Since 1 January 2008, it has been possible for employers in Belgium to introduce a collective bonus system eligible for favourable tax and social security treatment. In the current economic crisis, this type of bonus could help employers lower their salary costs without adversely affecting employees’ remuneration packages.

To qualify for favourable treatment, the bonus must be collective, meaning:

  • it must be granted to all employees of the company or group of companies or to all employees in a defined category; and
  • it must be linked to the company’s results or to collective objectives, defined in advance; these objectives must be clear, transparent, measurable and verifiable and may not be linked to individual evaluations or objectives or to an objective the realization of which is already certain at the time the bonus system is introduced.

The bonus cannot replace existing salary. However, if the employer’s existing bonus scheme already provides for collective objectives, it can be replaced by a collective bonus system.

The bonus may not exceed a maximum of EUR 2,314 (in 2009) per calendar year, per employee.

Bonuses meeting the aforementioned conditions may qualify for favourable tax and social security treatment. In other words, the bonuses will be exempt from tax and social security contributions in the hands of the employees. The abovementioned amount of EUR 2,314 thus represents the net gain to the beneficiary.

The employer must pay annual social security contributions at a rate of 33% on the collective bonuses. The total cost (bonuses + social security contributions) is a tax-deductible business expense for corporate tax purposes.  

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