Context

As discussed in our headline news of Friday 20 November 2009(*) employers are, under certain conditions, exempted from paying part of the professional wage taxes withheld on salaries to the Belgian Treasury, notably in the event of overtime hours, shift work and night work, activities in Research and Development, etc.
However, the accounting treatment of these exemptions was not entirely clear.

News

In its Opinion no. 2009/13 issued on 18 November 2009, the Accounting Standards Commission (“CBN/CNC”) published its view on what accounting treatment these exemptions should be given by employers.

The CBN/CNC distinguishes between two types of legal relationships: the employer-employee relationship and the employer-Treasury relationship.

The employer-employee relationship as determined by the mutually binding labour agreement is not impacted by the exemption from partial payment of withholding taxes. The employee’s gross remuneration borne by the employer remains a cost proper to the latter.

In the employer-Treasury relationship, in principle, the obligations to withhold taxes from the employee’s gross remuneration and to transfer the withheld taxes to the Treasury originate from the Belgian Income Tax Code. The above exemption measures solely relate to this second legal relationship (i.e. between employer and Treasury).
Because there are two distinct legal relationships, compensation is not allowed from an accounting viewpoint and therefore the employer should first deduct 100% of the normal wage taxes from the employee’s remuneration and report this debt to the Treasury by crediting account no. 453 – “Payroll withholding taxes” (Ingehouden voorheffingen/Précomptes retenus).

As the part of the wage taxes that is exempted from being paid to the Treasury should – according to the CBN/CNC – be regarded as definitively acquired (i.e. as a waived debt), the employer should then report this waived debt as “Other operating income” (section I.D.), by crediting account no. 740 “Operating subsidies and compensatory amounts obtained from public authorities” (Bedrijfssubsidies en compenserende bedragen/Subsides d’exploitation et montants compensatoires).

Note that a different approach has to be applied if all or part of the remuneration concerned needs to be booked on the assets side.

Additionally, the beneficiary company will have to disclose the nature of the wage tax exemption and the accounting procedure followed in its annual report.

Link to Opinion no. 2009/13:
FR: http://news.hrservices.be/?lk200912161
NL: http://news.hrservices.be/?lk200912162

(*) http://news.hrservices.be/?200911201234