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Financial Participation

The various participation programmes have different possibilities with regard to state support. Accordingly, individual forms of participation are treated differently in terms of tax and social security contributions.

Profit-sharing and Employee Share Ownership

Basic regulations for both forms of participation

The initiative for any participation scheme must come from the employer. It must be introduced company-wide via a joint commission of employer and employee representatives and all employees must be eligible. The only restriction possible is that an employee shall have been employed for at least one year. The level of employee participation can vary – in accordance with objective criteria – up to maximum ratio of 1:10. A separate commission must be established for the participation scheme.

Participation is regulated in SMEs without trade union representation by a so-called "accession charter”. The employer must give every employee the opportunity to express his opinion on the participation scheme and to decide whether he will participate.

The total amount of participation should not exceed 10% of the total wage bill and 20% of post-tax profit of the current year. To avoid any wage (or any other benefit) substitution through the financial participation, a wage commission responsible for negotiating wage and salaries must exist for a corresponding timeframe. The employer must also confirm that the introduction of the participation scheme will not lead to any redundancies.

Profit-sharing

Shared profits are liable to a tax-deductible social security contribution rate of 13.07%. They are taxed at 25%.

Employee Share Ownership

Shares issued to employees must be held for two to five years to gain tax exemption. The commission (CLA) determines the exact period within this range. Exceptions are made in such cases when an employee is made redundant or tenders his notice for a convincing reason, when he retires or dies, when a public sale offer is made within the framework of the participation scheme or when the composition of the company’s ownership changes. A wage commission can decide on the transfer of the employee shares into a non-associated company. Tax is liable at a rate of 15% if the shares are held for the two to five year period. If not, they are liable to an additional tax of 23.29%. Social security contributions are not due.

Investment saving

A third form of employee financial participation was introduced for SMEs. These can decide on an investment saving scheme. Employee benefits are directly converted into a 2 – 5-year loan to the company. Employees receive interest on their investment for this period at the going market rate. The purpose of this regulation is to enable smaller companies to encourage participation and at the same time to promote capital investment. Which types of investments are eligible is stipulated by the state. The employee benefits are taxed at 15% and exempt from social security contributions.

Share option plans

Share options plans have been supported since 1999. Employee share ownership is understood as the right of individuals to purchase a certain share of a company. State regulation is mainly via income tax, which is due 60 days after receipt of shares. The rate is determined either by the market value of the options when exercised or is set at a flat-rate. Any additional benefits accruing from the options such as discounts (discounted option prices) are also taxable. The flat-rate is set at 15% of the share capital at the time of allocation plus 1% for each year over an initial five-year period. In some cases the tax can be halved, for example when the share options come from the company where one is employed.

The Belgium Economic Recovery Programme adopted in April 2009 supports share option holders by extending the time window during which they can exercise their options without incurring an additional tax burden to 5 years (“Loi de relance à la rescousse des options sur actions“).

Free share allocations

While there are special tax regulations in effect for share option plans, there are none for free share allocations. They are treated according to normal tax regulations.

Stock appreciation rights

Stock appreciation rights are understood as an employee’s right to a payment corresponding to the appreciation of a referenced share in a pre-defined period. There is no share dealing involved. The purpose is to increase employee motivation. Tax and social security contributions are due on the difference between the share value at the beginning and end of the period.

Stock purchase plans

A stock purchase plan gives employees the chance to purchase shares in the company they are working for. As long as the shares are purchased out of net income and the market price is paid, they are not regarded as supplementary income. If however the market price is not fully paid, i.e. when the shares are discounted, then the discount is regarded as supplementary income and liable to tax.

Wilke, Maack and Partner (2014) Country reports on Financial Participation in Europe. Prepared for www.worker-participation.eu. Reports first published in 2007 and fully updated in 2014.