Belgium tax administration: Are reduction cards a benefit in kind?

Some service providers offer employers reduction cards, which employers can then distribute for free to staff members. Employees can use these reduction cards when they purchase goods. The reduction is not paid by the employer, but is achieved because of the large number of users of the card or through the commercial value of the personal information processed when using the card.

The tax administration recently published a ruling specifying how this type of reduction card should be treated from a tax point of view. Although there is no equivalent for social security purposes of the formal tax ruling, the National Office for Social Security generally follows the same position as the tax administration in its formal rulings.The ruling concerned a client card issued by one of the main supermarket chains in Belgium. Users of the card receive a reduction of between 5% and 15%, although the reduction is subject to a maximum amount per month. The supermarket now sells affiliation programmes to companies. The company under this programme pays a small amount to cover the administrative charges, and can then distribute the reduction cards for free to its staff members.

The tax administration considers that, in principle, the reduction is a benefit in kind. The fact that the reduction is not financed by the employer is, from both a tax and social security point of view, not conclusive. Benefits granted by somebody who is not the employer are taxable. While the legislation still stipulates that social security contributions are only due on benefits acquired from the employer, the National Office for Social Security takes the view that social security contributions are due as soon as there is a link with the employment relationship.

There is nevertheless the practical problem that nobody knows in advance which reduction an employee will get. It’s up to the employee to decide which goods they buy using the reduction card. If the reduction card was a benefit in kind on which taxes and social security contributions were due, it would not be possible to determine the value of the benefit at the moment the reduction card is given to the employee.

The tax administration takes the view that the reduction card qualifies as a social benefit. This means that although the reduction is in principle a taxable benefit, no actual taxes are due because it doesn’t constitute genuine revenues. The reduction card is treated in the same way as, for instance, a traditional gift given to staff members at the beginning of the year.