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180-Hour Threshold for Overtime Tax Relief Extended Retroactively from July 1 to December 31, 2025
A legislative measure adopted by the Belgian Chamber of Representatives last week (Doc. Parl., Chambre des Représentants, no. 56-0909) provides for the extension of the increased 180-hour annual cap applicable to payroll tax reductions on overtime hours. This measure adjusts Article 154bis of the Income Tax Code 1992 (CIR 92) and extends the application until December 31, 2025.
Background: Tax Relief on Overtime Hours
Under Belgian tax law, employers may apply a reduction of withholding tax (précompte professionnel) for certain remunerated overtime hours, subject to an annual threshold. In response to labor market pressures and inflationary concerns, the cap had been temporarily increased from the standard 130 hours to 180 hours in earlier relief packages.
With this latest extension, the 180-hour ceiling remains in effect for the second half of 2025, providing continued fiscal relief for employers and greater take-home pay for employees working extra hours.
Administrative Clarification: Annex III Update Coming
The tax administration (FPS Finance) has announced that Annex III of the Royal Decree implementing the Income Tax Code 1992 (AR/CIR 92) will be formally amended to reflect this updated time frame—specifically in paragraph 45.2, third subparagraph.
Although the formal legal amendment is still pending, the administration confirms that it will apply retroactively as of July 1, 2025, and employers are permitted to already apply the updated ceiling when calculating the withholding tax on overtime.
Key Practical Takeaways for Employers and Payroll Teams
- The 180-hour cap for the payroll tax reduction on overtime is extended until December 31, 2025.
- This change applies retroactively from July 1, 2025.
- Employers can already apply the new threshold when calculating the payroll tax, even before the formal update to Annex III takes effect.
- The measure is part of a broader effort to support workforce flexibility and reduce the cost of labor.
Employers are advised to adjust their payroll systems, internal policies, and employee communication accordingly and consult with their tax service providers for accurate application.
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