Tax reform in Belgium – phase 2
Measures in favour of employees
A first series of new tax and social measures took place in 2015 and 2016. The tax reform has just seen a second boost since 1st January of this year. The most important goal is to eliminate the tax bracket of 30 %, which will be merged into the tax bracket of 25 %. This measure is accompanied by an increase in simplification of the system of flat-rate professional expenses.
Moving forward, only one global percentage is applied to the gross amount of income, namely 30 % (with a maximum of € 2 950). This amount will be subject to indexation.
Other measure: the increase of the amount that is exempt of taxes, of which the standardisation is programmed for the year 2019.
After having seen an increase of around €83 (low income) and €51 (medium income) in their monthly revenue since 2016, employees can expect a new increase in their purchasing power of respectively €32 and €28 average/month.
Employer costs and structural reduction
The employer costs continue to fall. After a decrease of 2.4% in April 2016, since the 1st January 2018, they have been reduced from 30 to 25%. Here also, decrease goes hand-in-hand with simplification: the rate of 25% applies to all workers. And the cherry on the top: the rate will be brought down again to 24.2% as of 1st January 2020.
The system of structural reduction has been eliminated. The limit for low salaries that was introduced to combat the brain drain through a reduction in employer costs, is no longer needed. However, the efforts in favour of low salaries have been maintained and even reinforced.
All these measures come with new rules concerning VAT, Excise and capital gains tax.