Taxing Wages 2018

Belgium

Abstract

This chapter includes data on the income taxes paid by workers, their social security contributions, the family benefits they receive in the form of cash transfers as well as the social security contributions and payroll taxes paid by their employers. Results reported include the marginal and average tax burden for eight different family types.

Methodological information is available for personal income tax systems, compulsory social security contributions to schemes operated within the government sector, universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

 

 

The national currency is the Euro (EUR). In 2017, EUR 0.89 was equal to USD 1. The Secretariat has estimated that in that same year the average worker earned EUR 47 324 (Secretariat estimate).

1. Personal income tax system

1.1. Federal government income tax

1.1.1. Tax unit

Spouses are taxed separately. As from 2004, the principle of separate taxation applies to all categories of income. A non-earning spouse is taxed separately on a notional share of income that can be transferred to him or her (see “non-earning spouse allowance”, below). Married couples nonetheless file joint income tax returns.

1.1.1.1. Schedule

 

Taxable income (EUR)	Marginal rate (%)
0-11 070	25
11 070-12 720	30
12 720-21 190	40
21 190-38 830	45
38 830-and above	50

1.1.2. Tax allowances

1.1.2.1. Deduction of social security contributions

Unless stated otherwise, social insurance contributions are deductible from gross income.

1.1.2.2. Work-related expenses

Salaried employees and self-employed professionals are entitled to a standard deduction for work-related expenses. This deduction may under no circumstances exceed respectively EUR 4 320 per spouse for salaried employees and EUR 4 060 per spouse for self-employed professionals and is computed as follows:

The lump-sum deduction for business expenses for employees has been increased as of income year 2015 and has also been revised for income year 2016. The lump-sum deduction for business expenses for self-employed professionals remains unchanged.

 

Gross earnings less social insurance contributions (EUR)	Rate (%)
Below 8 620	30
Between 8 620 and 20 360	11
Above 20 360	3

For self-employed professionals:

 

Gross earnings less social insurance contributions (EUR)	Rate (%)
Below 5 870	28.70
Between 5 870 and 11 670	10
Between 11 670 and 19 420	5
Above 19 420	3

Paid company directors are also entitled to a standard deduction for work-related expenses; this is equal to 3% of gross income (less social insurance contributions) and may not exceed EUR 2 440 per spouse.

An additional allowance may be granted to wage-earners if their workplace is more than a certain distance from their home.

Actual expenses incurred in order to acquire or retain earned income are deductible if they exceed the standard deduction. The deductibility of certain categories of work-related expenses (cars, clothing, restaurant meals and business gifts) is limited, however. Taxpayers who report actual expenses may deduct EUR 0.15 per kilometre, up to 100 km per single journey, for travel between their home and their workplace by means other than private car.

1.1.2.3. Non-earning spouse allowance (quotient conjugal)

A notional amount of income can be transferred between spouses if one of them earns no more than 30% of the couple’s combined earned income. In this case, the amount transferred is limited to 30% of aggregate net earned income, less the individual income of the spouse to whom the notional share is transferred. This allowance is limited to EUR 10 490.

1.1.2.4. Exempt income

The base amount is:

 

Taxable income (S)	Fixed amount	Variable amount
0-27 030	7 570	0
27 030-27 330	7 270	27 330-S
27 330 and up	7 270	0

These amounts vary with regards to the family situation. Additional exemptions for dependent children (a handicapped child counts as two children):

• 1 child: 1 550

• 2 children: 3 980

• 3 children: 8 920

• 4 children: 14 420

• > 4 children: 5 510 per additional child

Dependent child exemptions in excess of available income give rise to a reimbursable tax credit. This reimbursable tax credit is calculated at the marginal rate for the spouse with the highest income and capped at EUR 440 per dependent child.

Additional special exemptions are also granted for certain household members (in euro):

• Other dependants: 1 550

• Handicapped/handicapped spouse: 1 550

• Other handicapped dependants: 1 550

• Widow(er) with dependent child(ren): 1 550

• Single father or mother: 1 550

These additional exemptions are applied first to the taxable income of the spouse having the most income, with any remainder then being applied to the income of the other spouse.

