Since 2003, companies employing workers on shift based schedules have benefited from a tax advantage in the form of a partial exemption of payroll tax. The requirement for eligibility of the tax advantage is for two teams of at least two workers to perform the work in succession, and for them to receive a bonus for doing so. The tax advantage is increased if the work is carried out continuously (four shifts of at least two people, working weekdays and weekends, without any noticeable interruption).
Constitutional Court, 8 February 2024: restrictive interpretation upheld
One of the conditions for benefiting from the favourable regime was that the work performed in shifts should be the same in purpose and scope. In practice, in the event of an audit, the tax authorities were tolerant and maintained the benefit of the scheme in the event of minor changes in the scope of the work (successive teams working more or less hours in relation to each other). In its ruling of 8 February 2024, however, the Constitutional Court upheld a strict interpretation of the legislation: strict equivalence in the scope of work would indeed be required. This decision is likely to call into question the aforementioned tolerance.
Government response: scheme maintained in the event of variations in scope
On March, 20 the government decided to adopt a temporary legislative measure to mitigate the potentially harmful consequences of the Constitutional Court ruling. The new measure introduces an alternative regime (“Regime bis”) that will allow companies to retain part of the tax advantage, even if there are variations in the scale of work of successive teams. The benefit will be granted up to a proportion that takes these variations into account. Differences in the volume of work between different teams will be measured and the tax benefit will be reduced to the extent of these differences (only).
New system: retroactive; old system: maintained
The amended law is due to be published in May. However, this Regime bis will be retroactive: it will apply to remuneration paid from 1 January 2021, in order to protect companies from the potentially harmful effects of the Constitutional Court ruling. The other legal conditions remain unchanged, in particular the fact that the work must be the same in purpose. The current system will be maintained, but the tax authorities will receive instructions (based on the legislative for the new law) to the effect that no restrictive interpretation should be applied to it; in this way, the current tolerances observed in practice, relating to the extent of the work of successive teams, can be maintained. To simplify matters, companies will not have to opt for one system or the other by indicating a specific code in their withholding tax return- they will indicate a higher or lower exemption amount depending on whether they actually apply one system or the other.
Companies will therefore have to determine whether the practice they have put in place complies with the current regime following the Constitutional Court ruling (with a certain degree of tolerance) and, if not, whether the Regime bis will allow them to retain the benefit of the tax advantage, albeit to a lesser extent.
READ THE ARTICLE IN FRENCH HERE
READ THE ARTICLE IN DUTCH HERE
For further information, please contact:
Olivier Bertin, Partner, Bird & Bird
olivier.bertin@twobirds.com
