I. Principle
The profit bonus allows companies to distribute part or all of its profits for the accounting period (after tax) to its employees.
The bonus can be :
- identical, i.e. a fixed amount or percentage of gross pay; or
- categorised, i.e. an amount or percentage that varies according to defined objective criteria
In any case, it must be provided for all employees of the company. When it is categorised, the difference between two categories may not be greater than a ratio of 1:10. In addition, the total amount of bonuses paid may not exceed 30% of the company’s gross payroll.
Example of a bonus:
A company has a net book profit of EUR 100,000.00 at the end of the accounting year 2021. It decides to grant an identical profit bonus to its employees corresponding to 10% of their gross annual salary.
II. Tax and social security regime
A. Social security contributions
The beneficiary premium is subject to a solidarity contribution of 13.07%.
B. Personal income tax
The profit bonus is taxed at a separate rate of 7% to the PPI. This is a final tax, so this income will not be subject to progressive tax in the employee’s PPI return.
C. Deductibility in the hands of the company
The profit bonus is a non-allowable expense for the company and is therefore subject to corporate income tax.
III. Conclusions
The introduction of a profit bonus by a company is a good way to motivate its employees. In addition, it is tax-advantaged for the employee. However, this type of incentive is only possible if the company has a minimum net profit.
For more information on the conditions of application and the implementation of this type of income, do not hesitate to contact one of our staff members!
