In Belgium, severance payments are currently taxed separately at the average tax rate of the most recent prior year of normal (full year’s) employment unless they amount to EUR 870 or less (the 2011 figure, which is the indexed statutory figure of EUR 615), in which case they are taxed at standard progressive rates. A recently published act of 19 June 2011 makes a couple of changes to the taxation of payments relating to the termination of certain employment agreements.

The system of separate taxation will stay. However, the progressive taxation of payments below the EUR 870 threshold will be repealed (on 1 January 2012). In its place comes a limited tax exemption (in the hands of the individual) for certain severance payments up to EUR 425 (again, the figure will be indexed). On 1 January 2014, the figure will go up to EUR 850 (to be indexed).

The lump-sum “crisis premium” becomes a “dismissal allowance”

Under the economic recovery legislation, in cases of dismissal, provided certain conditions are met, a lump-sum payment of EUR 1,666 can be paid to blue-collar workers free from income tax and Belgian social security contributions (the cost is partly borne by the employer and partly by the National Employment Office). This payment is currently known as a “crisis premium” (crisispremie/prime de crise).

On 1 January 2012, the ‘crisis premium’ will become a “dismissal allowance” (ontslaguitkering/allocation de licenciement), and will be paid in full by the National Employment Office. It will vary from EUR 1,250 to 3,750 depending on the employee’s employment starting date and seniority.

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