How is a referral bonus taxed in Belgium ?
A referral bonus is an incentive given by a company to motivate its employees (or third parties) to recruit candidates from within their professional network. This practice is common among those seeking specific profiles that are not easily found due the competitiveness of the market. It is often part of a bigger employee referral program. Instead of hiring an expensive staffing agency, employees are offered an opportunity to support their employer’s recruitment strategy and cash-in a reward at the same time.
The referral bonus is mostly rewarded (i) if the candidate is ultimately hired due to the employee’s intervention; (ii) the candidate effectively starts working/performing their activities; and (iii) the candidate remains with the company for a predetermined amount of time.
In the past, the Belgian tax authorities have confirmed that a referral bonus granted by an employer to an employee as a result of a successful referral is not taxed as employment income on the condition that the referral program is also made available to third parties (Ruling nr. 2012.312 of 18 September 2012).
If third parties can also be rewarded with such bonus, it means that the income is not necessarily granted in connection with the employment relationship. It should however be noted that the possibility of receiving a referral bonus should be made publicly available to third parties. It is not sufficient that the option is simply provided in the referral program; the company should also do the needful to make it accessible to third parties.
As a result, the referral bonus can be considered as ‘miscellaneous income’, which is subject to a flat tax rate of 33% plus communal charges. In any case, this is significantly less than the standard progressive tax rates (25% up to 50%) and additional (employer and employee) social security charges that apply to income from employment.
The Ruling Commission also confirmed that a referral bonus constitutes a business expense for the employer since the main goal of recruiting an employee is to expand the workforce in order to increase revenue. Under the above conditions, the reward will not be considered taxable salary for the employee but will remain fully tax-deductible for the company.