Shift or night work? Capture all gradually implemented legislative changes!

Two decades ago, the Belgian legislator had foreseen a specific tax incentive in order to safeguard (mainly blue-collar) labor in Belgium, and thus lower the overall employer cost. By means of a partial exemption of withholding tax with respect to employees working in a night- and/or shift system, a qualifying employer could keep a part of the taxes withheld from the salary of its eligible employees. This exemption gradually went up, and currently amounts to maximum 22,8 % (or 25%) of the taxable remuneration for night and shift work (higher percentage for full continuous work).

As mentioned in our alert dated March 15, 2022, the legislation has since undergone significant changes in an attempt to provide more transparency, but also to prevent abuse. On March 28, 2022, new legislation was adopted, of which some new regulations have come into effect earlier last year; other provisions are entering into effect now or in the future.

This alert will summarize these changes, as well as give an overview of the latest changes regarding the exemption for night and shiftwork for dock workers.

New conditions

As of April 1st, 2022:

1. The premium for shift work and for night work must be at least 2% and 12 % of the gross hourly wage, respectively, i.e., the hourly wage to which the employee would be entitled if he or she performed the same work in day shift, to be able to benefit from the (partial) tax exemption for shift or nightwork.
   Additionally, for remuneration paid from April 1, 2024, these premiums must be stipulated in the collective labor agreement, the labor agreement between employee and employer or the company work regulations to be considered a night or shift premium for the application of this exemption.
   
   
2. A strict separation between night and shift work has been implemented, meaning the two can no longer be combined to meet the 1/3rd rule per employee. The employee must therefore meet the 1/3rd condition by either working 1/3rd of the time in shift or in the night.
   Additionally, only hours for which a night or shift premium is (or would have been) paid can be considered (if other conditions are met) as hours performed in shift/night for this exemption.  
   
   
3. A maximum of a 15-minute interruption between two shifts is now allowed.
    

As of October 1st, 2022:

Another important change has come into effect regarding temporary employment agencies (interim offices). As of October 1st, formal permission is required from the company where the temporary employees are working, in order for the temporary employment agencies to (continue to) apply the withholding tax exemption for night- and shift work. Additionally, it is now also stipulated in the law that the burden of proof with respect to the conditions for night and shift work lies with the agency and not with the company where the employee is working. As the temporary agency will not have all information available (e.g. ‘with which own employees of the company did my employee work in shift?’) they will need to rely on the company to keep and provide that information in case of a tax audit.

As stipulated in the Royal Decree of November 30, 2022, the outcome of a negotiation between the administration and the interim sector can later potentially be included in the contracts. This includes for example a clause obliging the company to assist the interim office in case of a night and shift withholding tax exemption audit or a fine in case it appears at the moment of an audit that the company does not meet the conditions linked to this exemption (in case they would have signed the agreement in this respect with the interim office). At the moment these clauses are not legally foreseen but can in mutual consent be included in the contracts; an obligation to include these clauses in such contract could however be added in the future.
 

As of January 1st, 2023:

Furthermore, the law of March 28, 2022 anchored the obligation to create and maintain an extensive nominative list, including all employees for whom the withholding tax exemption for night and shift work is applied. As of April 1st, 2022, this extensive nominative list (see below 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. No further details have been shared till date on to ‘how’ this information should exactly be shared (as an attachment to the negative fiche, through separate platform,..) or ‘when’ this information should be provided at the latest (each month, at the end of each year, at the latest on August 31 of X+1, …).

On May 19, 2022, it has however been disclosed that the nominative list must include the following information per month, for each employee who performed shift or night work:

• the full identity of the employee;
• the number of hours of work effectively performed in shift or at night for which the employee also received a shift or night premium;
• the number of hours for which performance of the labor contract was suspended and for which wages continued to be paid by the employer, if it can be supported that, in accordance with his labor regulations, the employee in question would have been employed in shift or night work and would also have obtained a shift or night premium for these hours;
• the total number of effective working hours;
• the total number of hours for which performance of the employment contract was suspended but for which wages continued to be paid;
• the taxable remuneration paid or granted to the employee, excluding double vacation pay, end-of-year bonus and arrear payments;
• the amount of withholding tax deducted from such remuneration;
• the amount of the shift or night premium paid or granted for work performed that month.

In addition, it is important to note that -upon an audit- a company should also be able to support:

• the content and size (inhoud en omvang / contenu et ampleur) of the respective teams i.e. that the workers in the nominative lists are part of qualifying teams. The very strict interpretations given to both notions by the administration during an audit, proof to be a challenging factor especially when looked at post factum.
• The start and end hours of night workers; as well as shift workers; based on planning or -preferably- also actual time registration.

As we experience many hurdles with companies to comply with both the drafting of the nominative lists and the teams structure in view of this particular exemption, we have a dedicated team specialized in this matter to assist companies on all aspects, from legal matters to recurring compliance; based on documentation currently available within the company as well as optimized big data processing.
 

More changes to expect?

In response to a parliamentary question of September 2022, initially related to another withholding tax exemption, the Minister of Finance also shared a glimpse of the legislator’s plans with some of the currently existing exemptions. While the one for night and shift work has already been subject to a mayor change (as from April 2022, see above), the prime focus is now on the exemption for research and development however he explicitly referred to potential additional changes to the night and shift work exemption in a later phase. Given the tax reform blueprint, targeting a freeze of withholding tax exemption expenditures (with positive budgetary impact), any expected further changes are likely not to be in favor of the tax payer.
 

Side note: dock workers

In addition to the aforementioned changes, there is another important change that should bring more clarity to the port sector and its application for the withholding tax exemption for night and shift work.

The so-called “Wet Major” obliges employers who employ dock workers/port workers to be represented by a certified organization of employers, who in turn organizes and fulfills the necessary obligations for employing dock workers. This includes the calculation/implementation of the withholding tax exemption with respect to shift and night work, on a port-wide basis.

However, on the 5th of July 2022, the law ‘houdende diverse fiscale bepalingen/portant des dispositions fiscales diverses’ stated that the organization of employers for dock workers could not be considered as one employer for all dock workers in view of article 275/5 WIB 92; i.e. that the withholding tax exemption for night and shiftwork should actually be applied on the level of the separate employing companies, and not on the level of the representing organization.

Upon consultation between the ports and the administration, a new law of October 18, 2022 however confirms that the organization of employers for dock workers can be considered as the employer of all dock workers in view of article 275/5 WIB 92. It therefore nullifies the previous legislative adaption of July 5th and states that in view of the withholding tax exemption for night and shift work, the organization of employers for dock workers can be considered as one employer; i.e. the withholding tax exemption for night and shift work can be applied on the level of the organization.

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.