Belgium Payroll and Income Tax Guide

Learn about payroll and income taxes in Belgium, including employer contributions and tax treaties.

Belgium is a highly developed, trade-dependent country with a fast-growing economy. Thanks to its strategic location in Europe, companies can access multiple markets from a single location anywhere in the region. The country’s multilingual diversity also makes it easy to hire skilled talent across various sectors and cultures.

As you’d expect, Belgium has a highly regulated and structured tax environment, largely due to its affiliation with the European Union and international partnerships. Before you do business in Belgium, you must understand how this system works, the employer/employee responsibilities, and the local and national tax obligations, including social security contributions and withholding taxes.

In this guide, we’ll walk you through the essentials of payroll and income tax in Belgium. After reading, you’ll understand how their complex tax system works and how to stay compliant.

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What Is Payroll Tax in Belgium?

Payroll tax is a small percentage of an employee’s salary deducted by the employer to the Government to fund public programs such as healthcare, retirement, pensions, etc. The rate varies across countries but usually depends on the employee’s income.

Definition and Purpose of Payroll Tax

Like Andorra and other European countries, Belgium doesn’t have a definite “payroll tax” system. Instead, they collect social security contributions, which is almost similar to the payroll tax. This fund is used to finance the Belgian social security activities, such as:

Unemployment benefits.
Sickness, accidents, or disability allowances.
Family allowances.
Reimbursements for medical and hospital expenses.
Pensions and retirement benefits.

These funds are paid directly to the National Office for Social Secuitty (Rijksdienst voor sociale zekerheid – RSZ or Office National de Sécurité Sociale – ONSS) at the end of every quarter.

Keep in mind that the Social Insurance Contributions differ from income tax.

In this case, income tax is what you deduct from your employee’s gross salary after removing social security contributions, personal allowance, etc. All employees are expected to pay a progressive tax of 25 – 50%, depending on their income level and residency status. We’ll discuss this more later.

In January 2022, the Belgian government introduced a new expat tax regime to attract skilled talent worldwide. Their goal is to provide a favorable income tax for the workers and compensate for the high cost of relocation. This is called the 30% rule.

Under this regime, employers can reimburse up to 30% of the employee’s annual gross salary, which is capped at €90,000. This fund is tax-free, and the beneficiaries can use it to cover housing, relocation, and other relocation-related expenses.

However, this only applies to talents recruited from abroad and is limited to five years. If the taxpayer meets the requirements, it can be extended to eight years.

Employer and Employee Responsibilities

Under Belgian law, every active citizen (including non-residents) must pay Social Insurance Contributions of 40.07% of the total gross salary compensation.

Employees’ share of the Social Security taxes is 13.07%, while the employer shoulders the rest, roughly at 27%, which is added to the employee’s contribution. For example, say your employee earns €5000 per month. The employee contributes 13.07% (€653.50) and the employer pays 27% (€1,350). This is a cumulative of €2,003.50.

An additional “special social security contribution” is also deducted from workers’ net salaries, which varies between €9.30 and €60.94 monthly. The final amount your workers will pay depends on the total net taxable family income. Overall, it won’t exceed €731.28 per year.

Employer Payroll Tax Rates in Belgium

Belgium employers must register with the RSZ/ONSS and the Federal Public Service (FPS) Finance before hiring employees to fulfill tax and social security obligations. The RSZ manages the social security system and collects dues, while the FPSF oversees taxation at the federal level.

Employers must deduct social security contributions and income tax withholdings from their workers’ salaries by law. Both payments are essential for funding the country’s social welfare program. Here’s a breakdown of how the payment is made:

Social Security Contributions

The social security contributions are payable to and managed by the National Office for Social Security (NSSO). NSSO calculates the taxes and sends them to you or your payroll service provider monthly. This fund covers medical care, sickness and disability insurance, maternity benefits, pensions, unemployment, and accidents at work.

As the law requires, employers must deduct these contributions from their employees’ wage payments, including the employer’s contributions. Employers are mandated to contribute 27% of the employee’s gross salary, while the employees pay 13.07% of their pre-tax salary. This is a cumulative 40.07%.

Also, every quarter, you must submit a DmFA declaration (Déclaration multifonctionnelle/Multifunctional Declaration of Employment). This document provides the actual data about your employees and the wages/salaries paid to them. You can adjust the social contributions based on the actual employee data after each quarter.

REMOTE PEOPLE FURTHER READING

Want deeper insights? Explore our full guides on Average Salary in Belgium and Employee Benefits in Belgium to better understand compensation benchmarks and mandatory entitlements.

Overview of Income Tax in Belgium

Active residents and non-residents working for a registered company in Belgium must pay taxes on their income. However, the amount taxed depends on their residency status in the country. Here’s how:

Active residents

Active residents are citizens or workers who have lived in Belgium for more than 183 days a year. They are taxed based on their worldwide income, which means they must declare and pay taxes on all income earned, both inside and outside Belgium, such as foreign investments or rental income abroad.

