Topical audits launched by the STI focusing on incentive plans. Check your compliance !

on Aug 29, 2018 in News

Following the latest budgetary debates, the Minister of Finance announced the launch of specific audits. One of the topics the Special Tax Inspection is currently focusing on are long-term incentive plans set up by multinational (mostly US based) companies.

What is the issue?

US based companies usually have worldwide long-term incentive plans (stock option plans, restricted stock units etc.) in place. Employees of Belgian subsidiaries of these US companies can have the right to participate in these incentive plans provided that certain conditions are met.

Except for incentives that fall within the scope of the (Belgian) Stock Option Act of 26 March 1999 and which are accepted within 60 days from the offer date, the incentives referred to above must not be reported on the employee’s tax slip and no wage withholding taxes must be withheld, provided that certain conditions are met (e.g. the Belgian subsidiary did not bear any charges and was not (actively) involved in the decisions and management of the plans).

Nevertheless, Belgian employees who received benefits from such plans must report them in their income tax returns (irrespective of whether the incentives were reported on tax slips and/or wage withholding taxes were withheld) and pay income taxes on them.

Please note that the Government has the intention to extend the reporting and withholding obligation. The granting of free shares without (active) involvement of the Belgian subsidiary will then become reportable.

Topical audits

The tax authorities are currently conducting multiple investigations in this respect. Their audits are targeting both the Belgian company (regarding the reporting and withholding obligation) and the employees concerned (regarding the reporting obligation).

In the case of irregularities, the tax authorities can establish additional tax assessments, including tax increases and fines!

Key takeaway

  • Belgian companies should assess whether there is a reporting and withholding obligation, and check whether these requirements are met.
  • Belgian employees who received incentives should check whether the related benefits were reported in the tax return.

If the above requirements are not met, we recommend rectifying the situation proactively.

For more information or specific questions, please contact Véronique De Brabanter or Luk Cassimon.