Over the past year, the Belgian tax authorities have been scrutinizing the equity compensation tax withholding and reporting practices of multinational companies (particularly Belgian subsidiaries of US companies). Historically, the Belgian tax authorities have held the view that tax withholding and (employee and employer) social tax obligations should only arise if the costs of the equity awards are borne by the local subsidiary, or, if the local subsidiary is involved in the administration of the equity awards. On recent audits, the Belgian tax authorities have been closely examining the level of local subsidiary involvement in the equity plan/award grants to assess whether a withholding and reporting obligation applies. In light of this heightened scrutiny, US companies granting equity awards to employees of subsidiaries in Belgium should review the level of involvement and support provided by such Belgian subsidiaries. Absent reimbursement, activities often undertaken by local subsidiaries in Belgium that could prove problematic include:
- participating in the selection of potential Belgian award recipients;
- determining the criteria for the grant of equity awards;
- determining the number of equity awards to be granted, either directly or indirectly, to Belgian award recipients;
- determining the status of outstanding equity awards upon a leave of absence or a termination of employment;
- participating in the distribution of the grant documentation or actively responding to Belgian employee questions regarding the equity awards; and
- describing equity awards, in employment agreements, or employment offer letters.