Belgium | Spotlight on 'qualifying' stock options

An advantageous tax regime is available in Belgium for "qualifying" stock options, subscription rights or warrants – or options – granted to workers in the framework of their professional activities. "Qualifying" stock options are those that are within the scope of the Law of 26 March 1999.

Qualifying companies

The advantageous tax regime is available provided there is a professional relationship between the beneficiary worker and the granting company. The option scheme is generally implemented at the level of the employer company itself or the parent company within the group.

The underlying shares are generally shares of the employer company or shares of its (foreign) parent company (even though a scheme involving shares of a third-party company is – in the current version of the law – also possible).

Eligible employees

Any worker is eligible for this advantageous tax regime provided that the benefit in kind (BIK) deriving from the grant of options can be linked to and taxed in Belgium (based on the Belgian domestic law or the applicable tax treaty if the beneficiary is a non-Belgian tax resident).

The tax regime is open to employees, directors and independent consultants. It's even possible to grant options to a beneficiary providing services via a personal service company (subject to additional paperwork and with adverse impact on the valuation of the BIK).

Are there limits?

The value of the granted options should – in principle – be limited to 20% of the "remuneration of reference" (which is generally the gross remuneration for the previous calendar year).

Other requirements?

The options need to be offered in writing and accepted in writing by the beneficiary at the latest by the 60^th day following the date of the written offer – if the acceptance is made orally or after this period of time, the options will be treated as "unqualifying".

Approvals required?

The application of the advantageous tax regime is not subject to any approval from or notification to the Belgian tax authorities.

Valuation required?

Options have to be valued. This valuation process is crucial for the application of the advantageous tax regime. The valuation process differs depending on whether the options granted and the underlying shares are listed or not.

The main advantage of the regime is that unlisted options relating to unlisted shares can benefit from a lump-sum valuation upon grant of the taxable BIK, which will be equal to 9% (or 18% if conditions are not met) of the market value of the underlying shares.

Taxation, withholding and social security

• Upfront (and final) taxation at grant: A lump-sum BIK deriving from the free grant of the options is taxed upon grant for the beneficiary (the BIK subject to withholding tax to be retained by the employer company, if applicable). The grant for free of the options is – in principle – the one and only taxable moment in a qualifying option scheme.
• No social security: BIK deriving from options granted to employees are not subject to social security contributions, if conditions are met.
• No additional tax burden: No further taxation/social security contributions will be due upon exercise or transfer of the options (unless an exception applies or if some conditions are not met). For Belgian tax residents, no further taxation or social security contributions in case of a capital gain realised on the shares upon resale (for foreigners, a local tax analysis should be made regarding the tax treatment of the capital gain realised on the shares).

Employer reporting required?

There is no specific reporting obligations for the employer regarding the grant of options – the BIK will have to be reported in a tax form (281.10 for employees and 281.20 for directors), as with any other ordinary remuneration.

When applicable, ordinary withholding and tax reporting obligations are applicable with regard to the BIK resulting from the grant of options.

What about the future?

Following the federal elections of June 2024 and in the framework of the negotiations to form the new federal government, a reform of the tax regime applicable to Qualifying stock options is currently discussed. The main expected modification would be that in order to be considered as "Qualifying" stock options falling within the scope of the favourable tax regime provided in the Law of 26 March 1999, the options and warrants should give right to acquire the shares of the "employer company" only (e.g. bank warrants may not qualify anymore for the favourable tax and social security exemption).

In the meantime (and even in the future despite the expected reform), the Belgian Qualifying stock options tax regime remains a relevant way to incentivize your Belgian workforce.

Please get in touch with your usual Osborne Clarke contact or one of the experts below if you have any queries or would like to discuss further.