The National Social Security Office (hereafter referred to as NSSO) has recently agreed on a new position regarding the social security treatment of tax free allowances granted to expatriates under the Belgian special tax status for foreign executives, when calculated in accordance with the ‘technical note’ of 8 August 1983 of the Tax Authorities.
This new standpoint is the result of an extensive debate with the NSSO which was initiated by our firm within a social audit context. The special tax status for expatriates offers two important tax advantages for foreign executives:
- reimbursement of tax free allowances for up to € 11,250 and € 29,750, the upper threshold being applicable only to executives operating in a controlling or coordinating position or in a scientific function within a scientific research centre;
- tax exemption for the compensation percentage relating to business travel abroad (“travel exclusion”).
In the past the National Social Security Office limited the exemption for social security purposes of tax free allowances calculated in accordance with the technical note to the thresholds applicable for tax purposes, i.e. € 11.250 and € 29.750 depending on the function of the expatriate concerned.
The NSSO now takes the position that, as of 1 January 2012 and under certain circumstances, tax free allowances may be adjusted in line with the travel exclusion within a maximum limit of € 29,750. This means that the NSSO no longer limits social security exemption exclusively to tax free allowances but has decided to take into account, to a certain extent, travel exclusion as well.
Example
An expatriate has a foreign travel exclusion of 35%, subject to the limit of € 11,250.00. Tax free allowances, calculated in accordance with the technical note, amount to € 8,000.00. Under the new position, the exclusion would amount to € 12,307.69.
It is clear that the new regime may generate additional savings for the company as well as the employee.
It is clear that the new regime may generate additional savings for the company as well as the employee.
