Managing payroll in Belgium can pose challenges for international employers. The use of multiple official languages at the regional level can create communication difficulties and delays when interacting with authorities. Moreover, the payroll regulations are quite intricate.
One notable aspect of Belgian payroll complexity is the variation in social security contributions from employers. These contributions vary significantly depending on the size of the company and the Collective Labour Agreements in place.
Setting Up Payroll in Belgium
Before processing payroll in Belgium, companies must complete several administrative requirements. The first step is to register as employers with the National Social Security Office (NSSO), which is responsible for collecting social contributions. This registration can be done via email, letter, or an online portal.
Employers must establish industrial accident insurance that begins on or before the first working day of their initial employee. Additionally, they need to register with the Federal Public Service Finance to withhold income tax from employees’ wages.
After registering with social security and tax authorities, employers are required to submit an electronic hiring declaration (DIMONA) for new employees and notify for each employee who leaves the company. New hires will be added to the electronic database, replacing the previous obligation to maintain a physical staff register.
International employers do not need to set up a local legal entity in Belgium to hire and manage payroll, but they must adhere to the same registration and declaration processes as local employers. This can be achieved by appointing a local representative or collaborating with a local payroll service provider. Payments to authorities can also be made from a foreign bank account.
Income Tax and Social Security in Belgium
Belgium has a robust social security system funded by contributions from both employers and employees. This system automatically covers employees and provides extensive benefits, such as pensions, healthcare, disability support, unemployment benefits, and family benefits.
Income tax is progressive, featuring four different tax rates, with the highest rate reaching 50%.
Belgian residents are taxed on their global income, whereas non-residents are only taxed on income sourced in Belgium. However, the tax rates remain consistent for both residents and non-residents. Employment income is taxed at four rates:
There’s a personal tax-free allowance of EUR 10,570 for 2024, which increases if the employee has children. Additionally, certain work-related and other expenses can be deducted.
Residents must also pay communal taxes alongside national income tax, which can vary from 0% to 9% of the owed tax, based on the municipality of residence. Non-residents subject to Belgian income tax must pay a flat rate of 7%.
Further tax benefits are available, provided that income taxable in Belgium constitutes at least 75% of total earned income.
In 2024, the Belgian government introduced a new tax framework for expatriates, allowing employees and directors coming to work in Belgium to receive tax-exempt reimbursement of specific work-related costs—up to 30% of their standard pay, capped at EUR 90,000. This new tax regime went into effect in January 2022.
Tax Withholding and Reporting
Employers have several obligations regarding their employees’ income tax. The employer is responsible for accurately calculating and withholding the correct amount of income tax from employee wages and forwarding it to the relevant tax authority. Tax payments can be made on a monthly or quarterly basis, with monthly payments typically due by the 15th of the following month. If the total annual withheld income tax is below EUR 41,700, an employer may opt for quarterly payments.
While making payments to the tax authority, a monthly tax return detailing the taxable income and withheld income tax must be submitted. Employers also need to prepare an annual tax slip for each employee, which must be submitted to both the tax authority and the employee.
Employees are required to file their tax returns using information from their annual tax slips by 30 June of the following year. It’s important to note that married employees (or those officially cohabiting) must file a joint tax return, although their incomes are taxed separately. The tax year in Belgium runs from 1 January to 31 December.
Social Security Contributions
The only payroll tax employers must deduct from employee salaries, aside from income tax, is the employee’s share of the social security contributions.
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