Exemption from partial payment of withholding tax – accounting treatment
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
Posted: December 16th, 2009Tags: accounting treatment, exemption, withholding tax
Exemption of partial payment of withholding tax
Over the past years several tax incentives for various sectors of our economy have been implemented. Provided certain conditions are fulfilled, employers are exempt from paying part of the professional withholding tax withheld on salaries to the Belgian Treasury. According to articles 275/1 up to 275/7 of the Belgian Income Tax Code this system is applicable to:
- overtime hours
- merchant shipping, dredging and (vessel) towing
- employees performing activities in Research and Development (R&D)
- shift work and night work
- sportsmen
- structural decrease of the tax burden for the profit and non-profit sector.
In a practice note dated 3 November 2009 (Ci.RH.244/597.746), which is immediately applicable, the Belgian tax authorities point out that if the aforementioned exemption has not been claimed, the qualifying amount of withholding tax can be recovered by the employer via filing an additional, “negative” withholding tax return. Such return should be filed before 31 August of the year following the income year. In case this method cannot be applied due to the fact that the withholding tax relates to earlier years, the practice note allows the employer to file a tax appeal within a period of five years, starting from 1 January of the year in which the withholding tax is due.
Link to the practice note:
FR: http://news.hrservices.be?lk200911201
NL: http://news.hrservices.be?lk200911202
Posted: November 20th, 2009Tags: exemption, withholding tax
Year-end PTX headline
At the occasion of the year-end 2001 this headline contains some of the personal income tax changes that will have effect as from income year 2002.
Wage withholding tax (Royal Decree of November 21, 2001)
The wage withholding tax rules applicable as from January 1, 2002 will take into account the following changes:
- The further abolishment of the special crisis contribution (maximum 1% for income year 2002 instead of maximum 2% for income year 2001);
- The increase of the lump-sum business expense (23% of earned income for the first bracket of EUR 3,750, instead of 20%);
- The decrease of the marginal income tax rate of 55% to 52%.
As from April 1, 2002 the wage withholding tax scales will be indexed.
Radio and television license fee in Flanders
According to a draft decree approved by the Flemish parliament, the income tax discount of BEF 2,500 (single person) or BEF 5,000 (married) granted by the Flemish government for income year 2000 will not be continued for income year 2001 (tax year 2002).
On the other hand, the Flemish government has on 30 November 2001 approved a draft decree with respect to the abolishment of the radio and television license fee in Flanders as from 1 January 2002. The draft decree is currently under review by the State Council and will be voted on early in 2002 with retroactive effect from January 1, 2002.
Posted: December 20th, 2001Tags: PTX, rules, scales, withholding tax
Postponement of part of the tax reform
Facts
Belgian tax on taxable pay is mainly remitted to the tax authorities by the employer as wage withholding tax. The taxation itself occurs the year after the income year (e.g. tax year 2003 relates to the income from 2002) by way of a tax return to be completed by each taxpayer. The “tax bill” or “assessment notice” is finally sent to the taxpayer by the tax authorities at the latest on June 30 of the year following the tax year (so June 30, 2004 for income of 2002) with a tax due or a tax refund depending on the previously withheld tax.
News
Didier Reynders, the Minister of Finance confirmed on November 29, 2001 the postponement of part of the personal tax reform. In his answer to a parliamentary question of Yves Leterme (parliamentary question n°9355) he admitted that the wage withholding tax scales would only be adjusted as from April 1, 2002.
As a result, the fiscal benefit of the tax reform for the first three months of 2002 will only be realised by the taxpayer late 2003 or early 2004 by way of a tax refund.
Posted: December 5th, 2001Tags: fiscal benefit, tax reform, withholding tax