Withholding tax exemption update for shift work in construction & related sectors

Local contact

Hendrik Serruys

23 Nov 2022
Subject Tax alert
Jurisdictions Belgium

This article provides an overview of all recent and upcoming changes with regards to the (partial) withholding tax exemption for shift work in construction and related sectors, introduced by the law of March 28th, 2022 on the reduction of labour costs and further clarified in a new law of October 25th, 2022 containing various tax and financial provisions. On top, the new law in view of the federal budgetary measures also includes an interesting topic in view of this specific withholding tax exemption.
 

Anti-abuse provision

The 1/3rd rule stipulates that, in order for an employee’s monthly salary to be included in the calculation base for the exemption, at least one-third of the monthly working time should meet the conditions as set by article 2755 ITC/92. The law of March 28th, 2022 already announced that this anti-abuse provision should be determined on an hourly basis and no longer on a daily basis for the withholding tax exemptions as comprised in article 2755 ITC/92 – applicable as of income year 2022.

As of April 1st, 2022, only hours for which a shift or night premium of at least respectively 2% or 12% is paid, may be considered for calculating the 1/3rd rule within the ‘regular’ night and shift work withholding tax exemption. But how is this situation translated into practice for the application with respect to the exemption of withholding tax for shift work in construction and related sectors? The new law of October 25th, 2022 stipulates that these premiums are assumed to be included in the minimum hourly wage that is linked to this withholding tax exemption. The taxpayer is thus not obliged to grant the obligatory 2% shift premium nor the 12% night premium on top of the salary in order to claim the exemption.
 

Minimum hourly wage

Continuing on the minimum wage condition as established in article 2755 ITC/92, the hourly rate for a blue-collar worker in order to be eligible for the exemption during income year 2023 is known. It can be said that the high inflation rates are being reflected in the indexation figures for the minimum salary condition. The minimum hourly wage will increase to 16,02 euro, this was 14,61 euros for income year 2022. In case the hourly salary of an employee does not exceed 16,02 EUR in income year 2023, the withholding tax exemption for shift work in construction can’t be applied on the salary of this employee (regardless of the fact that he might meet all other conditions).
 

Supporting documents & declaration of works

Furthermore, the law of March 28th, 2022 anchored the obligation to create and maintain an extensive nominative list, including all employees for whom the withholding tax exemption for shift work in construction and related sectors is applied. As of April 1st, 2022, this extensive nominative list (see lower for details on the content of this list) should already be available within the organization at the moment of an audit. From January 1st, 2023 onwards, however, the taxpayer should pro-actively provide this list when submitting the negative fiche to request the withholding tax exemption.

A detailed list of the parameters to include have recently been disclosed:

  • Full identity of the employee;
  • The number of hours effectively performed in shifts on location on construction activities;
  • The number of hours for which the performance of the employment contract was suspended, but during which the employee would have been employed and would have received salary;
  • The number of hours actually worked;
  • The number of hours for which the performance of the employment contract was suspended with continued payment of wages;
  • Identification of all locations where the qualifying work has been carried out;
  • The remuneration paid (excluding double vacation pay and year-end premium);
  • The amount of withholding taxes;
  • The gross hourly wage.

In addition to that, evidence for each location or construction site must be collected on either whether the so-called ‘werfmeldingsplicht’ within the meaning of article 30bis of the law of 27 June 1969 has been performed or whether the obligation does not apply to a specific location. This article 30bis states that immovable works must be reported to the National Social Security Office (NL: Rijksdienst voor Sociale Zekerheid; FR: Office National de Securité Sociale), unless one of the exceptions installed by law occur. The declaration is dependent on both the value of the contract between the contractor and his principal and the number of subcontractors the contractor intends to engage to perform the contract. If no subcontractors are involved, the threshold amount is 30.000 euro. When one makes use of only one subcontractor, the amount of the order may not exceed 5.000 euro to fall under the exception. As soon as two subcontractors are involved or the respective threshold amount is exceeded, a declaration of works is always mandatory.

On October 18th, 2022, a preliminary draft program law was approved by the Council of Ministers, declaring the mandatory ‘werfmeldingsplicht’ also applicable to contractors who perform maintenance or cleaning work on immovable goods. In this regard, it is worth mentioning that the presence of each natural person, working on the cleaning tasks, must be registered by an electronic registration system (both the time of arrival and departure). However, the date of entry into force is still unkown.

Are you ready for proactively distributing all information as mentioned to be included in the nominative list to the Belgian tax authorities?

Should you feel you will not be able to, please do not hesitate to reach out to us so we can look into this together for your specific situation. As a side note, please be informed that this is not an automatic service from/action taken by your payroll office.
 

Interim sector

Interim workers assigned to clients of temporary employment agencies also qualify for the exemption as far as they meet all conditions as established in article 2755 ITC/92. In that case, it is the interim agency who benefits from the exemption. Further to the law of March 28th, 2022, and applicable as of October 1st, 2022, the explicit approval (in writing) of the clients/users who actually employ the temporary workers is required in order for the interim office to be able to apply withholding tax exemption for shift work in construction and related sectors.

Please do not hesitate to contact us in case of any questions regarding these recent changes. Your EY PAS Reward team is always available to provide more insights applied to your specific situation.