Now that 2007 is drawing to a close, this Headline highlights some recent personal income tax-related changes. The HRS Headline team also seizes this opportunity to wish you all the best for 2008

New bonus scheme 2008: favourable tax and social security treatment

The bill relating to a new bonus scheme has been approved by the Chamber and the Senate and should come into force as of 1 January 2008 (*). The bonuses in question do not qualify as remuneration. They depend on the achievement of predetermined non-recurrent and non-structural objectives.

The first step consists in setting measurable objectives at company level, for a group of employees or the entire undertaking, such as profit increase or reduction of occupational accidents or absenteeism. Companies have considerable freedom in setting the objectives. The scheme must be introduced through a collective bargaining agreement, and, in the absence of a union delegation, through a procedure largely similar to that provided for establishing corporate work regulations. The benefits arising from the new bonus scheme are tax and social security exempt up to a yearly amount per employee of EUR 2,200.00 (adjusted to inflation every year). The employer must pay a social security contribution of 33%. The entire employer cost is tax-deductible; hence, a net amount for an employee of EUR 1,000.00 will cost the employer EUR 1,330.00, which will be tax-deductible.

This legal provision still needs to be published in the Belgian Official Gazette before coming into force.

(*) http://news.hrservices.be?lk200712281

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Signature of the addendum to the French-Belgian tax treaty on frontier workers rule

As explained in our Headline of 16 March 2007 (**), French and Belgian tax authorities have finally reached an agreement on the changes to be made to the French-Belgian frontier workers rules.

The agreement has been signed on 13 December 2007. The full text is available on the Finance Ministry’s web site:
FR: http://news.hrservices.be?lk200712282
NL: http://news.hrservices.be?lk200712283

It should be stressed that this agreement still needs approval by the Belgian and French Parliaments before coming into force.

(**) http://news.hrservices.be?200703161051

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VAT on the contribution paid for the private use of company cars: determination of the taxable amount

If an employer provides a company car to an employee, the VAT authorities claim VAT from the employer calculated out of the contribution of the employee, if any or out of the benefit in kind, if there is no personal contribution, or out of the contribution and out of the benefit in kind on top, if there is a partial contribution of the employee.

As you may remember, the European Court of Justice (ECJ) decided in the Scandic case (see our headline of 2 February 2002 ***) that if an employee pays a contribution in exchange for a company car, VAT will be only due on the actual consideration received by the employer even if this contribution was lower than the cost.
After this decision, many Member States feared the risk of tax evasion and avoidance, as employees could pay a very low contribution, and VAT would be only due on this actual amount.
In Belgium, sections 32 and 33 of the VAT Code have been amended in this respect. The taxable amount for transactions between related parties should be the “normal value”.

Under the Administrative Decision E.T.112.791 of 12 July 2007, the VAT authorities have indicated that the benefit in kind determined for direct tax purposes could be used as normal value.

(***) http://news.hrservices.be?200502021836