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Reporting expenses inherent to the employer changes starting in income year 2022

25 May 2022 Employers

On 26 February 2021, a new tax circular was published that defines the conditions under which the employer's interventions in the costs of homeworking are exempt from taxes. However, this circular also shows that the FPS Finance will adjust the way of reporting expenses (fixed rate or otherwise) inherent to the employer on the tax sheet.

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Expenses inherent to the employer

In principle, all allowances and benefits that an employer grants to its employees are deemed to be remuneration and therefore taxable. Over time, however, numerous specific regimes have been created whereby originally taxable payments are nevertheless exempt.

However, a general exception to that principle is the expenses inherent to the employer. According to the Income Tax Code, reimbursements of expenses inherent to the employer are not considered remuneration (art. 31, paragraph 2, 1° in fine).

Definition

There is no real legal definition of these expenses inherent to the employer. In short, this concerns expenses that are the responsibility of the employer but were advanced by the employee and then reimbursed to that employee.

This exemption is related to the employer's labour law obligation to provide the necessary tools and materials to the employee to enable him to perform the agreed-upon work.

Actual or fixed-rate expenses

In order for the reimbursement to be considered exempt compensation for an expense inherent the employer, the employer must be able to provide dual evidence that:

  • the allowance is intended to cover expenses proper to him or her, and
  • that reimbursement was actually spent on such expenses.

The employer may choose to reimburse the actual costs incurred, upon presentation of the necessary supporting documentation. In addition, he or she may also set those fees at a fixed rate. If the amount of the fixed fee is determined according to serious standards resulting from repeated observations and sampling, the FPS Finance accepts that this fee covers actual costs incurred.

Entry on the sheet

Both actual and the fixed-rate expense reimbursements must be accounted for by reporting them on the tax sheet of the employee(s) involved. However, the way in which it is done differs.

Current Methodology

On the sheet 281.10 relating to the 2020 income year, the following distinction must be made (depending on the way in which the employer reimburses the expenses) in addition to section (b) of box 27 'Miscellaneous information':

 

Listing

Specify amount?

Situation 1:

Cost reimbursement determined based on supporting documents

Yes – supporting documents

No

Situation 2:

Fixed rate expense reimbursement, established on a fixed-rate basis, based on serious and concordant standards

Yes – serious standards

No

Situation 3:

Fixed-rate expense reimbursement, determined on a fixed-rate basis, that is not based on serious and consistent standards

Yes

Yes

 

If multiple types of cost reimbursements are granted, a combination of these entries must be made in the relevant section on the sheet, if necessary.

As of income year 2022

Based on the information included in the Circular, starting with the income year 2022, the amount (total or otherwise) of the expense reimbursement(s) granted will always have to be reported on the tax sheet. This will give the tax authorities a better understanding of the amounts awarded as expense reimbursements.

The above schedule will then look like the following:

 

Listing

Specify amount?

Situation 1:

Cost reimbursement determined based on supporting documents

Yes – supporting documents

Yes

Situation 2:

Fixed rate expense reimbursement, established on a fixed-rate basis, based on serious and concordant standards

Yes – serious standards

Yes

Situation 3:

Fixed-rate expense reimbursement, determined on a fixed-rate basis, that is not based on serious and consistent standards

/

Yes

 

In the event multiple cost reimbursements are granted, the total amount for each category will need to be listed on a separate line in the relevant section on the sheet.

Accordingly, the instructions for the preparation of the tax sheets relating to income granted in the 2022 income year will have to be drafted accordingly. We will discuss this in more detail later.

Not only for expense reimbursements in the context of home-based work

Although the Circular deals only with expense reimbursements granted in the context of homeworking, the scope of the change described above is much broader. After all, this change will be applied "in a general sense" starting in income year 2022, for all reimbursements of costs proper to the employer (marginal 12).

For business leaders, too

Not only employees but also company directors regularly receive expense reimbursements (fixed rate or otherwise) from the company. Although the circular itself explicitly excludes corporate executives from its scope – thus preventing them from falling under the legal certainty of the circular if they were granted a fixed-rate homeworking allowance – the circular goes on to state that the future change in terms of reporting on the tax sheet also applies to sheet 281.20. This is the classic sheet for corporate executives who are compensated for being a corporate executive.

Source:
Circular of 26 February 2021 (No. 2021/C/20) on employer's contributions for work at home.

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