The spread of the coronavirus (COVID-19) is forcing governments around the world, including in Belgium, to take drastic measures to take back control over the human impact of Covid-19. Although required, these countermeasures are causing major disruption for individuals, families, businesses and the global economy in general.
Aware of the significant impact of the pandemic on the economy, the Belgian Federal government has very recently introduced measures to limit the economic impact. This includes using the flexibility available under the EU treaty to provide companies with the supportive financial measures needed to reduce the economic impact of the current situation. To the extent that companies are facing financial difficulties directly resulting from the coronavirus spread (to be demonstrated and subject to additional conditions), several support arrangements can be requested.
Belgian federal measures to support the economy
In the below overview, we list the support measures that were adopted by the federal government to mitigate the economical impact of the coronavirus outbreak. Additional measures were adopted at the level of the Regions and even in some cities as well, however, because the federal measures are the most impactful, we’re focusing on these.
Temporary unemployment due to force majeure
The National Employment Office (NEO) has formally acknowledged the coronavirus pandemic as a force majeure-event, warranting the introduction of temporary unemployment due to force majeure in affected Belgian companies until 30 June 2020. This system of temporary unemployment allows employers to temporarily suspend the employment agreement of (some of) their employees – both blue collar – and white collar workers – if it’s no longer possible for the employer to put these employees to work as a direct result of the coronavirus outbreak (e.g. because production is halted due to a lack of parts or for employees who have been quarantined).
During the suspension of the employment agreement, no salary is due and the employees are entitled to unemployment benefits. As a result of the coronavirus pandemic, these unemployment benefits have been temporarily increased to 70% of the capped gross monthly salary (capped at EUR 2.754,76) instead of the normal 65%. The same holds true for unemployment benefits due to temporary unemployment for economical reasons (see below)
Businesses, such as bars and restaurants, that have been forced to fully or partially close their doors following the government’s contingency measures can also apply for the system of temporary unemployment due to force majeure for their affected staff, however, only until the end of these contingency measures, presently set at 3 April 2020.
An employer that invokes temporary unemployment due to force majeure must file an electronic notification with the local unemployment office as soon as possible.
Temporary unemployment for economical reasons
Companies that are confronted with a reduction in their customer base, production, turnover … as a direct result of the pandemic and can therefore no longer maintain the normal working time schedule in the company, can use the system of temporary unemployment for economical reasons for their blue collar workers.
Temporary unemployment for economical reasons is also possible for white collar workers, however, in principle only in companies that are recognised as undertakings in difficulties. As a result of the current pandemic, companies that have not yet been recognised as undertakings in difficulties can file for such recognition based on exceptional circumstances. Pending approval of their request, they can use the system of temporary unemployment due to force majeure (see above).
An employer that invokes temporary unemployment for economical reasons must file an electronic notification with the local unemployment office as soon as possible.
Payment by installments for social security contributions
Companies that are confronted with difficulties in paying the social security contributions on their employees’ wages as a direct result of the coronavirus pandemic, can request a payment by installments for the social security contributions due for the first and second quarter of 2020. This request can be filed on the website of the National Social Security Office. If the request is granted, the social security debt must be paid in monthly installments over a maximum period of 24 months.
Payment by installments for wage withholding taxes, VAT, personal income tax and corporate tax
Companies, regardless of the performed activities and/or sector, which can prove that they are facing difficulties directly resulting from the coronavirus spread (to be demonstrated and subject to additional conditions), can request for payment arrangements for wage withholding taxes, VAT, personal income tax, corporate income tax and income tax on legal entities.
The request for such arrangements should be motivated and formally filed prior to 30 June 2020 and the payment arrangements in question are:
- payment by installments;
- exemption of late payment interest;
- remission of fines due to non-payment.
In order to make use of the above measures, the companies should still fulfill their obligation to file a correct and complete tax return within the filing deadline. However, in case the company should have issues in meeting the filing deadline, we suggest contacting your local tax inspector and discussing if a filing extension can be granted.
