What is it about?
Companies that operate using work shifts or night shifts (e.g., typical work shifts, shifts for continuous production or construction works) can be exempt from the obligation to advance WHT. These exemptions must meet strict conditions, however (Art. 275/5 Income Tax Code 1992).
Staffing agencies that hire out temporary workers to companies that operate using work shifts or night shifts can also seek the application of this exemption for the wages of such workers.
But to prove that all exemption conditions are met (e.g., what the successive shifts are, how many workers do the shifts have, etc.), the staffing agency must consult the client-employer. In practice, this might be a bit tricky when labour inspections take place. That is why the law was amended in this regard. So, since October 2022, staffing agencies have been required to obtain an acceptance statement from the client-employer stating that the agency may seek the WHT exemption.
In practice, however, there seemed to be many differences and inconsistencies among the acceptance statements that the staffing agencies sought from their client-employers (e.g., some had an indemnity clause for any recourse, some described the scope of the duty to cooperation). To provide for a level playing field, the legislature clarified that the staffing agency must obtain an acceptance statement that meets the conditions determined by the King. The power to decide on this was therefore conferred on the King, who is to determine the conditions that the acceptance statement must meet.
In the Royal Decree of 16 September 2024, the King laid down these conditions. This Royal Decree was published in the Belgian State Gazette on 23 September 2024, and it applies to all wages that will be paid or granted as from January 2025.
Royal Decree of 16 September 2024: special conditions for staffing agencies
The Report that was submitted to the King clarified that the Royal Decree aims to “ensure that staffing agencies has ascertained unambiguously that all conditions for the exemption have been met …”. The intention behind this is to ensure that the acceptance statement from the client-employer can serve as a tax declaration through “a properly designed contractual framework,” and the client-employer can thus be held contractually liable if it has made a wrongful declaration by stating that the conditions for exemptions were met.
And although the same conditions apply to all staffing agencies, the manner in which the contractual framework should be implemented is not harmonized. Staffing agencies must therefore determine by themselves how they should adapt their internal processes in the best way possible.
These special conditions for staffing agencies entail that the agency and the client-employer conclude an agreement in writing in which the process and the way in which evidence will be furnished are elaborated. This can be a separate contract or a clause in a commercial agreement or even the general conditions.
This agreement with the client-employer must contain the following elements:
- Client-employer’s confirmation of work shifts
The client-employer must draw up a statement in which it indicates unambiguously that the temporary workers have indeed performed work shifts or night shifts (including shifts for continuous production or construction works) and in which it confirms that the client-employer can provide the necessary documentary evidence to prove that.
The statement must indicate clearly the type of work (typical work shifts, shifts for continuous production, construction works, night shifts, or standard working schemes).
- Confirmation of bis-variant
If the client-employer uses the bis-variant, the percentage of the scope deviation must also be mentioned.
- Method of proving the acceptance statement
This agreement must also stipulate how the staffing agency can produce evidence of the existence, date, and time of the acceptance that the client-employer has given in writing and unambiguously.
The way in which this proof must be submitted is not specified, however. The staffing agency can therefore choose how it should produce this. The Report to the King referred to an invoice (among other things) that is not disputed and that charges the performance of work done for work shifts or night shifts or a separate work performance statement filled in by the client-employer.
The statement may not be given implicitly either. If it was given in such way, it must clearly indicate the time period and manner in which the client-employer may dispute the statement. It must also state clearly that the implicit acceptance means the client-employer must be able to produce evidence to prove that the exemption conditions are met.
In any event, there must be written evidence available in which the date when the client-employer declared that all the conditions were met is clearly indicated. This statement must exist—according to a clarification in the Report to the King—“before it can serve as basis for the request for exemption.” Therefore, the date of the statement is also important. In this regard, one must bear in mind that a WHT declaration must be filed theoretically within 15 days after the payment of wages.
- Client-employer’s cooperation
The agreement must also impose on the client-employer a duty to cooperate in providing evidence showing that the temporary workers were indeed hired to perform work shifts or night shifts.
- Client-employer’s liability
The client-employer’s liability must also be set out if it cannot produce evidence showing that the temporary workers were indeed hired to perform work shifts or night shifts.
Entry into force: 1 January 2025
The obligations apply to wages that will be paid or granted as from 1 January 2025.
This gives staffing agencies enough time to adapt their internal processes and take the necessary steps to develop an adequate process. But given that staffing agencies must figure out by themselves how it should implement the contractual framework, which specific process will be used, and that it must inform the client-employers, they will have to undertake the necessary steps in a short period of time.
Furthermore, the Report to the King also emphasizes that the tax administration “[will] examine case by case whether this process does in fact meet the conditions and objectives of this Decree.”
Consequences for the client-employer?
Although the Royal Decree mainly lays down the conditions for staffing agencies so that they can seek the exemption, there are also significant consequences for client-employers.
In particular, they must set up an internal process whereby the necessary information are communicated timely to the staffing agency, and they must keep the required documentary evidence. This can potentially be paired with additional administration, e.g., if separate performance work statements must be provided to the staffing agency. And every staffing agency can follow another procedure in practice.
If the client-employer is unable to produce the required evidence later, it can also be held liable for any harm or loss suffered by the staffing agency.
Therefore, client-employers must also be vigilant about the obligations relating to the hiring temporary workers and about the risks that accompany such type of hiring.
Do you have any questions about this new obligation, or about how the exemption from advancing WHT can be applied? Contact Luk Cassimon (luk.cassimon@monardlaw.be or 0472/467.847) or your usual contact at Monard Law.
