In a lot of cases, you as an employer enjoy a substantial discount on your employees' payroll costs, and this in the form of an exemption from the payment of withholding tax, which you normally have to withhold from their wages and pay to the tax authorities.
In which cases do you qualify for this and what conditions are attached? Below we give an overview of the most common exemptions.
Research and development
If you are an employer engaged in research and development, you can obtain a partial exemption from withholding tax pass-through and this up to 80% of the withholding tax due on the wages of employees assigned to research and development projects within your company.
If you wish to make use of this, you should take into account the following conditions:
- As a rule, the employees involved must have a recognized degree in the sciences;
- Research activities must be notified in advance to BELSPO (POD Science Policy). These should be updated annually;
- You must be able to prove that you are conducting research activities. An administrative file must be built up and maintained with supporting documents that can be presented at any time during a tax audit.
Employee training
The federal government wants to encourage employers to invest more in the training of their employees than is required by law. That is why an exemption from withholding tax was introduced of 11.75% from the total of the salaries of all employees who have been employed for at least six months and attend training courses that meet certain conditions. If you want to take advantage of this exemption, as an employer you will have to, among other things, establish attendance records and keep information on the training courses attended.
The exemption is capped at EUR 3,500 per employee.
Overtime
There is an exemption from advance payment of withholding tax for overtime for which statutory overtime (20%, 50% or 100%) is due, limited to the first 130 overtime hours per year per employee (180 overtime for construction, 360 overtime for hospitality). However, an extension for the first 180 overtime hours applies until 30/06/2023. We recommend setting up an objective timekeeping system before applying this exemption.
The exemption currently amounts to:
- 32.19% of gross pay (which serves as the basis for calculating overtime pay) for overtime on which an allowance of 20% is payable
- 41.25% for overtime on which an allowance of 50% or 100% is payable.
Shift work
Under certain conditions, as an employer, you may be exempt from passing on a portion of the withholding tax that you withhold from the wages of employees who work at least one-third of their working hours in a shift system.
This exemption is calculated on total taxable wages, including premiums for shift work, and amounts to:
- 22.8% for regular shift workers
- 18% for workers working in a shift system on construction and related sites
- 25% for workers in a full-time work system
Night Work
Under certain conditions, you may be exempt from passing on a portion of the withholding tax that you deduct from the wages of employees who work at least one-third of their working hours between 8 p.m. and 6 a.m.
This exemption is calculated on total taxable wages, including premiums for night work, and is 22.8%.
Start-up company
Small companies that have been registered in the Crossroads Bank of Enterprises for no more than 48 months cannot pass on 10% of the withholding tax they deduct from their employees' salaries to the tax authorities. This percentage is increased to 20% for micro companies. Please note that the start-up company must not be affiliated with a company carrying out a similar activity.
The government thus provides many possibilities for exempting the transfer of withholding tax. However, always keep in mind that the application of each exemption is subject to certain conditions specific to the exemption to be applied. By keeping an up-to-date file, you can avoid many unpleasant surprises.
If you wish to start or update an exemption file, please do not hesitate to contact us. Would you like a conversation about the right approach for your business? Then make an appointment here with our pro experts!
