Benefit in kind of interest-free and beneficial loans: reference interest rates published

SD Worx Knowledge Centre

Source

Royal Decree of 6 February 2022 amending the Royal Decree on the Income Tax Code 92 with regard to benefits in kind in the event of the granting of an interest-free loan or a loan at a reduced interest rate, p. 11169.

The tax authorities have announced the reference interest rates that apply to interest-free and/or beneficial loans granted by the employer from 1 January 2021.

The publication of these percentages allows the employer to review the benefits in kind for these loans on a retroactive basis.

Taxable benefit

Employers sometimes provide their staff with interest-free and/or beneficial loans.

For tax purposes, this constitutes a taxable benefit in kind equal to the difference between:

• the annual reference interest rate, set per type of loan; and • the interest rate charged by the employer to the employee borrowing the funds (or company manager).

The reference interest rates change annually and vary depending on the type of loan.

Through publication in the Belgian Official Journal, the tax authorities publish the percentages that apply to loans granted from 1 January 2021.

More specifically, the following reference interest rates apply:

Mortgage loans: Reference interest rate

- Repayment guaranteed by a mixed life insurance policy 1.34% (instead of 1.41%)

- Other loans

1.29%

(instead of 1.36%)

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Non-mortgage loans with no specified maturity 6.48%

(instead of 10.20%)

Fixed-term non-mortgage loans

(monthly loan-to-value ratio):

- Loans to finance the purchase of a car

- Other loans

0.05%

(instead of 0.04%)

0.11%

Consequences for the employer

Current loans:

The publication of the percentages allows the employer to review the benefits in kind for loans granted from the 2021 income year on a retroactive basis.

Note:

This review is not considered on an annual basis for all types of loans.

New loans

The new percentages shall also be applied for loans granted from the 2022 income year, pending the publication of the correct percentages for 2022.

The publication of this information is scheduled for early 2023.

How will this affect the public sector?

If an employer in the public sector were to grant an interest-free or cheap loan to its staff, the same rules apply as in the private sector.

Table of contents

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Legal content

1. Principle

2. Benefit in kind

2.1. Calculation

2.2. Review

3. And what about the NSSO?

Legal content

1. Principle

The employer may grant an employee (or company manager) a loan:

• at an interest rate that is lower than the current interest rate; or • without interest.

This results in a taxable benefit in kind for the employee (or company manager).

2. Benefit in kind

2.1. Calculation

The taxable benefit is equal to the difference between:

• the annual reference interest rate, set per type of loan; and • the interest rate granted by the employer to the employee borrowing the funds (or company manager).

The reference interest rates change annually and vary depending on the type of loan.

The percentages applicable to loans granted in 2021 were published today (14 February 2022) in the Belgian Official Journal.

2.2. Review

The publication of the percentages allows the employer to review the benefit in kind for 2021 on a retroactive basis.

Note:

This review is not considered on an annual basis for all types of loans.

Fixed-rate mortgage loan

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The benefit is equal to the difference between the reference interest rate for the year in which the loan was taken out and the interest rate charged to the borrower.

For a loan granted in the course of 2021, the employer must therefore review the benefit following the publication of the reference interest rate at the beginning of 2022.

From then on, the percentage is definitively fixed throughout the term of the loan.

Non-mortgage loan – fixed term

Here, too, the taxable benefit is calculated on the basis of the reference interest rate for the year in which the loan agreement was concluded.

Once definitively established, this interest rate will continue to apply throughout the term of the loan.

Non-mortgage loan – no specified term

The reference interest rate of a specific year applies to the sums available to the borrower during the same year.

Only for this type of loan must the employer review the benefit in kind each year.

3. And what about the NSSO?

If the employer grants a loan to an employee at favourable conditions (interest-free or at a reduced interest rate), there is also a salary benefit for the NSSO.

No ordinary social security contributions are due. However, there is no specific arrangement for the NSSO treatment of this benefit.

The benefit therefore corresponds to its actual value: the difference between the allocated interest rate and the market interest rate.

This compares what the employee repays to their employer with the monthly repayments that they would have to make as a loyal customer with their bank for a loan of the same amount and with the same term.

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