Large number of fiscal advantages for married individuals compared to unmarried people

Second European Salary Survey by Deloitte
19 December 2011

'Belgium one of the only countries that has not yet made decision on retirement age'

Brussels, 19 December 2011 – Unmarried people in Belgium significantly differ from tax implications for people who are married with an inactive spouse. This is one of the most striking conclusions of the Deloitte Salary Survey, which was organized for the second year in row, and carried out in 11 European countries. The survey also revealed that Belgium is one of the only countries in Europe that has not yet made decisions for example on retirement age. Employer costs are also very high in Belgium and Belgian net wages are rather low, but the Belgian population's prosperity is reasonably positive when taking into account the low living and housing costs.

Tax implications for unmarried people significantly differ from tax implications people who are married with an inactive spouse

The heavier tax treatment for single status individuals compared to those who are married with an inactive spouse is clear cut. In no other European country is the systematic difference so significant. In certain countries, such as the United Kingdom and Sweden, there is no difference in treatment based on personal situation. Patrick Derthoo, Tax Partner at Deloitte Belgium and responsible for this survey stated: "The question is whether the distinction in marital status, from which this difference stems, can still be maintained in its current application. The marital status distinction in fact reflects the working husband and housewife social model. This model does not match the employment dynamics of today as well as the current economic challenges (with everyone at work for as long as possible). The marital status distinction aims to diminish the incentive of having a professionally active partner, or in cases where the partner works part-time or earns little income, to discourage this individual from staying professionally active."

Belgium one of the only countries that has not yet made decision on retirement age

The rules which determine the calculation of legal pensions are complex and far from transparent in the different countries studied. At best, certain countries practice minimum or maximum pensions, allowing a more predictable cost. It is clear however, that Belgium has not yet been able to make a decision on, amongst others, retirement age increase which is contrary to most of the other countries in this study.

Belgium has low net wages but is catching up with neighbouring countries in terms of net disposable income

Belgium's average net salary is relatively low compared to European colleagues, evidently so after an increase in gross remuneration. For an unmarried employee without dependants for example, the net salary almost always appears to be the lowest Compared to neighbouring countries, Belgium's living and housing costs are relatively lower. Consequently, Belgium is on par with, and even surpasses its neighbouring countries (with the exception of unmarried tax payers with no dependants) when it comes to net disposable income. Patrick Derthoo: "We can therefore cautiously conclude that Belgian's prosperity is generally and reasonably positive for 2011."

Belgium has the highest minimum wage

The legal minimum wage is relatively high in Belgium. The country's social security contributions are high compared to other European nations. However, Belgium has put in place a number of social measures which are favourable to the Belgian worker's prosperity.

Employer costs in Belgium are higher compared to the other 10 concerned countries

Employer costs in Belgium are very high. The higher the gross income, the larger the gap becomes between Belgium and the rest of Europe with regards to employer costs. The reason for this is the unrestricted nature of Belgium's social security contributions. Belgium is amongst half of the European countries that does not apply a limit on contributions, while the other half do apply a limit.

The higher the gross income, the larger the gap becomes between Belgium and the rest of Europe with regards the corresponding net income

This can be explained by the fact that in Belgium, the highest taxation rate is reached very quickly. As with last year, Belgium takes the second place (after Sweden) with the highest taxation rate. This is only evident from an annual taxable income of around EUR 35,000, whereas in Sweden, the highest rate is not applicable until EUR 58,000. In practice, the Belgian salary (medium or high) is the most heavily taxed. The benefit in kind constituted by the company car cannot compensate for this. Furthermore, this benefit will disappear in 2012.

Belgium remains the black sheep on important points in Europe

Belgium remains the "black sheep" on other important points. Only Belgium and Spain apply the salary indexation system. Patrick Derthoo: "Belgium is also the only one to attribute a differentiating status for blue-collar and white-collar workers. Moreover, Belgium remains the only country where capital gains on shares (realised in a private context) are not taxed (whereas in contrast, capital losses are not exempt)."

Company cars will cost more

The decisions taken within the "budget 2012" framework mean that Belgium's company cars will cost more. For many employers, the company car was the last remaining fiscally advantageous method of somewhat addressing the high fiscal strain exerted on professional income (53.5% as of EUR 35,000 on average). Patrick Derthoo: "The introduction of the car's market value in calculating the benefit in kind follows other European laws: all countries in our study use this criterion as a parameter, except for Poland." Notwithstanding the increased fiscal strain on company cars, taxation on (small and medium) cars remains more favourable in Belgium compared to neighbouring countries. This is however not the case with the most expensive models. The fiscal favourability of small and medium sized company cars falls short of compensating for the high tax strain exerted on other elements of the base salary.

Passive income and wealth taxation

None of the countries examined in this study, with the exception of France and Spain, formally tax large fortunes. As regards taxation on passive income (interest and dividends), Belgium finds itself in mid-rank. The applicable rates regarding passive income in the eleven countries analysed have an average of 23.2% for interests and 24.6% for dividends (The United Kingdom results have been omitted due to its exercise of progressive rates). In Belgium, an average passive income earner would pay an average rate of 25% on real estate income, falling within the European average. Belgium remains one of the only countries where the surplus value on shares (realised by the private management of own heritage) are tax exempt. This also means that capital losses are also non tax deductible in Belgium. It's obvious that each country needs to find its own balance in terms of active and passive income taxation. Belgium is mid-ranked in terms of passive income taxation, while the active income is heavy taxation exercised. It's necessary to ask ourselves the question if a heavy taxation on active income results in average costs of living and housing costs.