In view of the inflation experienced in 2022 and the lack of margin for wage increases, the government has taken steps to allow companies that had high profits in 2022 and/or good results during the crisis to grant their employees a purchasing power premium in 2023.
In this context, the Tax Administration has published a tax circular (2023/C/82) on 26September 2023 commenting on the rules and conditions for granting the premium set out in the royal decree of 23April 2023 and the Law of 24 May 2023.
What is the amount?
As a reminder, the granting of this premium must in principle be organised at sectoral level by a Collective Labour Agreement (CLA). Alternatively, the granting of this premium may also be provided for by a CLA at company level or, in the absence of a trade union delegation, by an individual agreement.
In its circular of 26 September 2023, the Tax Administration specifies that the total amount of purchasing power premiums granted by the employer may not exceed, depending on the importance of the profit made by the company in 2022:
- EUR 500 if the company made a high profit in 2022; or
- EUR 750 if the company made an exceptionally high profit in 2022.
We are surprised that the Administration omits to mention the distinction that needs to be made according to which the purchasing power premium is granted at sectoral or at company level.
Employers who have not made high (or exceptionally high) profits in 2022 (on the basis of the sectoral provisions) and who would still like to grant their employees a purchasing power premium, can nevertheless do so.
In particular, according to the legal provisions, high profits are not required in order to grant a purchasing power premium at company level. Therefore, even in the absence of (exceptionally) high profits in 2022, employers − if they so wish − have the option of granting a purchasing power premium of up to EUR 750 provided that they can justify good results during the crisis. This is explicitly confirmed by the NSSO in its "Instructions". In addition, the above-mentioned circular specifies that the fiscal treatment reserved for the purchasing power premium is validated when the social conditions are met.
Similarly, an employer may also grant its employees who are covered by a sectoral CLA a supplement within the limits of a permissible maximum of EUR 750, even in the absence of (exceptionally) high profits.
Favourable (para-) fiscal treatment
We would like to remind you that the purchasing power premium is tax-free for the employee and deductible as a business expense for the employer.
At social security level, the purchasing power premium is exempt from ordinary social security contributions. Only a special employer's contribution of 16.5% is due on behalf of the employer.
This purchasing power premium must be granted in the form of consumption vouchers and may not be granted as a replacement for or conversion of remuneration or other existing benefits.
Lastly, employers wishing to grant a purchasing power premium (or a complement) at their company level must ensure that they respect certain conditions: the justification of good results, the value of the consumption vouchers, period of validy, etc., on penalty of losing the favourable (para-) fiscal treatment. This purchasing power premium can be granted until 31 December 2023 (bearing in mind that certain sectoral CLAs have already provided for granting dates prior to this date).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.