Belgium is traditionally considered an open economy and a reliable socio-economic environment for foreign investment. Although providing interesting business opportunities, starting operations in Belgium will inevitably bring along challenges. Foreign investors will be confronted with unfamiliar Belgian employment and corporate law requirements. As is the case in other EU Member States, employment and corporate law in Belgium are governed primarily by national law. To successfully launch an activity in Belgium, it is therefore crucial to get acquainted with the specificities of the Belgian system. The checklist below will guide you through some of the key legal requirements for opening up shop in Belgium.
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2. Labour and Employment Law Requirements
a) Employer Policy Requirements
In order to be legally compliant, employers are required by legislation to create and implement a number of employment policies. In Belgium, a distinction should be made between the “internal work rules” which constitutes a mandatory document, and company policies, which are useful but not mandatory.
The “internal work rules” must include several mandatory provisions and procedures, which are applicable within the company, such as:
- working time schedules;
- rights and obligations of the supervisory personnel;
- declaration of intent and/or policy on alcohol and drug use;
- procedure on psychosocial risks at work, including sexual harassment and mobbing;
- disciplinary measures, penalties and the possible remedies available to the affected employees;
- the whereabouts of the person appointed to provide first aid and the whereabouts of the first aid kit, together with the names of doctors who can be contacted by the victim of a workplace accident.
Other internal policies are not mandatory but could be useful to make clear arrangements on specific topics and manage employee relations. The following policies are often adopted by Belgian employers:
- a car policy;
- a policy on data protection (GDPR);
- a policy on the use of e-mail, Internet and social media;
- a policy on the use of a mobile phone, laptop, tablet;
- a whistle-blower policy;
- a code of conduct;
- a diversity policy;
- a remote work (telework) policy;
- policy on the reimbursement of costs;
These policies will help an organisation manage employee relations and mitigate the risk of legal liability in the future.
b) Employee Training Requirements
Firstly, an employer must spend the necessary time and resources in welcoming newly hired employees.
Secondly, an employer is liable for the well-being of his employees. In this context, an employer has certain responsibilities, for example:
- ensure that all employees are aware of possible safety and health policies or guidelines;
- if the workplace contains hazardous materials, employees must receive training on the handling of such materials; and
- ensure that at least one employee is trained in first aid.
Finally, but only for employers with at least 10 employees, Belgian law requires the entire private sector to provide 5 days of training per full time equivalent, per year, to be specified at industry level or company level. Joint Committees can bring this number down to 2 training days per year. Employees have an individual right to receive these training days. Employers will also have to draft a training plan, in consultation with the works council (or trade union delegation).
c) Employment Agreements
Several types of employment agreements exist, and can broadly be subdivided on the basis of:
- First, the nature of the work performed;
Belgian law broadly distinguishes 6 types of employment agreements, i.e. for white-collar employees, blue-collar employees, sales representatives, temporary agency workers, domestic servants and students.
- Second, the period for which the contract is entered into; and
An open-ended employment agreement is the most common employment agreement used in Belgium. If not explicitly stipulated otherwise, every employment agreement is presumed to be for an indefinite term.
A fixed-term agreement automatically ends upon the expiry date of the agreement. Yet, if parties continue to perform the agreement after its expiry date, the employment agreement will be deemed to be an open-ended employment agreement. Furthermore, Belgian law limits the ability of parties entering into multiple consecutive fixed-term employment agreements.
An employment agreement for a specific project or a replacement agreement is also a type of fixed-term agreement. The employment agreement for a specific project will end on the date on which the project is completed, even though no specific time can be set. A replacement agreement may be entered into to replace an employee whose employment agreement has been suspended for reasons other than lack of work, the weather, a strike, or lock-out (e.g. long-time illness, pregnancy, career break, etc.).
Another type of employment agreement is an employment agreement for the performance of temporary work. Such agreements are used to address a temporary lack of personnel, manage a temporary increase in workload, or carry out an exceptional task.
- Third, the volume of work performed, i.e. full-time versus part-time agreements.
In principle, the standard employment agreement, namely the full-time open-ended employment agreement, may be written or verbal (however it is common practice and advisable to enter into a written agreement). Yet, all other employment agreements deviating from this standard, must be in writing. Several of these employment agreements must also include a number of predetermined stipulations.