Non-residents

Non-residents are individuals who do not live in Belgium for more than 184 days in a year, but earn income from work in Belgium, for example, freelancers, contractors, or short-term employees. As a result, they are only taxed on Belgian-sourced income, such as:

Salaries paid by Belgian employers
Income from property located in Belgium

Personal Income Tax

Personal income tax is the tax that workers pay on their worldwide income, including salaries, business profits, investments, etc. In Belgium, this tax is collected by the federal government and applies to residents and non-residents, depending on their income sources. Residents are taxed based on their worldwide income, while non-residents are only taxed on the revenue from Belgium.

Belgium follows a progressive tax system, which means the more you earn, the higher your tax rate. As an employer, you’re responsible for withholding personal income tax (précompte professionnel in French or bedrijfsvoorheffing in Dutch) from your employees’ salaries. Also, the amount you withhold depends on each employee’s income level, family, and tax status.

Here’s a breakdown of the personal income tax:

Taxable Income (EUR)	Tax Rate
Up to €15,820	25%
€15,820 – €27,920	40%
€27,920 – €48,320	45%
Over €48,320	50%

These rates apply to both residents and non-residents. However, residents are taxed on their worldwide income while non-residents are taxed on the income earned in Belgium.

Corporate income tax

Corporate income tax (CIT) is the tax companies pay on their net profit, that is, the money left after deducting business expenses, salaries, and other allowable costs. In Belgium, this tax is collected by the federal public service (FPS), and applies to:

All Belgian resident companies (on worldwide income)
Branches of foreign companies resident in Belgium (taxed on Belgium-generated income)
Subsidiaries of foreign companies in Belgium (taxed on worldwide income).

Unlike PIT, corporate tax in Belgium is a fixed rate of 25%. For example, if your company’s net profit is €200,000, then your corporate tax is calculated as follows:

€200,000 * 255% = €50,000

This means your company would pay the FPS €50,000 in corporate tax.

However, if your company is a start-up or small business enterprise (SME) and earns €100,000 or less, you can pay 20% instead of 25%.

Tax Free Allowances and Deductions

Belgium offers several deductions and allowances to reduce the tax burden on the payers. Some of them include:

Social security contributions: Include payments made to Belgian or foreign social security systems. It is fully deductible from taxable income the 13.07% employee contribution).
Employment expenses: This deduction covers work-related expenses, such as travel costs, meals, uniforms, etc. It is 30% of earnings, capped at €3,030.
Alimony: This payment is made to an ex-spouse or near relatives as part of a legal obligation, and is 80% deductible from taxable income.
Child custody expenses: Parents or employees with children under 14 will receive a 45% deduction, capped at €16.4 per day.
Patent income deduction: Income generated from eligible intellectual property, for example, patents and software, is subject to up to an 85% deduction from taxable income.

Tax Treaties and Withholding Taxes

Belgium signed a double taxation agreement (DTT) with 150 countries to avoid double taxation and offset tax fees on income earned in foreign countries. These treaties ensure that income is not taxed twice, i.e., once in the country where it’s earned and in the taxpayer’s country. This system also facilitates international trade between the countries.

Double Taxation Agreements (DTA)

Belgium has signed double tax treaties with over 150 countries, including EU member states such as Austria, Germany, Denmark, and Estonia, as well as non-EU countries like Algeria, China, Argentina, Brazil, the United States, Canada, Nigeria, and the United Kingdom, among others.

This means that if you’re a tax resident in Belgium but earn from your investments in any of these countries, you won’t be taxed twice on the same income, thanks to these treaties.

Withholding Tax on Foreign Income

Withholding tax is the amount deducted from the source before income is paid. According to Belgian law, all Belgian-sourced dividends, royalties, and interest are subject to a 30% withholding tax.

There are some exemptions, though.

If you’re a Belgian tax resident and receive dividends from any DTA countries, you’re eligible for a reduced withholding tax rate in the country where the income is earned.

This works vice versa, too. If you’re a non-resident receiving Belgian-sourced income, you can claim a reduced Belgian withholding rate, based on your tax treaty with Belgium. For Belgian residents receiving Belgian dividends or royalties, the standard 30% withholding applies.

Belgium Payroll Tax Calculator

To simplify the process, use the RemotePeople Global Payroll Calculator to estimate your payroll expenses for resident and non-resident employees in Belgium.

How the Calculator Works

To use the RemotePeople Global Payroll Calculator, follow these steps:

Step 1: Choose the country and employment type, i.e., either local or expat:

Step 2: Input the employee’s gross salary in the local currency (€) and the calculation period. The calculation period can be monthly or annually.

Step 3: Click calculate, and the tool automatically gives you a detailed breakdown of your net salary, tax deductions, and employee costs in real time!

Simplify Payroll and Tax Compliance in Belgium

Although Belgium has multiple tax deductions, its tax system is pretty straightforward and helps employers and taxpayers stay compliant and avoid penalties.

To streamline the process and ensure compliance as your workforce increases, use Belgian Payroll Outsourcing Services or an EOR provider. These providers help you to file tax returns, calculate employee wages, and ensure all your tax payments comply with local and national taxation laws.