Author: Sofie Jacobs, Euregio Law & Tax
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Belgium is a strategic business hub. Thanks to its central location in Europe, it offers easy access to neighbouring countries and even the United Kingdom. Moreover, Brussels is home to some of the largest EU institutions, further enhancing the country's business appeal. Consequently, employing workers in Belgium can present significant opportunities for business expansion. However, this also involves navigating various legal and regulatory requirements. Drawing on our experience as Belgian lawyers, we outline the key considerations to which particular attention should be paid when employing cross-border workers in Belgium.
I. Administrative formalities
When posting an employee to Belgium, a series of administrative procedures must be followed. These requirements can vary depending on the nature of the business activity.
The most important formality is the Limosa declaration. This is a mandatory declaration that nearly every employee and self-employed person coming to work in Belgium, who is not subject to Belgian social security, must complete. Introduced by the Belgian authorities in 2007, this declaration allows them to control who is working in Belgium. Failure to comply with this obligation results in both criminal and administrative sanctions for the employer of the posted worker.
The Limosa declaration applies to employees who are usually employed in a country other than Belgium, but who are working temporarily in Belgium. It also applies to foreign self-employed individuals intending to work in high-risk sectors in Belgium, such as construction and cleaning.
There are, however some exceptions to the Limosa requirement based on the purpose and duration of the stay in Belgium. These exceptions include, amongothers, academic conferences, international transport, urgent repair and maintenance work, small-group meetings, installation and assembly, as well as athletes, artists, scientists, personnel of international institutions and diplomats.
Lastly, depending on the specific sector and activities of each company, additional formalities may apply. For instance, construction companies must, under certain conditions, declare their work and register their posted workers via the Checkin@work application, and their employees must wear a Construbadge.
II. Permanent establishment
Another important practical consideration is that employers, by posting employees in Belgium, may establish a permanent establishment under the terms of the applicable double taxation treaty. If this happens, the employer must pay corporate tax in Belgium (at a flat rate of 25%) on profits earned there.
In general, there are three types of permanent establishment.
- The first type is a material permanent establishment, which exists when a foreign company has a physical presence in Belgium. This can be either owned or rented. Examples of material permanent establishments include offices, factories and workshops. Therefore, even renting an office for a posted employee could result in Belgian corporate tax obligations.
- The second type is a personal permanent establishment, which arises when an employee of the foreign company is employed in Belgium and authorised to conclude contracts on behalf of the company. This includes managerial staff and sales representatives. In such cases, the simple act of hiring these individuals in Belgium can be sufficient to establish a personal permanent establishment, triggering Belgian corporate tax obligations.
- The third type of permanent establishment comprises construction projects and installation works exceeding 12 months in duration, although this threshold may differ in some double taxation treaties. If this threshold is met, the company is subject to Belgian corporate tax on profits generated from activities carried out in Belgium.
Having a permanent establishment in Belgium determines not only whether a company is subject to Belgian corporate tax, but also affects the tax obligations of the posted employees. Generally, employees pay taxes in the country in which they are considered permanent residents. However, if the employer has a permanent establishment in Belgium, the employee also becomes taxable there. In most cases, this is considered more inconvenient than the company being subject to Belgian corporate tax.
III. Expat status
Employment in Belgium is not all bad news. Belgium also offers a favourable tax regime for foreign executives and researchers who are working in Belgium temporarily. This is commonly referred to as the 'expat status'. This special tax status applies to employees and company directors, as well as researchers employed by a Belgian company or the Belgian branch of a foreign company. Designed to attract international talent, the regime provides tax advantages for both employees and employers.
Certain conditions must be met to qualify for the expat status. The employee may not have been a Belgian tax resident in the 60 months preceding their employment in Belgium, nor have lived within 150 kilometres of the Belgian border during that period. They must also not have been subject to Belgian non-resident income tax on professional earnings. Additionally, they must earn a minimum gross annual salary of 75,000 EUR for work performed in Belgium. This income threshold does not apply to researchers, who must either hold a relevant master's degree or demonstrate at least 10 years of relevant professional experience. Furthermore, researchers must dedicate at least 80% of their working time to research-related activities.
Applications for the expat status must be submitted electronically by the employer to the Belgian tax authorities within three months of the employee starting their assignment in Belgium. If approved, the expat status is granted for a maximum of five years, with the possibility of a one-time extension of up to three years.
The expat status provides several important benefits. Qualifying employees and researchers may receive up to 30 % of their annual gross salary as a tax-free allowance for "employer-specific costs", up to a maximum of 90,000 EUR per year.
In addition, employers can reimburse certain substantiated expenses incurred by the employee, such as relocation costs to Belgium, furnishing a residence in Belgium and school fees for children attending school in Belgium. The Belgian social security authorities follow the approach of the tax administration, meaning that the aforementioned reimbursements and allowances are also exempt from social security contributions. This is also advantageous for the employer.
In practice, the expat status is thus an attractive option for companies seeking to recruit or retain foreign talent while optimising overall employment costs.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
