In a recent addendum to their official administrative guidelines of 20 May 2010, the Belgian tax authorities have clarified their view on the tax-deductibility of employer contributions to collective disability insurance schemes (Addendum 10.10.2011 to circular Ci.RH.332/583.327 – Aafisc No. 42/2010, 20.05.2010).

According to the May 2010 circular, employer contributions to collective disability insurances aimed at compensating a loss of income (incapacity for work) are tax-deductible in the hands of the employer, whereas employer contributions to collective insurances for medical care and collective insurances for physiological and/or economic disability (invalidity) are not.

Given that, for a lot of collective disability insurances, the amount of compensation paid to the employee depends on the degree of his physiological/economic disability and these collective insurance schemes do not always clearly stipulate that they are aimed at compensating a loss of income, no tax relief has been allowed on employer contributions to such insurances.

Under the addendum of 10 October 2011, the Belgian tax authorities now make a concession by acknowledging the tax-deductibility of employer contributions to these group insurances, provided an addendum is attached to the initial agreement stipulating that the contract is aimed at compensating a loss of income. For new contracts, i.e. as of 1 October 2012, this should instead be stipulated in the contract itself.