Landmark Supreme Court ruling: equity compensation granted by the parent company and social security tax
Written By
Head of Employment Belgium
Belgium
I am Head of Employment in our International HR Services group in Brussels with over 30 years' experience of advising on contentious and non-contentious issues in employment and benefits, including high profile employment litigation, boardroom advisory work, strategic change management, industrial relations, compliance and reward issues.
Counsel
Belgium
As Counsel in our International HR Services group in Brussels, I have in-depth experience in employment and civil law litigation, with a practice that spans an array of employment and social security law matters, focusing on dismissals, compensation and benefits and workplace health and safety hazards.
In a landmark case of 5 September 2022 (S.210007.N) the Belgian Supreme Court has quashed a ruling of the Ghent Labour Court of Appeals of 20 April 2020, which held that social security tax is due on equity compensation (in the form of RSUs) granted by the ultimate parent company to employees of a Belgian affiliate.
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…
