Wage withholding tax exemption: changes in response to the mini tax shift

On 4 February 2022, the Council of Ministers approved a draft bill that provides for a mini tax  shift. As part of this mini tax shift, the conditions for the various types of exemption (or partial exemption) from paying wage withholding tax have been tightened. The main changes relate to the exemption for shift- and night work. We’ve summarized these changes for you.

Exemption for shift- and night work

Companies can benefit from an exemption from paying wage withholding tax for employees who perform shift work or night work. This means that the wage tax must still be withheld, but 22.8% of the taxable remuneration does not have to be paid to the Treasury.

But this exemption is subject to strict conditions (Art. 275/5 Income Tax Code 1992). Employees must be paid a shift bonus. In addition, they must have performed shift work or night work for one-third of the working time during the relevant month.

There is shift work if “the work is performed by at least 2 shifts of at least 2 employees who do the same work in terms of contents and scope and who follow up on each other’s work throughout the day without interruption and without there being any overlap of more than one-quarter of the working time.”

There is night work if work is carried out between 20:00 and 06:00, but this does not apply to work that are performed only between 20:00 and 24:00 and to the employees who typically start work at 05:00.

This exemption is now the subject matter of targeted and thorough inspections, whereby the tax authority evaluates the various conditions very stringently.


Envisaged changes

The Court of Audit of Belgium (Het Rekenhof) exposed in a report in 2019 the multiple pain points relating to the application and verification of the various types of exemptions from the tax withholding obligation. The opportunity is now being used to respond (albeit partly) to the Court of Audit’s comments. In this regard, the government prefers to tighten the conditions for application. Moreover, legislative reform has a budgetary purpose as well.

The draft bill has certainly been approved by the Council of Ministers, but it now awaits the opinion from the Council of State. Thus, it can still be changed one way or another. The reform will contain the following already, subject to any further changes, of course:

  • Shift work and night work split up: the conditions for shift work and night work will no longer be the same. The result is that the statutory provision will be broadened, and the two systems will be treated separately.
  • Minimum shift work bonus: the bonus that is granted for shift work or night work must be at least 2% (for shift work) or 12% (for night work) of the wage. With this measure, the government wants to prevent any possible abuse of the measure, namely when very limited bonuses are granted purely for the purpose of being able to qualify for the exemption;
  • Proof of shift work bonus: the bonus that is granted must be stipulated expressly in a CBA, company rules & regulations, or employment contract;
  • Calculating the one-third norm: calculating the one-third norm on an hourly basis will be laid down in law. For your information, ever since the beginning of the year, the tax authority said already that the one-third norm will have to be calculated on an hourly basis. Calculating this on a daily basis would not be possible any more (see our earlier newsletter). Moreover, the one-third norm has to be calculated separately for shift work and night work. It is therefore no longer possible to evaluate the time worked in the totality in order to calculate the one-third norm. This will mainly affect employees who work in separate systems;
  • Restricted interruption of 15 minutes: the condition that the successive shifts must follow each other without interruption is still valid. But permitting the tolerance of a restricted 15-minute interruption will now be laid down in law. The Explanatory Memorandum states that the intention is not to extend the break any longer unless exceptional circumstances (e.g., because of sanitary measures in the context of the COVID-19 pandemic) so require;
  • Interim agencies: interim agencies will still be able to apply the exemption, but they will be able to do so as from 1 October 2022 only if they have obtained the approval from the company where the temporary worker is sent to work at for the purpose of applying the exemption.

Unfortunately, there is no further clarification about how to fulfill the condition that the shifts must perform “the same work in terms of job contents and scope.” Nevertheless, the Court of Audit had also sought clarification about the term “shift work”. But, according to the government, a clarification will “never be neutral”, yet it does not elaborate this. This is a missed opportunity, since this condition gives rise to debates.

Most of the changes apply to remunerations that will be paid as from 1 April 2022, except for the mandatory mention of the shift bonus in the CBA, company rules & regulations, or employment contract. This obligation would apply only to bonuses that are granted as from 1 April 2024.


What are the other changes?

The draft bill also provides for other changes to the various types of exemptions:

  • Shift-work exemption for property works could be sought only if one fulfills the NSSO registration requirement;
  • Tax on volunteer work will be excluded for the application of the exemption for R&D, sportspersons, assisted areas, start-ups;
  • The unpaid wage withholding tax for R&D will no longer be allowed to be recorded in the formula for calculating the tax credit for R&D;
  • The period for filing for a refund claim will be shortened. This is now 5 years, starting from 1 January of the year in which the withholding tax is paid. As from 1 April 2022, this period will be shortened to 3 years, starting from 1 January of the year following the assessment year;
  • The declaration obligation is broadened so that more information will have to be provided. This obligation would apply to remunerations that are paid from 1 January 2023 onwards.


What does this mean now?

The government is now working on reforming the scheme for the wage withholding tax exemption. Although the reform is not yet final, it is clear that the conditions will become stricter. This applies mainly to the exemption relating to shift work and night work, where the effect can be significant.

The new provisions would become effective from 1 April 2022. Companies should now do everything necessary to analyze the impact of the renewed scheme and prepare themselves. If appropriate, internal systems and procedures will have to be reviewed (e.g., in response to the new one-third norm calculation).

We will of course be following up on any evolutions to this.


Do you have any question? Please contact Luk Cassimon (0472/467.847 of luk.cassimon@monardlaw.be) or your usual contact person at Monard Law.

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