10 June 2019

Retroactive abolition of the minimum remuneration requirement

Retroactieve afschaffing van de minimumbezoldigingsvereiste

In our newsletter of 24 October 2018 we informed you of the latest state of affairs regarding the minimum remuneration requirement introduced by the Belgian law of 25 December 2017 and amended by the remedial legislation of 30 July 2018.

From the financial year starting on 1 January 2018, all companies (both large and small) were obliged to award a minimum remuneration of at least EUR 45 000 to at least one manager/natural person (with an exception granted if the taxable profit was relatively low). Failing this, the company was subject to a separate assessment of 5%. Companies with only legal entities as manager appeared as such to be automatically subject to the sanctioning assessment.

In addition, SMEs (within the meaning of the Belgian Companies Code) risked losing the possibility of applying the reduced rising rate (20% on the first tranche of EUR 100 000 taxable income, and 29% above this). In order for an SME to be able to apply the 20% rate, it is required, among other things, that the company award a remuneration to a manager of at least EUR 45,000. This double sanction was a bridge too far for certain members of parliament. A legislative proposal to “repeal” the generally applicable minimum remuneration condition was then submitted.

This legislative proposal was given the green light by the Belgian Chamber of Representatives on 3 April 2019. The minimum remuneration requirement (as included in Article 219quinquies Belgian Income Tax Code) is retroactively “revoked” (from 1 January 2018, the date of initial entry into force of the minimum remuneration requirement). The obligation for companies to pay a minimum remuneration of EUR 45 000 on pain of sanctioning with an additional levy of 5% may therefore be considered as never existing. Note, however, that this requirement is retained for SMEs in order to benefit from the reduced rate of corporate income tax (from the fifth taxable period since incorporation).

Justine Bouckaert

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