Landmark Supreme Court ruling: equity compensation granted by the parent company and social security tax

In the case at hand, both in first instance and on appeal, the Belgian social security administration claimed payment of social security tax on the value of RSU’s granted, paid for and borne by the ultimate US parent to the employees of its Belgian affiliate. Its claim was upheld both in first instance and on appeal, although on different grounds.

Now the Supreme Court has quashed the decision on appeal, by holding that an entitlement to a benefit, which is not the consideration for labour performed, is ‘compensation’ (‘loon’/’rémunération’) for the levy of social security contributions only if it is “borne” by the employer. The Court explicitly stated that this is the case where the employer has undertaken the commitment to grant the benefit and where the benefit is thus actually granted by the employer to the employee.

As a reminder, the key question is whether benefits granted (paid for and financially borne) by a third party to employees of a Belgian based employer are subject, as ‘compensation’, to social security contributions. Under Belgian law benefits must be borne by the employer in order for them to attract social security tax.

In a number of cases over the past few years the Supreme Court…