The profit-sharing bonus (prime participative) is a brand-new tax optimisation measure in relation to bonuses enacted from 1 January 2021. It can be granted by a company to any employee.
In a nutshell, several conditions must be met:
- The company must make profits.
- Regular accounts must have been kept in the year preceding the grant; the annual accounts of the prior year are used to calculate the threshold, as the overall bonus cannot exceed 5% of prior year’s profit.
- The bonus cannot exceed 25% of the employee’s gross base salary (extraordinary elements excluded).
If all conditions are met, the employee will be exempt from taxes in respect of 50% of the bonus thus granted. This option will reward employees by reducing their tax burden on bonuses. However, it must be noted that the employer must notify the relevant RTS tax office in a prescribed format when the bonus is paid, failing to do so would expose the employee to retroactive cancellation of the optimisation. The LIR Circular 115/12 dated 21 February 2021 contains more information about the profit-sharing bonus.
Should you want partially to shield the bonuses of your employees from tax? JW Partner stands at the ready to help you in implementing a tax-efficient solution for you. Reach out to us!