The basic exemption plus any additional exemptions for dependants and single parents is applied against each bracket from the bottom up; in other words, the lowest brackets are depleted first.

1.1.2.5. Schedule

 

Basic exemption plus any additional exemption (EUR)	Marginal rate (%)
0-8 930	25
8 930-12 720	30
12 720-21 190	40
21 190-38 830	45
38 830-and above	50

The basic exemption plus any additional exemptions is applied from the bottom up.

1.2. Regional and local government taxes

With the implementation of the sixth state reform, the Flemish Region, the Walloon Region and the Brussels-Capital Region have been delegated several important competences with regard to the individual income tax. As a result of this reform, as from 1 July 2014, the regional competences are:

• the possibility to levy surcharges on the federal PIT (the supplementary regional tax on the personal income tax). The surcharge may be proportional or vary with income but there are limits to ensure that the tax remains progressive);

• to grant (on the result of the surcharges) tax discounts;

• to grant tax reductions, tax increases and tax credits;

• to regulate exclusively some tax reductions.

Under the new tax model, the assumed federal income tax amount must first be calculated. The taxable base is reduced by the exempt income (see 1.1.2.4.), the tax credits for pensions, unemployment, sickness and other social benefits and the tax credit for income taxed abroad. Additionally, it is reduced by the tax due on passive income for which the Federal State remains exclusively competent.

The remaining PIT liability is than split between the central government and the Brussels-Capital Region according to a ratio of (1/(1-0.24957))*(0.995-(1-0.24957))

Subsequently, the Regions are allowed to levy a proportional surcharge on this reduced federal income tax. This surcharge may, within certain limits and given the matters for which the Regions are competent, vary per tax bracket. The actual rate is set at 32.591% (Brussels-Capital rate).

The starting point for the calculation of the municipal (and agglomeration) surcharges is the individual income tax (“impôt total”, i.e. the sum of federal PIT and regional PIT), before taking into account the surcharge resulting from insufficient prepayments, the foreign tax credit, federal and regional reimbursable tax credits (among others for children and for low-income workers), prepayments and withholding taxes. The rate of this local surtax is set by each municipality, and there is no upper limit. The additional surcharge of 1% levied in the Brussels-Capital Region, in addition to the municipal surcharge, is abolished as from income year 2016.

The calculation of the regional and local surtax for the average worker study assumes that the worker lives in the Region of Brussels-Capital. The weighted average local surtax of the 19 municipalities which form the Brussels-Capital Region is 6.4%.

1.3. Tax credits

Refundable tax credit for low-income workers

A refundable tax credit is intended for low-income workers and company managers (subject to the employees’ social security system) entitled to the employment bonus.

The refundable tax credit amounts to 28.03% as of 1 January 2016 of the “employment bonus” which is actually granted on remunerations earned during the taxable period. It cannot exceed EUR 650 per taxable period.

2. Compulsory social security contributions to schemes operated within the government sector

2.1. Rates and ceiling

a. Payroll deductions

The rates of employer and employee contributions are set by law. The applicable rates (in %) are as follows (for businesses having 20 or more employees) :

The schedule applicable as from 01.01.2017 is as follows:

 

2017	Employee	Employer	Total
Unemployment	0.87	3.16	4.03
Health insurance indemnities	1.15	2.35	3.5
Health care	3.55	3.8	7.35
Placement services		0.05	0.05
Family allowances		7	7
Pensions	7.50	8.86	16.36
Child care		0.05	0.05
Work-related illnesses		1.01	1.01
Work-related accidents		0.32	0.32
Education leave		0.05	0.05
Business closures		0.35	0.35
Wage restraint		7.46	7.46
Tax shift 2017		-2.27	-2.27
Total	13.07	32.19	45.26

The schedule applicable as from 01.07.2017 is as follows:

 

