Is tax advice a taxable benefit in kind?

In international employment relations, it is common practice that the employer and the employee agree that a tax advisor chosen and paid for by the employer prepares the tax return of the employee. This suits both the employee and the employer.

For an employee who works in another country on a temporary basis, or who regularly works in several countries, completing a tax return is a complex process, and employees prefer to avoid having to spend their free time finding out what the precise obligations under the relevant tax legislation are. Having an expert who completes this task on behalf of the employee makes life easier for the employee.

While, in principle, it is the duty of the employee to ensure they submit a correctly completed tax return, the employer also has an interest in helping the employee in this task. This is particularly the case if the remuneration in the employment contract is calculated as a guaranteed net amount. In such cases, the employer has a financial interest in the employee making use of all tax reductions and deductions that are legally available, as this will allow the employer to pay the guaranteed net amount at a lower cost. Even if the contractual remuneration is a gross amount, the employer still has an interest in the employee correctly submitting their tax return, for instance to ensure the factual elements (eg the number of days worked in a country) on which the tax withholdings are calculated are in line with the information used for the tax return.

If the employer pays for the services of a tax advisor, the question arises whether this cost is a reimbursement of a professional cost or a taxable benefit in kind on which social security contributions are due.

In a reply given on 16 December 2020 to a parliamentary question, the Belgian finance minister confirmed that tax advice should be seen as a benefit in kind. It is the duty of the employee and not the employer to submit a correctly completed tax return. If the employee needs professional advice to be able to do so, it is up to the employee to seek professional advice and pay for it. If the employer pays the cost of this tax advice, it should be considered a taxable benefit in kind. In his reply the finance minister did not address the question of whether social security contributions are due, but the tax administration and the Belgian National Office for Social Security generally take the same view as to what can be considered a reimbursement of a professional cost, hence one can assume that the Belgian National Office for Social Security will consider that social security contributions are due if the employer pays the tax advisor.

The finance minister continued that this also applies if the employment contract stipulates net remuneration. He did not, however, explain this in more detail. Also, he did not explain how the value of this benefit in kind should be determined. If the employment contract stipulates net remuneration, one could argue that the tax advice consists of two aspects. On one hand, the tax advisor serves the interests of the employer, as they advise on how the guaranteed net remuneration can be obtained at the lowest possible cost. This aspect can hardly be considered as a benefit in kind for the employee, as the employee will in any event receive the guaranteed net amount, irrespective of how it is structured from a legal point of view and irrespective of how much it costs the employer to pay this guaranteed net amount. On the other hand, the tax advisor also helps the employee, as the employee does not need to take the time to find out how a tax return should be completed. This ease of an administrative burden is similar to other benefits in kind that are offered to the employee, hence there are good arguments that taxes and social security should be due on that part. A point that was not dealt with by the finance minister is the question whether it could therefore be argued that in the case of an employee with a contractual net remuneration, the cost of tax advice is only partially a benefit in kind.

It is beyond dispute that there is no specific legislation on this point, hence one should apply the general definition of benefit in kind, but the question arises whether this point will not be detrimental for everyone involved, as (i) the employee will either have to take the time to complete the tax return personally, pay a tax advisor, or pay the taxes due on the benefit in kind if the employer offers a tax advisor, (ii) it will become more difficult for the employer and the tax advisor of the employer to have a view on the content of the tax return by the employee, and even the question whether the employee submitted a tax return in the first place, and (iii) for the tax administration, the risk of errors in the tax returns will be far higher if employees themselves complete their return, rather than an experienced tax advisor.