Please note that the supportive measures will be recalled in case the payment by installments is not complied with (unless the debtor informs the tax authorities timely) or in case insolvency proceedings arise.
Which steps need to be taken? One request can be filed per debt as from the moment a request for payment or an assessment notice has been received. Although the instruction is not clear regarding spontaneously payable taxes, such as VAT and wage withholding taxes, we suggest filing a request for those payments as well. The form can be found on the website of the Belgian tax authorities and should be filed via e-mail or via regular mail to the competent tax office.
Reduction of the income tax prepayments for self-employed individuals
Self-employed individuals are required to make quarterly prepayments for their personal income taxes, in order to avoid surcharges. The amount of the prepayments is based on an assessment of the individual’s taxable income for the coming fiscal year. If, due to the economic consequences of the current pandemic, the individual’s taxable income will decrease, he can request to have the amount of his prepayments decreased accordingly. To this end, he must file a reasoned request with his social insurance fund.
Deferral or exemption from payment social security contributions for self-employed individuals
Self-employed individuals who are confronted with the economic consequences of the coronavirus pandemic and have difficulties paying their social security contributions can request a deferral of payment of their social security contributions, without late payment surcharges becoming due. This deferral of payment must be requested with the individual’s social insurance fund and is applicable for the provisional contributions due in the first and second quarter of 2020. The deferral is limited in time; the provisional social security contributions for the first quarter of 2020 must be paid before 31 March 2021 and the contributions for the second quarter of 2020 before 30 June 2020.
In addition, self-employed individuals who are confronted with difficulties stemming from the corona-crisis can request their social insurance fund to lower their provisional social security contributions, if their self-employed income is expected to drop below one of the legal thresholds.
Finally, self-employed individuals in main occupation and assisting spouses who can no longer pay their social security contributions can request an exemption from contributions. This exemption can be awarded partially or entirely.
Obtaining replacement income for self-employed individuals
Self-employed individuals in main occupation and assisting spouses who are forced to stop their self-employed activity as a result of the coronavirus crisis can – if certain conditions are met – can be entitled to transitional rights (“overbruggingsrecht”/”droit passerelle”), which include a replacement income. Such situations are evaluated on a case-by-case basis.
Flexibility in executing a federal public contract
If a federal public contract incurs delays or cannot be executed as a result of the coronavirus pandemic, the federal government will not impose any fines or sanctions.
What is possible in other countries?
Belgium is not alone, and throughout Europe the Member States have taken measures. Most of the measures are similar to the Belgian measures: measures to facilitate unemployment, possibility to request for different payment terms for tax debts, etc… At PwC we keep a close eye on these broader international developments and we can provide you a first hand overview of the relevant measures for your business.
From an Indirect Tax perspective, an overview of these measures (EU and non EU level) can be found on https://globalvatonline.pwc.com/covid-19.
European response
On 16 March 2020, the European Commission presented a European coordinated response to counter the economic impact of the coronavirus outbreak. Besides numerous measures to ensure the continued functioning of the internal market, the European Commission has recently also confirmed their approach in respect of EU State aid rules and the EU Fiscal Framework.
The European Commission first of all confirms that EU State aid rules leave room for Member States to take impactful and necessary measures to support EU business. The Commission considers the measures taken by Member States to support business impacted by the Covid-19 reality, as general measures which as a result would be compliant with the EU State aid rules.
In addition, the European Commission recognises that the Covid-19 situation is exceptional, creating the necessary room in the Fiscal Framework to allow for government spending even if this would increase the budget deficit beyond the usual thresholds.
Conclusion
The Covid-19 reality requires impactful measures to take back control over this important human threat. These measures are necessary but there is equally no doubt that the coronavirus pandemic is having a significant operational and economical impact on Belgian businesses. Along with the necessary measures to contain the spread of the pandemic, the Belgian government has also taken steps to try and mitigate this impact on companies that are now facing major disruption. In these volatile times, the PwC experts are here to give you guidance on the key considerations you should take into account with respect to these support measures and beyond, so don’t hesitate to reach out.
