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Stricter disclosure requirements for employers and company directors

Stricter disclosure requirements for employers and company directors

With a significant increase in teleworking, the Belgian tax authorities want to get a clearer picture of the different reimbursements of expenses by employers to their employees.

As an employer, you can choose between lump-sum or actual expense reimbursements. These are in principle not taxable with the employee and are tax-deductible for the company on the condition they are reported on summary salary statements (Fiche 281.10 or 281.20) of the employee(s) concerned.

A new regulation has been drafted which introduces a more extensive disclosure requirement as from 1 January 2022. The rules apply particularly in the situation of working-from-home expenses, but in general extend to all (fixed or variable) reimbursements of costs proper to the employer.

The new regime will also be relevant for self-employed directors that receive a repayment of expenses from their company.

Current disclosure requirements

At this moment, employers can choose between the following three options, depending on how they want to reimburse certain expenses:

  • Category 1: reimbursement of actual expenses based on supporting documents;
  • Category 2: lump-sum reimbursement based on verifiable standards;
  • Category 3: lump-sum reimbursement not based on verifiable standards.

‘Supporting documents’ are basically any type of document like an invoice, expense note or receipt which can demonstrate the type and amount of the incurred expense.

The ‘verifiable standards’ refer to existing administrative guidelines, circular letters or tax rulings and cover reimbursements, for example, for working-from-home expenses, business trips in Belgium or abroad, car expenses, mileage, representation expenses and so on.

The requirement to disclose reimbursements on a summary salary statement currently only applies to lump-sum repayments (i.e. Category 2 & 3), but not for actual expenses (i.e. Category 1) for which, supporting documentation is normally available. Failure to comply with this requirement can be sanctioned with the (i) non-deductibility as a business expense for the employer, and/or the (ii) application of a so-called ‘secret commissions tax’.

New disclosure regime

As from 1 January 2022, the total amount of expense reimbursements will need to be reported on a summary salary statement, both lump-sum and actual expense reimbursements.

However, not disclosing Category 1 reimbursements should have no impact on the tax-deductibility for the employer. The tax authorities can only impose an administrative fine in that case. Furthermore, the non-disclosure should also not result in the application of the ‘secret commissions tax’.

With this more extensive disclosure regime, the tax authorities also want to expose the potential double use of lump-sum and actual expense reimbursements and their deduction as a business expense by the company.

Self-employed company directors

The new rules are also particularly relevant for directors who receive certain expense reimbursements or repayments from their own company.

It often happens that a company manager advances certain costs which the company then refunds afterwards. This is, for example, the case for (i) certain expenses (invoiced) in the company’s name, but initially paid by the director, but also for (ii) expenses paid by the director that benefit the company (e.g. home office and working-from-home expenses, professional use of private car, etc.).

Any transfers in this context are in principle recorded for accounting purposes in the so-called ‘director current account’. The balance of this account is the total amount of what the director owes to his company and what the company owes the director. Same as for employees, expenses can be reimbursed on a lump-sum basis or as an actual expense.

As from 1 January 2022, it is no longer sufficient to process these reimbursements via the company’s ‘current account’. They also need to be disclosed on summary salary statements (Fiche 281.20).

In view of this new regime, we can make the following recommendations:

  • Business expenses should – as much as possible – be paid directly with the company’s debit or credit card or via a corporate bank transfer and this to avoid private payments by the director (which would need to be reimbursed afterwards);
  • ‘Standing orders’ from the company’s bank account for certain recurring reimbursements of business expenses initially paid by the director, should be avoided;
  • Repayment or reimbursement to the director of certain business expenses should always be documented;
  • Inform your accountant or payroll administrator as accurately as possible at the end of every month/year of any reimbursements made from the company’s bank account.

The tax authorities can impose an administrative fine of €50 up to €1,250 in case of non-compliance. Failure to comply with this requirement can be sanctioned with the (i) non-deductibility as a business expense for the employer, and/or the (ii) application of a so-called ‘secret commissions taxation’. The reimbursement could be qualified as director salary as well, and taxed accordingly.

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