Employees who are (or have been) temporary unemployed may find they face unpleasant tax surprises next year. This is because your unemployment benefit payment is not the net amount you will be able to keep. There is even a significant chance that you will have to pay top-up taxes. Want to find out more? Be sure to keep reading.
During the coronavirus crisis this year, the Belgian government temporarily raised unemployment benefit payments to 70% of gross monthly pay, plus an extra payment of 5,63 euros per day. However, the important thing to note here is that this benefit is not a net amount.
Just like ordinary income, unemployment benefits are subject to tax. That is why income tax is deducted at source when they are paid. This income tax at source is merely a prepayment. The prepaid tax was reduced from 26.75% to 15% between 1 May 2020 and 31 December 2020. The effect of this reduction is a temporarily higher net income, but the final calculation is not made until you file your tax return in 2021.
Who is affected by this?
If you received wages or a salary for several months in 2020 as well as unemployment benefit, there is therefore a significant chance that you will have to pay taxes because the prepaid income tax deducted at source will not be enough. The tax authority does apply a tax reduction to replacement incomes, but as soon as there is other income, this advantage is partly or even entirely lost.
What can you do to prevent an unpleasant surprise with the tax payment in 2021?
If there is a possibility that due to your employment situations in 2020 you may have a higher amount of taxes to pay in 2021 take in consideration to put a certain amount form your monthly income apart. Like that you will be prepared in case your tax payment in 2021 is higher than other years.
Any other questions? Don’t hesitate to contact our Accent Foreign offices.