2017	Employee	Employer	Total
Unemployment	0.87	3.16	4.03
Health insurance indemnities	1.15	2.35	3.5
Health care	3.55	3.8	7.35
Placement services		0.05	0.05
Family allowances		7	7
Pensions	7.50	8.86	16.36
Child care		0.05	0.05
Work-related illnesses		1.00	1.00
Work-related accidents		0.32	0.32
Education leave		0.05	0.05
Business closures		0.35	0.35
Wage restraint		7.46	7.46
Tax shift 2017		-2.27	-2.27
Total	13.07	32.18	45.25

Vacation pay is not subject to the social security contributions applicable to salaries, but a social security levy of 13.07% is deducted when the money is attributed.

b. Reduction of employer contributions

The schedule applicable as from 01.07.2016 is as follows:

 

Gross annual earnings (S) in EUR	Fixed amount	Variable amount
0-28 152.00	1 752	0.1369 (28 152-S)
28 152-54 676.36	1 752	0
54 676.36 and up	1 752	0.06 (S-54 676.36)

The schedule applicable as from 01.07.2017 is as follows:

 

Gross annual earnings (S) in EUR	Fixed amount	Variable amount
0-28 715.04	1 752	0.1369 (28 715.04-S)
28 715.04-55 769.88	1 752	0
55 769.88 and up	1 752	0.06 (S-55 769.88)

c. Reduction of individual social security contributions

A reduction of individual social security contributions is granted monthly for low-income earners, depending on wage level. The schedule below is restated in annual terms.

The schedule applicable as from 01.06.2016 is as follows:

 

Gross annual salary (S) in EUR	Reduction in Euros
0 < S < 18 934.68	2 325.48
18 934.68 < S < 29 535.24	Min (2 325.48, (2 325.48-0.2194 (S-18 934.68))
S > 29 535.24	0

The schedule applicable as from 01.06.2017 is as follows:

 

Gross annual salary (S) in EUR	Reduction in Euros
0 < S < 19 313.64	2 372.04
19 313.64 < S < 30 125.64	Min (2 372.04, (2 372.04-0.2193 (S-19 313.64))
S > 30 125.64	0

d. Special social security contribution

All persons totally or partially subject to the social security scheme for salaried workers are liable for this special contribution. In theory, the amount of the contribution is determined according to aggregate household income. Aggregate household income is equal to combined gross earnings less ordinary social security contributions and work-related expenses. The amount of the contribution is as follows:

 

Taxable income (EUR)	Amount due on the lower limit	% above the lower limit
from 0 to 18 592.02	0	0
from 18 592.02 to 21 070.96	0	9
from 21 070.96 to 60 161.85	223.10	1.3
60 161.85 and above	731.29	0

e. Work accidents

All employers are required to insure their employees against accidents that occur in the workplace or while travelling to or from the workplace. The insurance is written by a private company. The usual premiums are approximately 1% of gross pay for office workers and 3.3% for labourers. The premiums are based on capped gross wages: in 2011 these premiums apply to gross wages (including holiday pay and extra-legal remunerations) with a minimum of EUR 6 068 and a maximum of EUR 37 546 (EUR 5 949 and EUR 36 810 respectively in 2010). Higher rates apply in certain industries in which risks are greater. The premium rate for construction workers, for example, varies between 7% and 8%.

2.2. Deductions according to family status or gender

None.

3. Universal cash transfers

Family allowances are granted for children. The annual amounts of these benefits (in euro) are as follows:

 

	< 5 years	5-6 years	7-10 years	11-12 years	12-16 years	17-18 years	> 18 years
1st child	1 138.77	1 162.77	1 357.42	1 375.10	1 476.97	1 497.78	1 543.03
2nd child	2 089.36	2 113.29	2 501.65	2 519.33	2 724.39	2 745.20	2 906.33
3rd child	3 109.24	3 133.17	3 521.53	3 539.21	3 744.27	3 765.08	3 926.21

To determine the resources available to the average worker, the Taxing Wages calculations assume that one child was between seven and ten years of age and that the other child was between eleven and twelve years of age.

4. Main changes in the tax/benefit system since 2016

None.

