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Your contact person for this topic:
Marco Wirtz
Lawyer
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Contact:
- +32 11 29 47 01
- m.wirtz@euregio.law
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Further publications on this topic:
- Employment in Belgium – Part 2: Fundamentals of Belgian labour law
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More on this topic:
- Personnel
- Labour law
- International tax law
If you want to hire an employee in Belgium, you can do so either through a Belgian (subsidiary) company or directly via a foreign company. But what should you bear in mind when hiring an employee in Belgium? This question often arises, especially among foreign companies without experience in the Belgian labour market.
To help you get started, we have put together an overview of the most important aspects to consider when hiring an employee in Belgium. This overview covers both tax implications and social legislation, assuming a foreign company that wishes to employ personnel in Belgium.
This overview covers 3 aspects:
- Corporate tax: Does employing an employee in Belgium have corporate tax implications for the employer?
- Income tax: Where does the employee have to pay income tax?
- Social insurance: Where is the employee covered by social security and what social security measures must be taken before the employee can start working in Belgium?
1. Corporate tax in Belgium
According to the double taxation agreement between Belgium and most EU member states, a company is liable for corporate tax in Belgium if it has a permanent establishment in Belgium.
A permanent establishment in Belgium means that the profit generated in Belgium (= Belgian turnover less Belgian costs) is subject to Belgian corporate tax (25%).
A distinction is made between three types of permanent establishment:
1.1 Material permanent establishment
A permanent establishment exists if your company has a physical space in Belgium (e.g. as owner or tenant). This permanent establishment can take the following forms: branch office, place of business, factory, workshop, etc.
So if you rent an office in Belgium for your employees, you establish a permanent establishment.
1.2 Representative office
If you employ a representative in Belgium who is authorised to conclude contracts on behalf of your company, it is assumed that your company has a permanent establishment in Belgium.
If your foreign company employs (managerial) staff in Belgium, you should therefore bear in mind that a permanent establishment can be established simply by hiring them.
1.3 Construction or assembly work
Finally, the place of execution of a construction or assembly project is also considered a permanent establishment if the execution lasts longer than 12 months.
2. Income tax
The double taxation agreements also regulate which income is taxable in which country. In general, the following principles apply.
An employee who is employed by a foreign company is taxed in that country for every day he works there.
In Belgium, the country where he lives (and probably works most of the time), the employee must pay tax on his worldwide income and receives a tax exemption for the income that has already been taxed in another country.
The employer must withhold income tax from the gross salary on a monthly basis and pay the income tax to the Belgian tax administration on a quarterly basis. A Belgian payroll office can take over the calculation and payment of the income tax amounts to the tax administration.
3. Social security in Belgium
According to EU Regulation 883/2004, which regulates social security in the EU member states, an employee who lives in Belgium and works at least 25% of his total working hours in Belgium is subject to Belgian social security.
In this case, the employer must register as an employer with the National Social Security Office (RSZ). A payroll office can act as an authorized representative of the RSZ. This means that the payroll office registers your company as an employer with the RSZ and pays the Belgian social security contributions for your employees‘ salaries.
Below you will find an overview of your obligations as an employer if your company is registered with the RSZ.
3.1 Social security contributions in Belgium
You agree a gross hourly or gross monthly wage with your employee. As an employer, you must pay social security contributions on this gross wage (± 25% for white collar employees and ± 30% for blue collar workers).
The employee contributions are deducted from the gross wage and amount to 13,07%.
For blue-collar workers, the employer and employee contributions are calculated at 108% of the gross wage.
Unlike in some other EU member states, social security contributions are calculated on the basis of full (unlimited) employee remuneration.
However, a number of support measures have been introduced to reduce labour costs. In Belgium, for example, new employers are exempt from employer social security contributions for the first employee. For the second to sixth employee, interesting social security reductions can also be claimed, although these are limited in time.
3.2 Dimona
In Belgium, you must submit a Dimona notification to the RSZ before the employee starts work. This is an electronic notification with which you can report every entry and exit of an employee. Late notifications are penalised with a fine.
3.3 Industrial accident insurance
As an employer, you are legally obliged to take out occupational accident insurance with a Belgian insurance company. The insurance must be taken out on the first day of work at the latest. Please note that late registration is punishable by law.
The average cost is 0,50% of an employee’s gross annual salary. This means that for an employee with a gross monthly salary of 5.000 EUR, you should expect annual costs of around 350 EUR. If the employee’s job involves a higher risk, occupational accident insurance will be more expensive.
3.4 External service
Your company must also join an external service for prevention and protection in the workplace. The payroll office will take care of this for you. The costs depend on the risk associated with your company’s activities. On average, the cost per employee is 50 EUR per year.
Do you have a question or concern?
Do you have further questions about the tax and social law consequences of hiring employees in Belgium? Our Belgian lawyer Marco Wirtz specialises in advising foreign companies with employees in Belgium.
