2026 Personal Income Tax Reform: Much More Than Personal Income Tax Alone

At the end of July 2026, the Act reforming personal income tax was published. The reform aims to make work and entrepreneurship more attractive from a tax perspective but clearly extends beyond personal income tax alone. Employers and companies are also directly affected, including through new rules on directors’ remuneration and benefits in kind, the reformed overtime regimes and the reintroduction of software into the favourable tax regime for copyright income. Moreover, the measures do not all enter into force at the same time. Some already apply to income received in 2026, while others will be phased in up to income year 2030. The main changes and points for attention are outlined below.
 

1. LOWER TAX BURDEN ON WORK

The tax-free allowance will gradually increase over the coming years. By income year 2030 (assessment year 2031), the indexed basic amount should reach approximately €15,600.

In addition, the tax work bonus for lower salaries will be strengthened. For the lowest salaries, this will take place in several stages, from assessment year 2027 and again from assessment year 2029.

From income year 2028, the Special Social Security Contribution (BBSZ) will also be calculated individually rather than at household level, and the maximum amount will be reduced.

The reform is clearly focused on employment income. For pensions and certain replacement income, the benefit resulting from the higher tax-free allowance will be wholly or partly offset by adjustments to the applicable tax reductions.

Point for employers to consider: the changes will gradually feed through into payroll and payroll withholding tax. As the net impact will vary from one employee to another, gross-to-net simulations may be advisable.
 

2. OVERTIME: GREATER STRUCTURAL FLEXIBILITY

The Act makes several temporary favourable overtime regimes permanent.

From 1 April 2026, up to 240 voluntary overtime hours per year may qualify for a tax exemption, provided that no overtime premium is paid for those hours. Please note that, for 2026, the previous relaunch overtime hours and the new voluntary overtime hours must together remain within the ceiling of 240 exempt overtime hours.

In addition, the number of tax-favoured overtime hours with an overtime premium will be permanently increased for all sectors from 130 to 180 hours. Employees benefit from a tax reduction, while for employers the ceiling for the partial exemption from payment of payroll withholding tax will likewise be increased to 180 hours. This regime applies to overtime worked from 1 January 2026.

Tip: companies facing recurring peak workloads should consider reviewing their overtime policy and aligning the available tax benefits with the applicable employment law requirements.
 

3. EARNING ADDITIONAL INCOME AFTER RETIREMENT

From 1 January 2027, certain remuneration earned by pensioners who continue working as employees will be subject to a separate tax rate of 33%.

Subject to certain conditions, the regime applies to individuals who are actually receiving a retirement or survivor’s pension and have reached the statutory retirement age, or who had completed a full career at the time of retirement.

Importantly, the regime applies to employee remuneration. A pensioner who continues working on a self-employed basis and earns profits or proceeds is not covered by this regime.

For employers, this may create new opportunities to retain experienced employees after retirement.
 

4. ADDITIONAL INCENTIVES FOR THE SELF-EMPLOYED

From assessment year 2028, a new entrepreneurs’ deduction will be introduced for self-employed individuals carrying on their activity as a main or secondary occupation. The deduction amounts to 10% of the qualifying profits or proceeds, subject to a statutory ceiling that will subsequently be increased.

The measure applies only to individuals and therefore not to profits realised through a company.

In addition, from income year 2026, the tax increase for insufficient advance tax payments will be abolished for self-employed individuals earning profits or proceeds and for assisting spouses. Voluntary advance tax payments will remain possible and may still give rise to a tax credit. A fifth advance payment period will also be introduced, running from 21 December until 20 February of the following year. For company directors, however, the obligation to make sufficient advance tax payments will continue to apply.

Tip: the abolition of the tax increase makes advance payments less imperative, but cash flow considerations and the potential tax credit remain relevant factors in tax planning.
 

5. ‘DE MINIMIS’ RULE FOR MISCELLANEOUS INCOME

The reform also introduces a new ‘de minimis’ rule for certain income derived from the ‘normal management of private assets’.

Where the gross proceeds from transactions involving, among other things, movable property remain below a statutory threshold (approximately €2,000, indexed for assessment year 2027), there is an irrebuttable presumption that these transactions form part of the normal management of private assets. They will therefore not be taxed as miscellaneous income.

The rule may, for example, be relevant to occasional sales through second-hand platforms. If the threshold is exceeded, the automatic presumption no longer applies. However, this does not mean that the entire proceeds automatically become taxable: the ordinary assessment rules will then apply.

