Exemption of social security contributions on discounts

As from 1 April 2002 (Royal Decree of 28 February 2002), when an employer grants discounts to his employees on the normal price of goods manufactured or sold by the employer himself, no social security contributions will have to be paid since such discounts are no longer considered as salary for social security purposes.

However, the following conditions must be fulfilled (simultaneously):

-the number of items sold at a discount may not exceed the normal consumption of the family of the employee concerned;
-the discount may not exceed 30% of the normal price. The “normal price” is the one the employee would in principle have to pay if he/she was not employed by the company manufacturing or selling the goods/services concerned (the employer will have to justify what is to be considered as “normal price”). Social security contributions are due on the part of the discount exceeding 30% of the normal price;
-the price paid by the employee for the goods or the service may not be lower than the cost of these goods or service (social security contributions are due on the negative difference between the price paid by the employee and the cost of the goods or service for the employer).

From a tax point of view, in summary, if the price paid by the employee for the above-mentioned goods is greater or equal to the cost price, no advantage will be taxed, provided the purchases are not too frequent when relating to valuable consumer goods. However, if the price paid by the employee is lower than the cost price, the taxable advantage will amount (maximum) to the difference between the cost price and the price paid by the employee. Please note that the favourable tax treatment for the purchase of employer manufactured goods at cost price does not apply to real estate, nor to luxury goods like e.g. sports cars. In such cases, the regular taxation regime for benefits in kind will apply.