Tax shift - update
Some tax shift measures announced at the end of 2015 by the Michel I administration take effect at the beginning of the second quarter of 2016. Belgian employers will benefit from a substantial reduction in the employer's contribution. The abolishment of the withholding tax general exemption partially compensates for this reduction. Finally, the structural reduction is being reoriented.
The tax shift measures of the Michel I administration start in 2016 and increase in significance in 2017 and 2018. The following measures entered into force on 1 April 2016.
1. Reduction of employers' contributions
The employers' social security contributions are calculated on the basis of the gross wages of the employee and are paid by the employer.
Until the end of March 2016, the base percentage of the employers' contributions amounted to 38.05% for manual workers and 32.40% for white-collar workers. Starting on 1 April, the employers' contributions fall to 35.65% for manual workers and 30% for white-collar workers.
The holiday allowance accounts for the difference between the percentage for manual workers and the white-collar workers. The holiday allowance for manual workers is paid by the employer into a holiday allowance fund via the employers' contributions. For white-collar workers, the payment is made directly to the employee.
2. Abolishment of general withholding tax exemption
In 2007, a 1% general exemption of the payment of the withholding tax (the so-called IPA discount) was adopted. With effect from 1 January 2014, the IPA discount was increased by 0.12% for SMEs.
The tax shift reduces the employers’ contributions and is financed, in part, by the abolition of the IPA discount with effect from 1 April 2016 for the profit sector. However, this reduction is retained for the non-profit sector, and the 0.12% increase for SMEs is also retained.
3. Reform of structural reduction
Until 31 March 2016, the structural reduction consisted of a fixed reduction in the employers' contributions with a supplement for high and low wages.
The reform aims to target the reduction on low and mid-level wages and to abolish the reduction for high wages.
With effect from 1 April 2016, the fixed reduction is reduced from 462.60 EUR to 438.00 EUR.
The ceiling for the low wages will gradually increase until it also includes the mid-level wages. With effect from 1 April 2016, it goes from 5560.49 EUR to 6900.00 EUR.
Pro-Pay will continue to inform you in the future of further developments regarding the tax shift.
