In the Belgian Official Gazette of 9 March 2022, the Act of 28 February 2022 holding several provisions concerning social affairs was published. One of the sections of this Act contains an adjustment of the system of joint and several liability of principals and main contractors for the social security debts of their (sub)contractors in case of works on immovable property, as laid down in Article 30bis of the Act of 27 June 1969 revising the Decree-Law of 28 December 1944 on the social security of employees (‘NSSO-Act’).
More specifically, the Act contains a revision of the possibility to reduce the amount of the surcharge that can be imposed by the National Social Security Office (‘NSSO’) if a principal or main contractor fails to properly withhold 35% from a payment to their (sub)contractor that has social security debts.
Works on immovable property – joint and several liability for social security debts
According to Article 30bis of the NSSO-Act, when a principal or main contractor concludes an agreement with a (sub)contractor, for works on immovable property, they are required to verify whether the (sub)contractor has any social security debts. If so, the principal or main contractor will be jointly and severally liable for the payment of the social security debts of their (sub)contractor. This liability is, however, limited to the total fee for the contracted works (excluding VAT).
A principal or main contractor has to perform the same check each time they pay part of the agreed fee for the works. If the (sub)contractor has social security debts at that stage, the principal or main contractor has to withhold 35% from the payment to the (sub)contractor (excluding VAT) and transfer this amount to the NSSO. If the principal or main contractor correctly fulfils this obligation, they will not be held jointly and severally liable for the social security debts of their (sub)contractor. However, when failing to (correctly) withhold and transfer the required amount, they will not only be held jointly and severally liable for their (sub)contractors social security debts, but – on top of the 35% that has to be withheld and transferred – a surcharge of the same amount will become payable.
A number of limited possibilities to reduce the amount of this surcharge were adopted by Royal Decree.
Ruling by the Constitutional Court
In its decision of 9 July 2020 (No. 104/2020), the Constitutional Court held that the application of the above-mentioned surcharge violated article 16 of the Constitution, read together with the provisions of the European Convention on Human Rights, to the extent that it didn’t allow the NSSO and the labour courts to take into account all elements of the case at hand – and most notably whether the principal or main contractor acted in good faith – to reduce the amount of the surcharge.
Act of 28 February 2022 – new system of reduction of the surcharge
In order to remedy the Constitutional Court findings, the legislator adjusted the way the surcharge can be reduced as follows.
If the NSSO imposes the surcharge in question, the principal or main contractor must firstly communicate their arguments for a reduction to the NSSO within 30 days following the NSSO’s notification to levy the surcharge. Next, the NSSO (or the labour courts) – taking into account all relevant elements of the case (e.g. whether it can be demonstrated that the principal or main contractor acted in good faith) – can decide to reduce the amount of the surcharge with a maximum of 20%. In addition, they can waive the entire amount of the surcharge when the principal and their contractor, resp. the main contractor and their subcontractor, have no social security debts at the moment the surcharge is applied or in cases of force majeure.
Any appeal against a decision on the reduction of the surcharge must be filed, under penalty of nullity, within three months following the notification of the decision.
The above provisions entered into force retroactively as of 12 November 2020, i.e. the date of publication of the Constitutional Court's judgement in the Belgian Official Gazette.
Note that Article 30ter of the NSSO-Act contains the same system of joint and several liability for social security debts, but for work in the security industry, as well as for some activities in the meat processing industry. Article 30ter was therefore adjusted along the same lines as described above for Article 30bis.
Key takeaways
If the NSSO imposes a surcharge against a principal or main contractor because the latter didn’t correctly withhold 35% of their payment to a (sub)contractor that has social security debts, Article 30bis now contains clearer guidelines on how this surcharge can be decreased.
If you find yourself in such a situation and acted in good faith, it will be important to demonstrate this good faith towards the NSSO – taking into account all relevant elements – in order to obtain a reduction of the surcharge.
