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. You can read more about the most recent changes to the bonus system in this newsletter.
For 2009, employers could deduct a maximum bonus per employee of EUR 2,314 under such plans.
For 2010, the maximum employee bonus has been set at EUR 2,299. However, the National Social Security Office's Management Committee and the competent department of the Federal Public Service for Finance have agreed to apply for 2010 the 2009 amount (i.e. EUR 2,314) if the targets under the plan are mainly met on the basis of performance in 2009.
The maximum bonus per employee for 2011 will obviously differ, and it is therefore advisable to mention in the plan that the bonus will be indexed at the time of payment.
If the collective bonus plan meets the applicable statutory criteria, including with respect to the maximum bonus per employee as indicated above, the plan will 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 thus represents a net gain to the beneficiary.
The employer must still pay annual social security contributions at a rate of 33% on all bonuses paid. However, the total cost (bonuses + social security contributions) is deductible for corporate tax purposes.