Minimum remuneration of company directors (individuals) required – sanctions in case of non-compliance
Since 2018, a separate assessment is due by companies paying none or only limited director’s remuneration. This measure wants to prevent that smaller companies, generating a certain level of profits, will reward their company directors by other means than remuneration subject to personal income tax and social security contributions.
How does it work ?
As of 2018, all Belgian companies are required to grant a minimum remuneration of EUR 45.000 per year to a company director (individual). Should the taxable result of the company be lower than EUR 45.000, the minimum remuneration equals the amount of taxable income.
If this minimum remuneration requirement is not met, Belgian companies will be subject to a separate tax of 5,1% on the difference between the minimum requirement and the highest remuneration paid.
In case the taxpayer has no individuals acting as company directors but only legal entities (management companies), the maximum amount of tax, i.e. EUR 2.295 (EUR 45.000 x 5,1%) will always be applied.
What is considered to be a remuneration ?
The director’s remuneration that needs to be taken into account is the gross remuneration before deduction of social contributions withheld. Amongst others this includes:
- The remuneration itself;
- Benefits in kind;
- Requalified rental allowances;
What about affiliated companies ?
When at least half of the company directors (individuals) of affiliated companies are the same, compliance with the minimum remuneration requirement can be assessed on a consolidated basis, but then the remuneration threshold is increased from EUR 45.000 to EUR 75.000.
If not one of the common company directors (individuals) receives a jointly paid remuneration of at least EUR 75.000, the separate tax of 5,1% on the remuneration shortage should be borne by the company with the highest reported taxable income.
Exception to the rule for SME startups ?
The separate tax will not come into play for SMEs during the first four taxable periods after their incorporation. On the other hand, SMEs that are not compliant with the minimum remuneration requirement will not be able to benefit from the reduced SME corporate income tax rate of 20%.
Action required ?
On a stand-alone basis the separate tax of 5,1%, which is a tax deductible expense, will not lead to sleepless nights. Make sure it stays that way and contact our KPMG specialists to help you analyze what this new tax measure exactly means for your company and if further action is required.