Belgium

2017 parameter values

	Ave_earn	47 324	Secretariat estimate
Work-related expenses	work_rel_max	4 320
	work_rel_sch	0.30	8 620
		0.11	20 360
		0.03
Tax credits (exempt income)	single_cr	7 270
	Married_cr	7 270
	Supp_cr_base	300
	supp_cr_thrsh1	27 030
One child	child_cr1	1 550
Two children	child_cr2	3 980
Single parents	s_parent_cr	1 550
Maximum Child Credit Payment	child_cr_max	440
Basic Credit	basic_cr_base	0
	basic_cr_thrsh1	5 100
	basic_cr_thrsh2	6 810
	basic_cr_thrsh3	17 040
	basic_cr_thrsh4	22 140
Basic exemption plus any additional exemption schedule		Ex_rate1
	Ex_sch	0.25	8 930
		0.30	12 720
		0.40	21 190
		0.45	38 830
		0.50
Income tax schedule		tax_rate1
	tax_sch	0.25	11 070
		0.30	12 720
		0.40	21 190
		0.45	38 830
		0.50
	quote_max	10 490
	quote_rate	0.3
Regional tax	red_rate	0.24957
	reg_tax_rate	0.32591
Local tax	local_rate	0.064
	add_local_rate	0.00
Unemployment	unemp_rate	0.0087
Medical care	med_rate	0.0115
Sickness	sickness_rate	0.0355
Pension	pension_rate	0.0750
Employee contribution	SSC_rt	0.1307
	SSC_redn	0	0	2 352.64	0
	(annual)	19 155.74	19 155.74	2 352.64	0.2194
		29 879.64	19 155.74	2 352.64	0.2194
		29 879.64	0	0	0
		99 999 999	0		0
Special annual contribution	SSC_special	0.000	18 592.02
		0.090	21 070.96
		0.013	60 161.85
		0.000
Employer contributions	SSC_empr_rt	0.32185
	SSC_empr_redn	0	1 752.60	0.1369	28 433.52
		28 433.52	1 752.60	0	55 223.12
		55 223.12	1 752.60	-0.06	55 223.12
		9 999 999	0		0
Structural reduction on the withholding tax on wages	PrP_redn	0.000
Low-income credit	LIC_rate	0.2803
	LIC_max	650.00
Child benefit (age 7-10)	CB_1	1 375.10
second child (age 7-10)	CB_2	2 501.65
third child (age 7-10)	CB_3	3 521.53

2017 tax equations

The equations for the Belgian system in 2017 are mostly calculated on an individual basis. But central government tax for a married couple is calculated on two bases and the lower value is used. One of the bases takes account of the combined income of the couple. Also, tax credits may be used against the tax liability of the secondary earner if the principal earner is unable to use them.

The functions which are used in the equations (Taper, Tax etc.) are described in the technical note about tax equations. Variable names are defined in the table of parameters above or are the standard variables “married” and “children”. A reference to a variable with the affix “total” indicates the sum of the relevant variable values for the principal and spouse. And the affixes “princ” and “spouse” indicate the value for the principal and spouse respectively. Equations for a single person are as shown for the principal with “_spouse” values taken as 0.

 

