The non-recurring, result-related bonus or the new profit participation bonus?

Bonus types

Since a couple of years, employers can offer their employees a tax friendly non-recurring, result-related bonus, also referred to as CLA n° 90.

Starting January 1 2018, the government has introduced a new kind of tax friendly bonus, called the profit participation bonus.

Which type of bonus is the best choice to reward your employees?  We provide you with a short overview of both bonuses in this newsletter.

It is noteworthy that both bonuses are not taken into account for the wage norm. You can grant these bonuses in other words also when the salary cost in your company cannot increase any further.

The non-recurring result-related bonus

Since a couple of years, employers in Belgium can grant their employees a bonus in the scope of the Act of December 21, 2007 and the collective labour agreement n° 90 (CLA n° 90). This benefit enjoys a favourable treatment when it comes to taxes and social security contributions.

Thus the allocated benefit is not subject to withholding tax, is tax deductible as a business expense and is not taken into account for the calculation of the indemnity in lieu of notice and the holiday pay. It is however subject to a special employer’s contribution to the social security of 33% and a solidarity contribution of 13,07% for the employee.

There are some conditions linked to the allocation of the benefit of which the most important ones are the following:

• The benefit cannot exceed a certain threshold:

  Social threshold = 3.313 EUR (amount 2018) per employee per calendar year. The amount is subject to a solidarity contribution of 13,07 % for the employee.
  Fiscal threshold =  2.880 EUR (amount 2018) which is exempt from taxes.

• The benefit must be related to collective results or objectives;

• The result or objectives must apply to a company, a group of companies or a well-defined group of employees;

• The results or objectives must be clearly outlined, transparent, determinable/measurable and verifiable. Examples of objectives are: achieving an actual turnover during the reference period, decreasing the error range, decrease the complaints from customers, obtaining an ISO-norm or another license … 

• At the time of introducing the bonus plan, it should be uncertain whether the results or objectives will be achieved;

• The bonus plan should meet certain formalities such as drafting an act of adhesion or concluding a collective labour agreement.

The new profit participation bonus

The new bonus allows to grant the employees as from January 1, 2018 a tax friendly non-recurring profit participation bonus.

For this type of bonus there are some conditions as well linked to the allocation of which you will find the most important ones here below:

• The company is subject to corporate taxes or to taxes for non-residents in Belgium;

• The allocation is only possible based on (part of the) profit;

• If the employer grants an identical amount or percentage to all employees, the only formality is a decision of the General Assembly and a written notification by the employer.

• If the employer wishes to grant different bonuses to different categories of employees, an act of adhesion or a collective labour agreement on company level will be required.

• This bonus is not a deductible cost for the employer. There are no social security contributions due from employer’s side. The employee on the other hand will pay a solidarity contribution of 13,07% and withholding taxes of 7%.

• The total amount of the bonuses may not exceed 30% of the total wage mass of the concerned fiscal year.

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