Belgium: Summary of Considerations for Equity Compensation Plans
[updated September 2020]
This Summary Guide to Belgium provides information on the exchange control, securities law, labor law and taxation considerations for offering stock compensation to employees in this country.
Taxation of Employee
Full summary guide can be downloaded at the bottom of this section
|Editor’s Note: Text highlighted with BOLD FACE indicates features that qualify for special tax relief or that present other plan-design opportunities.
TAXATION OF EMPLOYEE
Qualified stock options: Options are taxable upon grant, which occurs after the 60th day following the offer to the employee, but only if the employee expressly accepts them in writing within the 60-day period. The amount of tax is then calculated using a special formula. A reduced rate of tax applies if the options cannot be exercised for at least 3 years and other conditions are met. If the offer is not accepted, the option is taxed as a nonqualified stock option. Capital gain is tax-free upon resale.
Nonqualified stock options: Options that do not meet the requirements of a qualified stock option are taxed as employment income technically upon grant on the fair market value of the underlying shares. Taxation, however, is often deferred until exercise, in which case taxation occurs on the option spread.
Restricted stock: Taxation generally occurs upon vesting.
Restricted stock units: Taxation generally occurs upon vesting unless there are conditions subsequent that would defer the taxable event until a later date, such as the date of issuance of the underlying shares. If the RSUs immediately vest at grant without any conditions subsequent, then they would be taxable at grant.
Bonus stock: Taxation at grant.
Performance stock: Taxation at grant or upon vesting (depending on whether grant is subject to suspensive or dissolving conditions).
Stock purchase plans: Tax due at the moment any discount purchase right is exercised. Certain qualifying plans afford tax relief on purchases (at a discount of up to 20% of fair market value) if shares are held 5 years. Capital gain is tax-free upon resale.
Retirement savings plans: Employer contributions (i) are tax-deductible for the employer to the extent they finance an aggregate - statutory and occupational - pension not exceeding 80% of the employee’s last salary and (ii) constitute a taxable benefit-in-kind for the employee. Employee contributions (financed from the employee’s net salary) are not tax-deductible for the employee, but distributions are tax-free, except for any interest earned, which is taxable as passive income.
Effective March 2019, withholding by the Belgian employer is required for awards granted by the Parent.
Effective January 2019, reporting by the Belgian employer is required for awards granted by the Parent.
SOCIAL SECURITY TAXES
According to recent case law, stock plan benefits are generally included in remuneration for social security tax purposes, even if the benefits are granted by the Parent and even if the cost of the benefit is not borne by the employer, but there are exceptions (and hence exemptions) which may apply to specific types of arrangements.
EU Prospectus Regulation includes exceptions from the requirement to publish a prospectus for offers that are addressed to fewer than 150 persons or where the shares have a consideration of less than €5 million (such threshold set by Belgian law and calculated over a 12-month period), if certain other conditions are met. The “employee share scheme” exemption, which previously could only be relied upon by companies with a registered office in the EEA or that traded its shares on an EEA market, is now available (as of July 21, 2019) to companies that are established or trade on certain markets outside of the EEA.
Discrimination based on sex, age, ethnic origin, handicap, sexual orientation, etc. are not permitted under Belgian or EU law. Discretion may be exercised in making awards based on rank, responsibilities, seniority, etc., subject to justifiable differentiation criteria.
Stock-based awards offered on a regular basis could become a vested right unless the employer’s right to terminate is explicitly reserved. Additional restrictions on withdrawal apply to Belgian qualified plans.
Statutory severance pay and termination indemnities generally apply, but owing to conflicting legal interpretations, it is not always clear how to evaluate such advantages.
Paycheck withholding is not permitted to fund stock plans.
Belgium has implemented the EU General Data Protection Regulation.
Electronic signatures are acceptable (subject to various exceptions), but only if certified by a qualified and accredited certification service supplier.
STAMP DUTIES AND OTHER FACTORS
No applicable stamp duties.
Salary and wage freeze legislation applies to some stock benefits if the cost is borne by the employer.