Seniority bonus as from 25 years service

A seniority bonus can be granted tax free after at least 25 years or 35 years in service. The tax authorities no longer require that the bonus is granted at the occasion of 25 years or 35 years of service. This implies that a bonus granted for the first time after 30 years of service also qualifies. A new circular letter deals with the seniority bonus as a social advantage for employees.

Seniority bonus not taxable for the employee

Seniority bonuses are so-called social advantages. Such social advantages are inconsiderable advantages granted with a social goal or to strengthen the employee's relations in and with the company.

There are not taxable in the hands of the employee and should not be reported neither should pay slips be drafted.

For the employer the social advantages are in principle not deductible expenditure.

New conditions for the tax exemption

The seniority bonus is not taxable in the hands of the employee provided the following conditions are met:

the bonus is granted or paid maximally twice during the career of the employee with a certain employer;

the first time the bonus is granted or paid is at the soonest during the calendar year in which the employee is 25 years in service with the employer and amounts to maximum one gross wage (before deduction of social security contributions);

the second time the bonus is granted or paid is at the soonest during the calendar year in which the employee is 35 years in service with the employer and amounts to maximum two gross wages (before deduction of social security contributions).

The tax authorities no longer require that these bonuses are granted at the occasion of being 25 years or 35 years in service. This implies that a bonus granted for the first time after 30 years of service also qualifies.

As from 2009 the seniority bonus can also be calculated in an alternative way. The maximum exempt amount can be calculated in function of the average gross wage in the company.

During the calendar year you can calculate the seniority bonuses granted or paid in that year in the same way. Using two different calculation methods implies that the bonuses will not be exempt in the hands of the employees. In this case they are taxed as income and the amounts should be reported on the pay slips. Consequently the employer can deduct the bonuses as professional expenditure.

Also exemption for social security contributions

The seniority bonus is also exempt of social security contributions. The same conditions as for the tax exemption apply.