Employment Tax
Belgium | Shift work regulations – An update following the judgment of the Belgian constitutional court
Article 275/5 of the Income Tax Code (“CIR 92”)
Summary
In a recent update (see our LinkedIn post), we have analyzed the interpretation made by the Constitutional Court with respect to the shift work regulations following the judgment published on 8th February 2024 and which dealt with the compatibility of this exemption with the principle of equality and non-discrimination.
The purpose of the analysis provided by the Court was to find out whether the principle of equality and nondiscrimination was (not) violated, taking into account the intention of the legislator, and whether it must be considered that only companies in which the teams always carry out the same amount of work within the framework of so-called “assembly” work can benefit from the exemption, whereas companies in which the amount of work of the teams varies depending on peak and trough time.
Given the uncertainty linked to the judgment provided by the Court, The Minister of Finance decided to intervene and as a result an agreement was reached by the federal government (the draft bill was published on 27 March 2024 and afterwards the Belgian Parliament adopted the law concerning the new exemption of withholding tax for shift work with variable shifts on 3 May 2024. The legislation has been published in the Belgian Official Gazette on 29 may 2024) on adjusting the tax regime for shift and continuous working, proposing an amendment offering a transitional measure until 31 December 2026.
It is also worth mentioning that this transitional measure will also apply retroactively to the income year 2021 (as from 1 January 2021) and following.
This transitional measure is referred to as the “bis variant” of the initial exemption, which replaces the condition of equally scoped shifts with a proportional correction factor based on the deviation in the shift sizes.
The detail
The “bis” variant
The purpose of this amendment is to provide legal certainty for companies so that they do not find themselves in an ‘all or nothing’ situation. Companies will be offered the choice of remaining in the same system with the same conditions (the current law) or opting for the ‘bis’ variant of the current law, allowing them to benefit from the exemption even if the company does not have a team of the same size, but at a reduced percentage taking into account the difference in teams. This percentage is calculated in four stages.
● Step 1 : determining the percentage applicable to the exemption: either 22.8% (shiftwork) or 25% (continuous work) in order to recalculate the exemption in full.
For the purpose of the example below, we will assume the calculation results in EUR 50.000.
● Step 2 : define the difference in size between the teams, established in the numerator, and total the number of workers, established in the denominator. For example, let’s take the situation of shift work in 3 consecutive shifts on 2 days of the period (during the month) :
○ Day 1 :
■ Morning : 60 workers
■ Afternoon : 40 workers
■ Evening : 40 workers
=> The difference between the size of the teams is 20, and the total number of workers is 140.
○ Day 2 :
■ Morning : 20 workers
■ Afternoon : 10 workers
■ Evening : 30 workers
=> The difference between the size of the teams is 30, and the total number of workers is 60.
As we can see, the difference on the first day is 20/140 and the difference on the second day is 30/60.
● Step 3 : the difference in the scope of work, which relates to the total period of the month, is determined. To do this, we need to add up all the numerators and denominators for the period in question. In our example, this would be: (50/200) = 25%.
● Step 4 : reduce the amount obtained in the first step by the percentage determined in the third step. For example :
○ Total exemption: EUR 50.000.
○ Amount determined under step 3 (25%) = EUR 12.500
○ Total exemption after applying the new measure : EUR 37.500 (EUR 50.000 – EUR 12.500)
Key takeaways
The main point are as follows :
● The transitional measure applies to remuneration paid or granted as of 1 January 2021 up to 31 December 2026.
● The previous condition requiring the same scope for all shifts has been replaced. Now, a proportional correction factor will be applied and taking into account the size and frequency of shifts.
● The Minister of Finance provided a number of explanations and examples in the explanatory note attached to the draft law and which could be raised in the context of an audit in order to defend a file depending on the situation of a company applying the shift work exemption.
● In the explanatory note, the Minister of Finance has clearly indicated that it is not the intention of the legislator to apply the initial regime in its most strict sense. When a company has the intention to organize the work in equally scoped shifts, limited variations that occur due to circumstances such as illness, technical failures, etc, should not give rise to the disqualification of the exemption. An example is provided where there is a deviation of 5% which is disregarded.
● One of the advantages of this transitional measure is that the size of the teams is no longer an obstacle to the exemption and can be applied on a larger scale. For companies that have not benefited from this exemption because of a significant difference in the size of their teams, there is now an opportunity to benefit from the exemption.
● There is however a seemingly complex situation about the way this measure should be applied in practice regarding the deviation factor to be monitored on a daily basis from a payroll perspective. In order to apply this new transitional measure, the payroll providers will probably need to revise the way they are currently tracking the population of workers benefiting from the shift work.
● As soon as the new transitional measure is picked by any given company instead of the “old” measures, it will not be possible for the company to apply the old measures going forward.
Contact us
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:
Anton Scornea
Senior Associate
Myriam Boudinar
Senior Manager
Maxime Deforche
Manager
Further information on Vialto Partners can be found here: www.vialtopartners.com
Vialto Partners (“Vialto”) refers to wholly owned subsidiaries of CD&R Galaxy UK OpCo Limited as well as the other members of the Vialto Partners global network. The information contained in this document is for general guidance on matters of interest only. Vialto is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. In no event will Vialto, its related entities, or the agents or employees thereof be liable to you or anyone else for any decision made or action taken in reliance on the information in this document or for any consequential, special or similar damages, even if advised of the possibility of such damages.
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Further information on Vialto Partners can be found here: www.vialtopartners.com
Vialto Partners (“Vialto”) refers to wholly owned subsidiaries of CD&R Galaxy UK OpCo Limited as well as the other members of the Vialto Partners global network. The information contained in this document is for general guidance on matters of interest only. Vialto is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. In no event will Vialto, its related entities, or the agents or employees thereof be liable to you or anyone else for any decision made or action taken in reliance on the information in this document or for any consequential, special or similar damages, even if advised of the possibility of such damages.
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