While payroll administration is often an overlooked part of running a business, it is extremely important to ensure that your staff are paid correctly, on time, and that the necessary taxes and deductions have been accounted for. In Belgium payroll administration is especially important, as your business needs to ensure that it remain compliant with the local laws and regulations.
Payroll in Belgium
Taxation in Belgium is one of the highest in Europe and as such there are various deductions and components that need to be accounted for, when administering a payroll in Belgium. These deductions include social security contributions, income tax, and other tax, such as municipal or regional taxes. Businesses also need to be mindful of corporate taxes, VAT and other deductions that may be applicable.
Social Security Contributions Belgium
Both employers and employees are required to contribute to social security. An employee is required to contribute 13.07% of their gross salary to social security, with no cap placed on the amount. Foreign employees who are employed in Belgium for a short period or there on a short-term project and contribute to the social security schemes in their home country, could be exempt from paying social security in Belgium.
An employer is currently required to contribute around 27% which may progressively decrease to a rate 25%.
Residents of Belgium (irrespective of nationality) are required to pay personal income tax on their total worldwide income earnings, which is taxed on a sliding scale. Non-residents are only taxed on any income sourced in Belgium.
Personal income tax (PIT) is determined by calculating the tax base and assessing the taxable income due on that figure. PIT is charged on a sliding scale.
Non-residents taxable income
There are certain categories of income remitted from a tax resident in Belgium, to a non-tax resident, that are taxable. A clause in the Belgian Income Tax Code applies to such payments made to non-residents, provided the following conditions are met:
- The income stems from a provision of service.
- The income amounts to being a profit or benefit to the non-resident.
- There is a direct or indirect link between the non-resident supplier and the resident counterpart.
- The services that have been provided are within the scope of the of one’s business activities, the activities of a corporation, a taxpayer, or Belgian establishment.
Corporate Income Tax (CIT)
Generally, the base for CIT is determined on an accrual basis, which looks at a company’s worldwide income, minus deductions. CIT is applied at rate of 25%, to both Belgian companies (who are subject to Belgian CIT) and private entities of foreign companies in Belgium (who are subject to non-resident CIT).
Small and medium sized enterprises (SME’s) can benefit from a reduced CIT rate of 20% on the first bracket of €100,000 profit.
A surcharge is also liable to be paid on the final CIT amount upon assessment. This surcharge can however be avoided if a sufficient amount of advanced tax payments have been made. As of 2020, the surcharge is 6.75%.
Minimum Tax Base
For companies who have a taxable profit that exceeds €1 million, a minimum tax base applies through the limitation of certain deductions. Deductions in the basket are limited up to the amount of 70% of the profits which are greater than the €1 million threshold, while the 30% that remains is fully taxable at the normal CIT rate. Deductions that occur outside the basket are fully deductible.
Partner with INS Global
INS Global has been delivering high quality service to our clients all across the world, for more than 15 years. We ensure that we manage and administer your businesses payroll timeously and efficiently. We also offer a range of other services which include PEO, which allows you to hire staff in Belgium without setting up a separate entity, recruitment, and invoicing. Get in touch with us today and let us simplify your business expansion.