On 20 November 2023, the Antwerp Labour Court of Appeals ruled that Belgian social security contributions are not due on equity compensation in the form of restricted stock units (RSUs) granted by a foreign parent company to employees of its Belgian affiliate. The court concluded that the National Social Security Office (NSSO) did not successfully demonstrate that the RSUs are “borne by” the Belgian affiliate, or that they should be considered a counterpart to work performed under the employment agreement.
On 5 September 2022, the Belgian Supreme Court had overturned the earlier ruling to the contrary by the Ghent Labour Court of Appeal (see our Tax Alert of 11 October 2022) that an entitlement to a benefit which is not consideration for work performed under an employment agreement is “salary” (loon/rémunération) for the purposes of social security contributions only if also borne by the Belgian affiliate. This is the case when the Belgian affiliate has made a commitment to grant the benefit.
In light of the Supreme Court’s decision, the Antwerp court revisited the facts at hand and concluded that the RSUs were not borne by the Belgian affiliate and therefore no social security contributions were due on the RSUs in question. The key arguments presented to the court were as follows:
It may be interesting to note that the Antwerp court held that the tax treatment of RSUs has no impact on their social security treatment; the deduction of withholding tax does not necessarily imply that the benefit is also subject to withholding of social security contributions.
The NSSO has confirmed that it will not amend its current administrative position on the legal definition of salary and indicated that it is also exploring the possibility of a (new) appeal before the Belgian Supreme Court.
Following the Antwerp court’s ruling, employers should still be cautious when it comes to equity compensation granted by a foreign parent company to employees of a Belgian affiliate. The NSSO will continue to apply the principle that benefits considered part of the consideration for work performed within the framework of the employment agreement are always salary and therefore subject to social security contributions.
The question of whether the benefit is borne by the employer will only arise for benefits that do not represent such consideration. In addition, whether equity compensation is borne by a Belgian affiliate is highly dependent on the specific facts in each case, requiring a thorough review of each individual situation.
Stefanie is part of the Deloitte Legal's Employment, Pensions & Benefits practice. She is an employment law and social security specialist, known for her outside the box thinking, innovative and pragmatic solutions for all her clients’ personnel related legal matters. Stefanie is a well know expert for social inspections in Belgium and advises the Belgian government on topics of social criminal law. She wrote a handbook on the topic which is used in the master after master social law. In addition, she advises clients on employment and social security law related aspects of compensation packages, structuring self-employment relations (consultancy and management agreements), the S within ESG and social inspections. Next to that Stefanie was a lecturer at Ghent University College for 7 years.