While Belgium has granted for example special tax regimes for foreign executives in order to attract foreign capital, relatively few incentives have been reserved to Belgian nationals who are subject to an average burden that is amongst the highest in the European Union.
In order to remedy this situation, a law approved in December 2007 and a Collective Agreement established a new regulation regarding non-recurring, results-tied bonuses that entered into force on 1 January 2008. The new rules offer employers the possibility to pay a collective bonus to all, or a well-defined group of, employees in a very flexible and tax-efficient way.
The new regulation is applicable to employers and employees mentioned in the law December 1968 on collective agreements and joint committees. However, also workers with an employment contract and workers on a training contract or an apprenticeship can be eligible. The only requirement is that they have effectively worked during the period to which the bonus scheme refers.
The main feature of the new bonus regime is that it is not based on individual performance but rather on collective targets of the company, a group of companies or a group of employees. The term collective means that the targets should refer to at least two employees. It is however possible to set different targets for different groups of employees. The collective targets should depend on objectives such as, for instance, an increase in sales volumes.
The collective targets must be established by the company and be well-defined, transparent and measurable. Targets must be set over a period of a minimum of 3 months, a calendar or financial year or the time which is required for the realisation of a project. Once the targets and the time frame have been set, the employer should implement the collective bonus scheme via a collective labour agreement at the company level.
Employees eligible for the new scheme can receive a bonus in the form of either a lump sum amount or a percentage of their base salary. Not all eligible employees must necessarily receive the same amount. The first 2,200 euro paid per employee and per calendar year is exempt from social security contributions and income tax. A special final contribution of 33% will be due to the social security administration on top of the bonus paid. The contribution is due annually on 31 December of the year in which the bonus was granted. The special contribution and the amount of the bonus are corporate tax deductible. When the bonus exceeds 2,200 euro per employee and per calendar year, only the excess amount is subject to normal social security contributions and income taxes. 
While the employer incurs about the same cost with this new scheme, the benefit to the employee is far greater because unlike regular bonuses, cash bonuses are not considered as salary for labour law or social security purposes. Therefore they need not to be taken into account for the calculation of the vacation pay and other benefits.