Tax alert

Work bonus – Changes as of April 2024

6 May 2024
Subject Tax alert
Jurisdictions Belgium

Employees who have a gross salary below a certain level can benefit from the system of the so-called ‘work bonus’.
 

Context

Initially, this (social) work bonus was only a lump sum deduction from the social security contributions due for these employees (to decrease the amount of social security contributions to be paid).

However, as this decrease of social security contributions caused an increase of their taxable salary, the application of the social work bonus had as a side effect that the employees needed to pay more taxes on their salary. To compensate for this side effect, the fiscal component of the work bonus was introduced in 2011, which consists of a reduction of 33,14% in withholding tax on the salary.

On January 1st, 2024, the maximum amount of the fiscal work bonus increased to 710 euros (to be indexed). The fiscal work bonus will further increase to 765 euros (to be indexed) as of January 1st, 2025.
 

Changes as of April 1st, 2024

On April 1st, 2024, the guaranteed average minimum monthly income was increased. Because the social work bonus is linked to this guaranteed average minimum monthly income, this increase also lead to an increase of the amount of the social work bonus.

Besides the increase of the guaranteed average minimum monthly income, the legislator also wanted to increase the net benefit resulting from the fiscal work bonus, but only for employees with "very low wages". To do so, as of April 1st, 2024, the social work bonus is split into two components depending on the amount of the employee's monthly salary.

This distinction into two components has no impact on the amount of the social work bonus. It will however allow the tax authorities to apply different withholding tax reduction percentages on the two components of the social work bonus.

The percentage for the first component will remain fixed at 33,14% of the amount of the first component of the social work bonus. For the second component, the percentage will be raised to 52,54% of the amount of the second component of the social work bonus.

To illustrate this, you can find an overview of the social work bonus for both components, applicable as of April 1st, 2024 below.

Component A (low wages)
S: reference salary (100%) in EUR R: amount social work bonus in EUR
≤ 2.669,96 115,91
> 2.669,96 en ≤ 3.144,45 115,91 - ( 0,2443 x (S - 2.669,96))
> 3.144,45 0,00
* amounts applicable for white-collar workers
Component B (very low wages)
S: reference salary (100%) in EUR R: amount social work bonus in EUR
≤ 2.090,78 156,30
> 2.090,78 en ≤ 2.669,96 156,30 - ( 0,2699 x (S - 2.090,78))
> 2.669,96 0,00
* amounts applicable for white-collar workers

The total amount of the social work bonus is the sum of the social work bonus calculated in component A and the social work bonus calculated in component B.

The total amount of the fiscal work bonus is the sum of 33,14% of the amount of the social work bonus calculated in component A and 52,54% of the amount of the social work bonus calculated in component B.

Taking into account the above – the increase of the social work bonus and the increase of the withholding tax reduction percentage (fiscal work bonus) for the second component of the social work bonus – the net salary of the employees with a (very) low salary further increases as of April 2024.

If you have any questions regarding this legislative change, please contact your trusted EY advisor and we will be happy to assist.