The FPS Finance offers a whole range of support measures for companies that are experiencing difficulties during the corona crisis. A very important support measure for many SMEs is the general deferral of payment of the professional withholding tax for two months. But what does this mean for me in practice?
Important to know: what is the professional withholding tax? And what is the withholding tax?
As a monthly advance on the final tax of every working Belgian, the professional withholding tax is situated within the personal income tax and can therefore never fall within the corporate income tax.
The personal income tax is the tax levied every year on the income of Belgian residents. However, there are four categories of income:
- income from immovable property (e.g. cadastral income and rental income);
- income from movable property (e.g. interest on bank accounts, dividends on shares, income from intellectual property rights, etc.);
- professional income (e.g. salary, pension, unemployment benefits, home-work allowances, etc.);
- Various revenues (e.g. profits from the sharing economy, capital gains, accidental profits, etc.).
These four categories each have their own system and rate, but all together form the 'personal tax'.
Significance of the aid measures for the employee
The third category, professional income, is subject to professional withholding tax. This is to prevent the employee from having to pay a huge amount of income tax at the end of the year (and because Father State also needs income from taxes during the year of course). The professional withholding tax is thus a monthly advance payment on the annual income tax, which is withheld from the employee's salary and paid to the Treasury by the employer. This deduction is a legal obligation for the employer and is made on the gross monthly salary of the employee, after deduction of social security contributions.
The support measure for the deferral of payment of payroll tax therefore has no effect on the employee. In any case, the employee never receives the amount of professional withholding tax. It is paid directly by the employer to the Treasury.
Significance of the aid measures for the employer
While the aid does not affect the employee, it does affect the employer. The latter now has two extra months to pay the professional withholding taxes of all his employees to the Treasury. Thus, the deadline for the payment of professional withholding taxes for the month of February has been extended to May 13th instead of March 15th. The same applies to the advance payment for the month of March (deadline June 15th instead of April 15th). For periods from April onwards, the normal deadlines (and penalties for lateness) will again apply.
This aid is granted automatically to all employers in Belgium.
This aid measure will therefore provide the employer with a (large) extra amount of cash in times of scarce income to keep his business running and to pay certain urgent invoices. Please note: postponement does not mean cancellation! The same amount must still be paid, just a little later.
What about copyrights and profit premium?
As an employer, do you compensate your employees for copyrights or profit premiums (these are absolute winners in terms of fiscal optimisation, read the Payflips blogs on copyrights and profit premiums)? Then it is very important to be able to situate this.
The income from copyright and profit premium is income from movable property, and therefore the second category of income (see above). A withholding tax is levied on copyrights and profit premiums, also as advance payment on the final income tax. The employer is also obliged to pay this advance levy to the Treasury, even before the money reaches the employee.
It is important to know that income from movable property and professional income form a completely separate tax system, with different rates and declarations.
If we link this back to the COVID-19 support measures of the FPS Finance, the support measures only apply to the professional withholding tax on professional income - and not to the withholding tax on personal income. Thus, the withholding tax on royalties and profit premiums must be paid in time.
The logic behind this decision is as follows. The government wants to support companies in the core of their operation: the cost of employees' wages is temporarily reduced and postponed to a later date so that the employer has a little more room for other payments and does not have to go bankrupt. The professional withholding tax on professional income plays a central role and is omnipresent: every employee who receives a salary pays the professional withholding tax on professional income in principle.
In contrast, withholding tax is generally much less present in the middle of our economy and is therefore not the subject of an aid measure.
Do you still have questions about the support measures or your payroll tax situation in general? Or do you want to reward your employees with a profit bonus even in times of crisis? Contact Payflip at firstname.lastname@example.org and we will be happy to help you!