Employee stock option plan in Belgium: reporting of taxable benefits and withholding tax on wages also required in an international context

Nowadays, there is a veritable war for talent being waged on the labour market. This makes it increasingly difficult for companies to fill vacancies. An individual approach to remuneration by granting stock options, for example, or similar benefits can play an important role.

A stock option plan can be fully customised. This offers the opportunity to reward employees for their individual performance. In addition, employees are more involved in the growth of the company and are extra stimulated to contribute to it.

The benefits that result from this remuneration are taxed as a benefit in kind for the employee. If the plan meets the conditions of the option law of 26 March 1999, a favourable tax regime can be applied. Under this option law, the benefit in kind is taxable at the time the option is granted, and not at the time the option is exercised. This has the advantage that the beneficiary doesn’t pay tax on the actual benefit, but only on a lump-sum estimated benefit. At the time of the effective exercise of the share option, in principle no further taxes will be due, no matter how large the capital gain is.

Withholding tax and withholding obligation also in an international context

In a purely Belgian context, the benefit in kind under an option plan (both within and outside the 1999 Options Act) must always be subject to withholding tax on wages. In addition, the taxable benefit must always be recorded on the individual tax return.

In practice, such plans are often implemented on a cross-border basis, with the foreign parent company granting stock options or free shares (such as the 'Restricted Stock Units' or RSUs) to employees of the Belgian subsidiary. The benefit that the employee enjoys is, in principle, taxable in Belgium. 

Until recently, it was not obligatory to report such foreign plans on a tax return and to withhold / pay the withholding tax on wages if there was no active intervention by the Belgian subsidiary. However, the option plans that fall under the 1999 Act, where the Belgian employer is required to report the taxable benefit on the beneficiary’s salary slip and annual tax form, are an exception. 

For the foreign plans that fell outside the scope of the obligation to report the taxable benefit and the withholding / payment of the withholding tax, the beneficiary had to remember to include the benefit in his tax return (which in practice often resulted in the benefit not being taxed). 

To eliminate this point of discussion, the income tax code was recently amended. In concrete terms, a concept has been introduced whereby the Belgian employer is regarded as the provider of the benefit, even if the Belgian company has not intervened. As a result, the Belgian company, whose employees receive taxable benefits (regardless of the type of plan) from a foreign group company, will from now on always be obliged to withhold withholding tax and to report the taxable benefit. 

In an international context, it will from now on be important for the Belgian company to be aware of the foreign plans to which its employees can subscribe. In this way all administrative obligations in Belgium can be correctly met, in a timely manner. 

The reporting obligation is already valid from 1 January 2019. Since 1 March 2019, the obligation to withhold and pay the withholding tax has also come into effect.

Do you have questions about stock option plans, in a Belgian or international context? Please feel free to contact one of our specialists via contact@vdl.be.