Remuneration of company directors: tax rules

In Belgium, the remuneration of company directors is subject to a specific legal and tax framework that regulates not only the amounts received but also the nature of the income. We will address two aspects: the requalification of real estate income as remuneration and the theory of remuneration. Understanding these aspects is crucial for directors and companies to avoid tax penalties and to structure their remuneration optimally.

1. Requalification of real estate income as remuneration

It is common for a company director to rent out real estate to the company where they serve as an administrator or manager. This practice is not problematic within the framework of personal income tax (PIT), as both real estate income and remuneration are taxed progressively. However, the issue arises when it comes to social security contributions.

Rental income is not subject to social security contributions, unlike professional income. To prevent company directors from avoiding social security contributions by receiving high rents instead of appropriate remuneration, a measure was introduced. This measure limits the rental income to 5/3 of the revalued cadastral income. Any part exceeding this limit is requalified as professional remuneration and subject to social security contributions.

2. The theory of remuneration

The theory of remuneration aims to prevent abuses related to the granting of real estate or other in-kind benefits to directors, often under favorable conditions. It is based on the principle that the services provided by the director must be adequately compensated, whether the remuneration is in cash or in kind.

This theory is particularly important when the company deducts actual expenses for the provision of real estate, while the director is taxed on a frequently lower lump-sum benefit in kind. This discrepancy between the deductibility for the company and the lighter taxation for the director is closely monitored by the tax authorities. They may requalify certain benefits as professional remuneration if they believe that the structure is primarily intended to reduce the tax burden.