	Line in country table and intermediate steps	Variable name	Range	Equation
1.	Earnings	earn
2.	Allowances:	tax_al	B	MIN(work_rel_max, Tax(earn-SSC, work_rel_sch))+SSC
3.	Credits in taxable income	taxbl_cr	B	0
4.	CG taxable income	tax_inc_int	B	earn-tax_al
	Quote part	Q	J	IF(married, Positive(MIN(tax_inc_int_total*quote_rate, quote_max)-tax_inc_int_ spouse), 0)
	CG adjusted taxable income principal	tax_inc_adj_princ	P	Positive(tax_inc_int_princ – Q)
	CG adjusted taxable income spouse	tax_inc_adj_spouse	S	Positive(tax_inc_int_spouse + Q)
5.	CG tax before credits	CG_tax_excl	J	Tax(tax_inc_adj, tax_sch)
6.	Calculation of credits
	Child exemption amount	child_ex_inc	P	(children=1)*child_cr1+(children=2)*child_cr2
	Family exemption amount	fam_ex_inc	B	IF(Married,married_cr,single_cr+(Children>0)*s_parent_cr)+IF(tax_inc_adj<=0,0,IF(tax_inc_adj<=supp_cr_thrsh1,supp_cr_base,MAX(0,supp_cr_base+supp_cr_thrsh1-tax_inc_adj)))
	Initial exempt income principal	ex_inc_int_princ	P	child_ex_inc+fam_ex_inc_princ
	Initial exempt income spouse	ex_inc_int_spouse	S	fam_ex_inc_spouse
	Transferable amount	ex_inc_tran	J	married*IF(ex_inc_int_princ<tax_inc_adj_princ, MIN(MAX((ex_inc_int_spouse-tax_inc_adj_spouse), 0), tax_inc_adj_princ-ex_inc_int_princ), -(MIN(MAX((ex_inc_int_princ-tax_inc_adj_princ), 0), MAX(0, tax_inc_adj_spouse-ex_inc_int_spouse))))
	Final exempt income principal	ex_inc_fin_princ	P	ex_inc_int_princ+ex_inc_tran
	Final exempt income spouse	ex_inc_fin_spouse	S	ex_inc_int_spouse-ex_inc_tran
	Tax credits	tax_credits	J	Tax(ex_inc_fin, Ex_sch)
	Basic Credit	basic_cr	B	basic_cr_base*IF(tax_inc<=’basic_cr_thrsh1,’ 0, IF(tax_inc<=’basic_cr_thrsh2,’ (tax_inc-basic_cr_thrsh1)/(basic_cr_thrsh2-basic_cr_thrsh1), IF(tax_inc<=’basic_ cr_thrsh3,’ 1, IF(tax_inc<=’basic_cr_thrsh4,’ (basic_cr_thrsh4-tax_inc)/(basic_cr_ thrsh4-basic_cr_thrsh3), 0))))+IF(tax_inc=’0;0;MIN(LIC_rate*(MIN(VLOOKUP(’ earn, SSC_redn,3), VLOOKUP(earn, SSC_redn, 3)-VLOOKUP(earn, SSC_redn, 4)* (earn-VLOOKUP(earn, SSC_redn, 2)))));LIC_max))
7.	CG tax
	Tax prior to non-wasteable credits	CG_tax_init	B	Positive(CG_tax_incl-tax_credits) *(1-red_rate)
	Non-wasteable child credit	child_credit_nw	J	MIN(Tax(MIN((children=1)*child_cr1+(children=’2)*Parameters!child_cr2),’ (positive(ex_inc_int-tax_inc_int), tax_sch), children*child_cr_max)
	Final CG tax	CG_tax_final	J	CG_tax_init-basic_cr_total-child_credit_nw
8.	State and local taxes
	Regional tax	regional_tax	B	CG_tax_init*reg_tax_rate
	Local tax	local_tax	J	(local_rate+add_local_rate)*(CG_tax_init+regional_tax)
9.	Employees’ soc security	SSC	B	Positive((earn)*SSC_rt-MIN(VLOOKUP( earn, SSC_redn,3), VLOOKUP(earn, SSC_ redn, 3)-VLOOKUP(earn, SSC_redn, 4)*(earn-VLOOKUP(earn, SSC_redn, 2))))
		SSC_special	J	positive(Tax(tax_inc_total, SSC_special)
		SSC_total		SSC+SSC_special
11.	Cash transfers	cash_trans	J	(Children>0)*CB_1+(Children>1)*CB_2
13.	Employer’s soc security	empr_sch	B	Positive(earn*(SSC_empr_rtPrP_redn)-(VLOOKUP(earn, SSC_empr_redn, 2)-VLOOKUP(earn, SSC_empr_redn, 3)*(earn-VLOOKUP(earn, SSC_empr_redn, 1))))

Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse calculation) J calculated once only on a joint basis.