The rule does not apply to financial assets, which are subject to specific tax rules.
 

6. SOFTWARE RETURNS TO THE COPYRIGHT TAX REGIME

For the technology and software sector, the return of computer programs to the favourable tax regime for copyright income is particularly noteworthy.

The regime is once again extended to computer programs within the meaning of the relevant provisions of the Belgian Code of Economic Law and applies to income paid or attributed from 1 January 2026.

An important clarification was also provided during the parliamentary discussions. These discussions indicate that the renewed regime may be interpreted broadly within the IT sector and that in-house software and bespoke software may also fall within its scope.

This does not, of course, mean that every payment to a software developer will automatically qualify. The copyright, contractual and tax requirements must be assessed on a case-by-case basis. The social security treatment also requires separate consideration.

Tip for technology companies: this is a good time to review existing contracts and remuneration models. A sound legal basis remains essential; merely labelling part of an employee’s remuneration as ‘copyright income’ will not suffice.
 

7. COMPANIES ARE DIRECTLY AFFECTED TOO

Higher minimum remuneration for company directors

For a small company to benefit from the reduced corporate income tax rate of 20% on the first €100,000 of taxable profit, one of the conditions is that a minimum level of remuneration is paid to a company director. This threshold is increased and will henceforth be indexed annually. For assessment year 2027, the indexed minimum remuneration amounts to €51,000.

Since assessment year 2026, the remuneration condition has also become relevant for the crediting of withholding tax on certain dividends from DRD-SICAVs.

Point to consider: check the minimum remuneration in good time. A shortfall may not only jeopardise the reduced SME corporate income tax rate but may, in certain cases, also result in the withholding tax deducted from dividends from DRD-SICAVs held in the portfolio becoming an effective tax cost.

New 20% rule for benefits in kind

From assessment year 2027, the composition of the remuneration package will also become more important.

Benefits in kind valued on a lump-sum basis will be regarded as ‘excessive’ where they exceed 20% of the total taxable remuneration of the relevant category. The assessment is carried out separately and on an aggregate basis for employees and company directors, rather than on an individual-by-individual basis.

Where excessive benefits are granted to employees, a special 7.5% assessment may apply. For company directors, exceeding the threshold may result in a small company losing its entitlement to the reduced corporate income tax rate.

(Note: under the legal entities tax regime, an additional 7.5% assessment may also apply to excessive benefits granted to company directors.)

Companies making extensive use of company cars, free accommodation or other benefits valued on a lump-sum basis should therefore review the balance between cash remuneration, benefits and dividends. This is particularly relevant for management companies.
 

8. FAMILY TAXATION AND REPLACEMENT INCOME

Family taxation will also change in several respects. The supplements to the tax-free allowance for one and two dependent children will be adjusted in stages, while the conditions for certain benefits available to single parents will become more stringent.

The marital quotient will gradually be restricted for non-pensioners from assessment year 2027. A longer transitional regime applies to older pensioners.

The tax reduction for unemployment benefits will also be phased out and will disappear from assessment year 2030.
 

9. A REFORM MOVING AT DIFFERENT SPEEDS

The timing of the measures deserves particular attention.

The reform should therefore not be viewed as a single package with one commencement date. For tax and payroll planning purposes, the relevant income year and assessment year must be considered for each measure.
 

WHAT DOES THIS MEAN IN PRACTICE?

The reform clearly shifts the focus of the tax system towards work and entrepreneurship, while at the same time introducing new conditions and restrictions. For companies, its impact also extends well beyond payroll. Corporate income tax, directors’ remuneration, benefits in kind, dividend policies, copyright income and workforce planning are becoming increasingly interconnected.

It is therefore advisable to review existing structures in good time. Particular attention should be paid to:

• the balance between cash remuneration, benefits in kind and dividends;
• the minimum remuneration of company directors;
• existing DRD-SICAV positions;
• copyright remuneration within IT and software companies;
• the use of the revised overtime regimes;
• the impact of the new rules on self-employed individuals and pensioners working as employees; and
• the phased implementation of the reform up to 2030.

The key question is therefore not only which measures offer a tax advantage, but above all whether existing remuneration, workforce and business structures remain appropriate under the new tax framework.
 

If you would like to receive additional information on this matter or require tax assistance, the RSM Belgium Tax team is at your disposal via tax@rsmbelgium.be.