Van Olmen & Wynant has extensive experience in drafting employment agreements tailor-made to the specific needs of the function. We would be happy to assist you.
3. Corporate Law Requirements
a) Compliance for Incorporation
To incorporate a company in Belgium, there are a number of steps and requirements that are needed to ensure legal compliance, as listed below:
- decide whether to establish a subsidiary (legal personality) or a branch (no distinct legal personality);
- decide on the region wherein in the registered seat is located, which is important for linguistic obligations such as the language of the articles of association;
- in case of the establishment of a subsidiary: define the legal structure of the company and choose a form for your company. The most common form is the limited liability company (BV/SRL);
- prepare an incorporation deed (including the articles of association) with the public notary. The notary deed can be signed electronically, without any party or the notary having to be physically present. Additionally, a power of attorney can be granted to third parties (like law firms) to represent you or the firm for the execution of these formalities;
- the articles of association need to contain the object of the company. The object of the company is a general, but precise description of the type of activities to be carried out by the company (i.e. no general clause such as “doing everything an entity may legally do”);
- deposit of the funding (BV/SRL) with a Belgian credit institution and obtain a standard certification that the amount is held in a blocked account;
- obtain a release certificate from the notary public which proves the incorporation of the company. The bank will require the release certificate in order to render the funds, deposited on the blocked account, available;
- work out shareholders’ structure and establish a shareholders’ register;
- comply with Ultimate Beneficial Owner (“UBO”) registration, if applicable. The UBO register contains the identity of the owner, beneficiary or persons that exert control over the enterprise for anti-fraud or money laundering purposes;
- a financial plan covering – at least – the next two (full) financial years needs to be submitted to the notary at incorporation on the basis of which the funds/assets at the incorporation of the company are explained and justified, in the light of the intended activities. As such, the financial plan is to be carefully prepared, if needed, with the assistance of external financial advisors (which is recommended);
- decide who will be the directors of the company;
- registration of the deed of incorporation with the Enterprise Court;
- publication of the deed of incorporation in the Belgian Official Gazette;
- registration with the Crossroads Bank for Enterprises, VAT and social security at a Business-One-Stop Shop in order to obtain a company number;
- the Business-One-Stop Shop will also take care of the application for a VAT number; and
- registration of trademarks or other intellectual property rights, if applicable.
b) Post Incorporation Obligations
The most important employer obligation is to pay and withhold social security contributions and withholding taxes for their employees. The calculations of these contributions and taxes are a complicated matter, but in general over 50% of an employee’s salary will “disappear” to taxes and social security.
Social Security Contributions
The employer is responsible for withholding social security contributions due by employers and employees from their salaries. Although it depends heavily on the specific situation of every employee, the average employer contribution amounts to 25% of the employee’s salary and an employee contribution amounts to 13,07%. A reduced contribution applies to certain categories of employees.
Payroll Withholding Tax
The payroll withholding tax is an advance payment on the personal income tax. The amount depends on several factors connected to each individual employee, such as salary, marital status and household expenses. Furthermore the withholding tax is calculated based on tax brackets, for the lowest tax bracket (up to EUR 13,450.00) the rate is 25%, the rate continues to increase until max. 50% (for the income above EUR 41,360.00). The withholding tax is calculated on the remuneration after the deduction of the social security contributions. The payment of the payroll withholding tax is an obligation for the employer, not the employee.
Reductions in Social Security Contributions for First Hirings
The tax pressure on wages is rather high in Belgium, but in order to stimulate starting companies to hire their first employees, there is a beneficial system. For the first employee, the social security contributions are limited to a max. of EUR 4,000.00 per quarter (unlimited in time). For the second employee, there is a reduction of social security contributions of EUR 13,750.00 in total over 13 quarters. For the third to sixth employee, a reduction in social security contributions of EUR 11,250.00 in total is given for 13 quarters.
 Many factors influence the rate applicable to the employee’s salary for determining social security contributions, such as marital status, dependants, the sector and employee status.
4. Payroll and Benefits Providers
The vast majority of employers in Belgium use the services of a pay roll company to manage all pay roll-related issues. The pay roll company acts as an intermediary between the employer and the social security and income tax authorities. We would be happy to put you in contact with a pay roll company to fit your business requirements.