Employee share ownership

The bill tabled on 23 September 2024 aims to introduce a new tax and social security system to encourage employee share ownership in Belgium.

The scheme allows employers to offer their employees shares in their company, free of charge or at a reduced price, without this being considered as remuneration subject to tax or social security contributions. The aim is to increase employee involvement in the management and success of the company, while offering them attractive tax benefits.

General principles of the new mechanism :

– Allocation of shares or units: Employers may offer their employees shares or units in their company, either by using own shares held by the company, or by granting a tax-free bonus intended to finance the acquisition of new shares issued during a capital increase.

– Tax and social security treatment at the time of grant: At the time of grant, these shares or units are not considered as remuneration. They are therefore not subject to income tax or social security contributions, either for the employer or the employee.

– Taxation on disposal: If the employee subsequently sells the shares, the benefit will be taxed at a favorable flat rate of 10%.

– Shareholder status: During the period in which they hold the shares, employees benefit from the rights and obligations associated with their shareholder status, thereby strengthening their involvement in the governance of the company.

Benefits of the scheme :

– Increased employee involvement: By becoming shareholders, employees are more motivated to contribute to the company’s success, fostering a positive and collaborative corporate culture.

– Tax appeal: The scheme offers a tax advantage, with exemption from tax and social security contributions when the shares are allocated, and reduced taxation when they are sold, making it attractive for both employers and employees.

– Flexibility for companies: Employers have a number of options for setting up this mechanism, whether by direct allocation of existing shares or by issuing new shares financed by tax-free premiums.

Practical considerations :

– ‘Restricted’ shares: Companies can issue shares with specific rights, for example without voting rights or with special rules on the distribution of profits. This makes it possible to tailor the scheme to the company’s specific needs, while offering employees a tax-efficient alternative form of remuneration.

– Long-term commitment: To benefit fully from the tax advantages, employees must hold the shares or units for a minimum period, thereby encouraging a long-term commitment to the company.

Conclusion:

This proposed law represents a significant step towards greater employee participation in the capital of their company in Belgium. By combining attractive tax benefits with greater employee involvement in corporate governance, it could strengthen the competitiveness of Belgian companies and foster a more inclusive and collaborative corporate culture. However, it remains essential that companies and employees are informed and supported in the implementation of this new mechanism to maximize the benefits.