Withholding tax exemption for night and shift work is changing significantly

Mini tax shift: withholding tax exemption night and shift work is changing significantly

SD Worx Knowledge Centre

The mini tax shift thoroughly amends the regulation on the withholding tax exemption night and shift work.

As an example, there will be a tightening of certain conditions in order to benefit from the exemption. From 1 April 2022, for example, an employer must grant a minimum hourly bonus of 2% for shift work and 12% for night work in addition to the contractual gross hourly wage.

Current system in a nutshell

Companies in which employees carry out night and/or shift work and receive a bonus for doing so may qualify for this withholding tax exemption.

The exemption amounts to 22.8% of the taxable remuneration of all employees who work in a system of night and shift work. It is applied to the withholding tax deducted from the salaries and the shift (or night) bonuses.

In order to benefit from the exemption, a number of conditions must be met.

In the case of shift work, the employees concerned must carry out the work in at least two shifts:

• of at least two employees who carry out the same work both in terms of content and scope; • that follow on from each other during the day without: o there being an interruption between the consecutive shifts; o the overlap being more than a quarter of their daily work.

In the case of night work, this concerns companies in which employees work between 20:00 and 06:00 pursuant to the work schedule applicable in the company, with the exception of employees who:

▪ usually start work from 05:00; ▪ only work between 06:00 and midnight.

The employees concerned must be employed in shift or night work for at least one third of their working time pursuant to the work schedule in which they are employed. This is the socalled one-third standard.

New rules as from 1 April 2022

The withholding tax exemption night and shift work is changing in the following areas:

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• The exemption in the context of night and shift work is being split into two separate exemptions.

This has consequences for: o the calculation of the one-third standard; and o collectivisation.

• The calculation of the one-third standard in the context of night and shift work must be done per hour instead of per day. This principle is expressly included in the law in accordance with jurisprudence.

• A break of a maximum of 15 minutes between two consecutive shifts is now explicitly permitted.

• The condition to grant, in addition to the contractual gross hourly wage, a minimum bonus per hour of: o 2% for shift work (irrespective of whether it is a day or night shift); o 12% for night work.

The above changes shall apply from 1 April 2022.

• The bonus must be explicitly included in a CLA, the working regulations or the individual employment contract.

This condition shall apply from from 1 April 2024.

• The temporary employment sector may only apply the exemption if the client agrees to this.

This additional condition shall apply from 1 October 2022 for both new and current temporary work assignments.

Note:

This discussion is based on draft bills. Amendments may still be put forward, which means the arrangements as described above may still change. This discussion is also subject to publication in the Belgian Official Journal.

Table of contents

Context

Legal content

1. Night work

2. Shift work

3. Collectivisation of the exemption

4. Calculation of the one-third standard

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5. Temporary employment sector: client consent

Context

A number of conditions must be met for withholding tax exemption night and shift work. Most conditions have remained in place, but have been clarified or even tightened.

As an example, the bonus must be a minimum amount from now on.

The exemption for night and shift work has been divided into two separate exemptions. This has consequences for:

• the calculation of the one-third standard; • collectivisation.

Additional conditions have also been added for the temporary employment sector.

Legal content

1. Night work

In the case of night work, this concerns companies, recognised temporary employment agencies or certain public limited companies:

• where the work is carried out by employees: o in category 1 (for the calculation of the structural reduction of charges) or by statutory employees of certain autonomous public undertakings; o who work between 08:00 and 06:00, with the exception of employees who:

▪ usually start work from 05:00; ▪ only work between 06:00 and midnight. • where those employees receive a bonus for night work.

Minimum bonus

From 1 April 2022, the bonus must be a minimum of 12% of the contractual gross hourly wage.

In addition, the bonus will only be eligible from 1 April 2024 if the allocation is included in a collective labour agreement, in the working regulations or in an employment contract.

If this is not the case, the bonus is not eligible and the employer therefore loses the exemption.

2. Shift work

Shift work concerns companies, recognised temporary employment agencies or certain public limited companies:

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• where the work is carried out by category 1 employees (for the calculation of the structural reduction of charges) or by statutory employees of certain autonomous public undertakings; • in at least two shifts: o of at least two employees doing the same work both in terms of content and scope; o that follow on from each other during the day without the overlap between the two being more than a quarter of their daily work; • where the employees receive a shift bonus in this regard.

The overlap route of a maximum of one-eighth, as mentioned during the workshops in February, did not reach the final meeting.

Minimum bonus

From 1 April 2022, the bonus must be a minimum of 2% of the contractual gross hourly wage.

In addition, the bonus will only be eligible from 1 April 2024 if the allocation is included in a collective labour agreement, in the working regulations or in an employment contract.

If this is not the case, the bonus is not eligible and the employer therefore loses the exemption.

Break between consecutive shifts

Shifts must follow one another without interruption. There was doubt as to whether or not a break between two shifts caused the exemption to be lost.

The law now explicitly allows a break of a maximum of 15 minutes between two shifts.

The memorandum shows that the administration may accept a supplementary tolerance in very exceptional circumstances.

The current administrative tolerance under the sanitary measures to combat the Covid-19 pandemic is therefore maintained.

Shifts that do the same work both in terms of content and scope

In the event of audits, this condition is the subject of much discussion. However, no clarification has been forthcoming.

According to the memorandum, the consultation with the stakeholders did not provide a workable proposal. The proposals would have resulted in either a drastic limitation or a significant extension of the scope.

3. Collectivisation of the exemption

Since 1 January 2018, the withholding tax exemption night and shift work has been calculated at the level of the group of employees who are eligible for this exemption and no longer at the level of the individual employee.

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In other words, a lack of withholding tax to charge the exemption to an employee is offset by the surplus of withholding tax for another employee who enjoys this exemption for night or shift work.

From now on, this collectivisation must take place separately:

• firstly, for the group of employees for which the employer applies the exemption from the duty to transact pass-through payment of withholding tax on night work; and • on the other hand, for the group of employees who are eligible for the exemption from payment of withholding tax on shift work.

4. Calculation of the one-third standard The employer may only apply the withholding tax exemption shift work, night work, real estate work and in the navigation system regime (navigation en système) for employees who, in accordance with the work schedule in which they are employed, do the following for the month in question for at least one third of their working time:

• work shift work; • work night work; • carry out construction work on site; or • work in the system navigation (navigation en système) regime.

The condition that the employee in question works one third of their working time in shift work or night work, or works one third of their working time in shift work on site in real estate or a system navigation (navigation en système) regime is called the one-third standard.

Only the working hours for which a bonus is actually granted are eligible for the application of this one-third rule in the context of night or shift work. This is now explicitly included in the law.

An accumulation of work in two or more of the above-mentioned types of exemptions for the same month is not possible for the assessment of the one-third standard.

For the counting of the one-third standard, the calculation on an hourly basis has been the standard since 1 January 2022. The count may no longer be done on a daily basis.

The law clarifies the existing legal text in accordance with the judgment of the Court of Appeal of Bergen of 21 October 2020. A Circular of 16 November 2021 recently confirmed this principle.

5. Employment agency sector: client consent

Employment agencies may continue to make use of the system.

However, the employment agency must now have the explicit agreement of the user. This condition shall apply from 1 October 2022, both for new and current temporary work assignments.

This adjustment is intended to encourage employment agencies to make binding arrangements with their clients before they request the application of this exemption. This will

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allow them to provide evidence that all the conditions for application have been met in the event of an audit.

This explicit agreement is only required for the application of the exemptions for:

• night work; • shift work; • construction work.

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