Overtime and tax benefits: new limits
Overtime and tax benefits: new limits
April 2022 – In 2005, in the implementation of the interprofessional agreement, the government reduced the cost of shift work and overtime. For employees, it did so by means of a tax reduction. For employers, it has provided for an exemption from the obligation to pay the withholding tax to the Treasury. But there are limits to these tax benefits. And these 'ceilings' were adopted on 1 January.
Initially
The interprofessional agreement introduced a tax reduction for workers of 24.75% on the extra pay for hours worked as overtime during the taxable period. Initially, the number of overtime hours to which the tax reduction applied was limited to 65 hours, but this was soon increased to 130 hours.
The employer, on the other hand, obtained an exemption from the obligation to pay part of the withholding tax to the Treasury. Initially, this exemption concerned 24.75% of the gross amount of the remuneration used as a basis for calculating the additional salary. However, the government has also increased this exemption to :
32.19% for any hour worked to which a 20% surcharge applies (mainly concerns the hotel and catering sector), and
41.25% for any hour worked to which a 50% or 100% surcharge applies (in most other cases).
The limit on the number of hours was then increased in 2 sectors:
In the hotel and catering industry, it was thus possible to work up to 360 hours of overtime. At least, provided that the employer has installed a white box.
In the construction sector, it was possible to work up to 180 hours of overtime. The condition was (and still is) that the employer uses an electronic attendance registration system.
2019 - 2020
The 'Jobs Deal' - a 2019 law - increased the basic limit from 130 hours to 180 hours for the 2020 and 2021 tax years; the other two schemes (of 180 and 360 hours) were retained. This was a temporary increase that was supposed to end on 31 December 2020 (i.e. at the end of the 2021 tax year).
2021
The "old" regime was therefore to apply again from 1 January 2021. That is :
360 additional hours in the hotel and catering industry
180 hours of overtime in construction
130 hours of overtime for all other sectors.
In the interprofessional agreement of June 2021, however, the government decided to set the limit back to 180 hours of overtime for the other sectors (not for the hotel and catering industry or construction). The extended limit was again to be temporary, i.e. it was to apply only to hours that were or will be worked in the period from 1 July 2021 to 30 June 2023 inclusive. But it was not until mid-December that this extended limit was enshrined in law.
The general limit of 130 hours of overtime is therefore again increased to 180 hours of overtime for the tax years 2022, 2023 and 2024.
For the 2022 tax year, the increase from 130 to 180 hours of overtime only applies from 1 July 2021.
For the tax year 2024, the increase from 130 to 180 hours of overtime only applies until 30 June 2023.
This means in practice that if an employee has already worked 200 hours of overtime in the first half of 2021 (of which 130 hours are tax-reduced), he or she can no longer benefit from any tax reduction in the second half of 2021 because he or she has already exceeded the limit in the first half of the year.
In 2023, the tax reduction and the payment waiver also apply for the extra 50 hours, but only if they were all worked in the first half of 2023. If a worker has worked 100 hours of overtime in the first half of the year and works another 100 hours of overtime in the second half of the year, the tax reduction is only granted for 130 hours of overtime: i.e. for the 100 hours of overtime in the first half of the year and for a maximum of 30 hours of overtime in the second half of the year, when the ceiling has been reduced to 130 hours of overtime.
Construction and road works
As already mentioned above, the limit for the tax reduction and payment exemption in the construction sector is permanently set at 180 hours of overtime. In the social agreement, and thus also in the law of the end of December 2021, this limit was raised to 220 hours of overtime.
The limit was even raised to 280 hours for workers employed by employers who mainly carry out road or rail work, excluding underground pipe and cable laying, and who are required by the authorities to work at weekends, on public holidays or at night.
But... neither increase has yet come into force. The entry into force depends on the approval of the European Commission.
Tighter conditions?
In the course of 2021, the Court of Auditors issued a rather negative opinion on the impact of the payment exemption. The cost of this measure is high and its effectiveness is difficult to measure. In reaction, the Minister of Finance has already hinted that he will commission an audit of the exemptions.