Belgium: Benefits In Kind

employment income, means that the employee or director - who receives such benefits - must pay income tax (at progressive tax rates) and social security (employee/director + employer) contributions (subject to certain exceptions) on the amount that corresponds with the value of the benefit in kind.

As to the latter, the general rule is that the “taxable value” equals the “real value” in the hands of the beneficiary taking into account the facts and circumstances. In other words, the amount that the beneficiary would normally have to spend to obtain the benefit or the savings that the beneficiary has accomplished.

However, for some benefits in kind Belgian legislation provides a “lump sum” valuation method. Even if the actual value of these benefits in kind can be determined, the beneficiary will be taxed on the “lump sum” amount.

Taxation of these benefits in kind can only be minimized or reduced to nil where the employee or director (partially) reimburses the employer or company for the private use.

Hereafter you will find a nonexhaustive overview of the most frequently granted benefits in kind and their taxation method:

1 Company car

One of the most coveted remuneration methods to reward an employee or director is the free use of a company car - most of the time - accompanied with the free use of fuel – due to its relatively favorable tax treatment. A company car will initially be  used for professional purposes but in practice it regularly happens that the employee or director also uses the car for private purposes. This private use is regarded as a taxable benefit in kind.

The taxable value of the benefit in kind for a company car is determined on a “lump sum” yearly basis according to the following formula, regardless the real number of kilometers of private use.

official list price x emission coefficient x 6/7 x correction

1. The official list price, including options and paid VAT but excluding any discounts
2. Emission coefficient: min. 4% - max. 18% depending on the kind of fuel (gasoline or diesel)
3. The correction is a function of the first date of registration of the car (6% reduction per annum, with maximum of 30%)

The taxable value of the benefit in kind also includes fuel costs regardless of whether a fuel card is provided or not. Reimbursements – wholly or partially - made by the employee or director are deductible from the taxable lump sum value.

The employee or the director who receives such a free use of a company car will only have to pay income tax. The solidarity contribution (based on the emission of the car) will become due by the employer.

Example:

An employee or director was granted – apart from his normal salary - a BMW 530 TDI with an emission of 119 g/km and an official list price (incl. options and VAT paid, excl. discount) of EUR 54,950. The first date of registration of the car was 31 March 2013.

For the income year 2014 (tax year 2015) the employee or director will be taxed on a benefit in kind calculated as following:

Period 1st January 2014 until 31st March 2014 => car is 1 year old

= € 54, 950 x [5.5 + 0.1 x (119 – 93)] / 100 x 6/7

= € 3 815.10 x 3/12 months

= € 953.78

Period 1st April 2014 until 31st December 2014 => car is 2 years old

= (€ 54, 950 x 94%) x [5.5 + 0.1 x (119 – 93)] / 100 x 6/7

= € 3, 586.19 x 9/12 months

= € 2, 689.64

Total taxable amount = € 3, 643.42 (€ 953.78 + € 2, 689.64)

2 Mobile or smart phone

Another interesting remuneration method is to provide the employee or director with a free mobile or smart phone. In practice it very often happens that the employee or director also uses it for private purposes. This private use constitutes a taxable benefit in kind.

As Belgian legislation doesn’t provide a “lump sum” valuation method for such a benefit in kind, the general rule applies. In other words, the taxable value - in principle - equals the real value (taken into account facts and circumstances) or the amount that the beneficiary would normally have to spend to obtain the benefit/savings that he has accomplished.

In common practice, however, it’s not always easy to determine this so called “real value” and for that reason the Belgian Tax Administration (and Social Security Authorities) accept a lump sum amount of 150 EUR/year as taxable benefit.

Reimbursements – wholly or partially - made by the employee or director are deductible from the taxable value.

3 PC and/or internet  

Taking into account the automation and the use of social media it’s also common practice that the employee or director has a PC and/or internet at his disposal. In cases of private use it constitutes a taxable benefit in kind.

The taxable value of the benefit in kind for a PC and/or internet is determined on a “lump sum” yearly basis:

PC (including peripherals and software)	180 EUR/year
Internet (subscription and connection)	60 EUR/year

Reimbursements – wholly or partially - made by the employee or director are deductible from the taxable value.

4 Free housing

Another coveted remuneration method is to grant an employee or a director the free use of a house or a flat under the terms or on the occasion of exercising professional activities. This free use or use against a too low rent price is regarded as a taxable benefit in kind.

The taxable value of the benefit in kind for free housing is determined on a “lump sum” yearly basis, regardless the fair market rent, according to the following formula:

• Unfurnished and cadastral income (not indexed) < 745 EUR

indexed cadastral income x 100/60 x 1.25

• Unfurnished and cadastral income (not indexed) > 745 EUR

indexed cadastral income x 100/60 x 3.8

The above mentioned “lump sum” benefits are increased by 2/3 where the house or flat is furnished.

Reimbursements – wholly or partially - made by the employee or director are deductible from the taxable value.

Example:

An employee or director is allowed to use an unfurnished house for free. The cadastral value (not indexed) of the house is € 3,500. The index coefficient for the year 2014 is 1.6813.

For the income year 2014 (tax year 2015) the employee or director will be taxed on a benefit in kind calculated as following:

= € 3,500 x 1.6813 x 100/60 x 3.8

= € 37,268.82

If, in the case at hand, the house would be furnished, the benefit in kind would result in a taxable amount of:

= [€ 3,500 x 1.6813 x 100/60 x 3.8] + 2/3

= € 62,114.70

Taking into account the rather significant difference in the taxable amount of the benefit in kind, it’d be advisable not to grant a ‘furnished’ house or apartment for free.

5 Free heating and electricity

The free use or use against preferential criteria of a house or a flat is often accompanied by the provision of heating and electricity.

The taxable value of the benefit in kind for heating and electricity is determined on a “lump sum” yearly basis (tax year 2015):

Heating		Electricity
Director	EUR1900	EUR940
Employee	EUR850	EUR430

Reimbursements – wholly or partially - made by the employee or director are deductible from the taxable value.

6 Servants, housekeepers, drivers, gardeners, etc.

An employee or director who’s able to benefit from such personnel will be taxed on a benefit in kind.

The taxable value of the benefit in kind is determined on a “lump sum” yearly basis regardless the real staff cost for the company:

Full-time employment	5,950 EUR/year
Part-time employment	working time x 5,950 EUR/ year

Reimbursements – wholly or partially - made by the employee or director are deductible from the taxable value.

As illustrated above, these are just some of the most frequently granted benefits in kind. It needs no further clarification that most of these benefits in kind are often used to offer a tax-efficient remuneration.

However, if an employer or a company wants to grant such benefits to its employee or director it’s very important that the appropriate valuation method is used and that the necessary pay slips are drawn up in order to avoid tax penalties ranging from 50% (individual) to 100%(company)…

 

If you have any questions, please feel free to contact us.

Delphine Vandamme
E delphine.vandamme@vgd.eu