Self-employment presumption is now refutable if a director is unremunerated or has no presence in Belgium
Context
Royal Decree n°38 provides that persons appointed with a mandate as director of a Belgian company are irrefutably presumed to perform a self-employed activity in Belgium.
They are thus subject to the Belgian social security scheme for self-employed persons and must therefore pay social security contributions. The Royal Decree of 19 December 1967 extends this presumption of self-employment to other mandatories in Belgian companies (e.g. for members of an executive committee).
The recent Act of 25 April 2014 holding various provisions on social security and the Royal Decree of 27 May 2014 rendered the presumption explicitly refutable after it had been challenged in the Belgian Constitutional Court and in the European Court of Justice (ECJ).
Irrefutable presumption contrary to national and EU law
The irrefutable presumption’s aim was to prevent social security fraud, which consists of an “artificial” relocation abroad of director activities relating to companies established in Belgium, thereby eluding the Belgian social security scheme.
Following this presumption, company directors with an unremunerated mandate were also obliged to affiliate themselves with a social insurance fund and pay social security contributions.
In practice, however, the presumption has been applied as refutable for years since its irrefutability was challenged by both the Belgian Constitutional Court in 2004 and the European Court of Justice in 2012 (see our Newsflash of 3 October 2012).
As a result, the irrefutable presumption in Belgian legislation was incompatible with both national and European law.
Presumption is now refutable if a director is unremunerated or has no presence in Belgium
According to the new legislation, directors of a company subject to Belgian corporate tax or non-resident income taxes can refute the presumption of self-employment, and thus challenge the payment of social security contributions, in two ways:
by demonstrating that their mandate is unremunerated; The unremunerated character of the mandate can be proven based on a statutory provision or, in the absence thereof, a decision of the competent body determining the company directors’ remuneration that the company director’s mandate is unremunerated.
by demonstrating that they do not physically exercise an activity in Belgium.
Marginal impact in practice
As before, a director of a company located in Belgium will be deemed to be subject to the Belgian social security scheme for self-employed persons. As such, the self-employed status of company directors and other mandatories, e.g. members of executive committees, is not affected by this new legislation. However, Belgian legislation now explicitly provides that this presumption can be refuted if the concerned individual demonstrates that his mandate is unremunerated or that he has no physical presence in Belgium.
This recent legislative change should have no considerable impact in practice, as the existing irrefutable legal presumption was already applied as if it were refutable.
The Act of 25 April 2014 is rather an update of Belgian legislation to formally align it with national and European law and to confirm the administrative practice that already existed. Its most important merit is that it renders legal certainty for company directors towards the social security authorities and provides a method to refute the presumption if the mandate is unremunerated. At present, a method to demonstrate the location of the activities has not been defined yet but should be adopted soon.
