in the case the rights and intangible assets resulting from the R&D are not maintained in the Belgium-based entity or branch

• To reflect to what extent there is a need to limit the night and shift work wage withholding tax exemption to the actual cost of the premiums/revise the calculation method

It is important to underline that these suggestions remain recommendations. Their translation into official legal guidelines or regulatory frameworks will depend on government priorities, budgetary constraints, and political consensus. However, as the Federal Government is currently re-initiating budgetary discussions, the spending review may influence the pace and scope of any eventual implementation.