The Belgian government has just taken two new measures aiming at fighting against fiscal and social fraud in the construction industry.
Strengthening of Existing Measures regarding the Joint Liability to Fiscal and Social Debts of the Subcontractor – Successive liability
Joint liability for fiscal and/or social debts is a system according to which the contracting authority is jointly liable to the debts contracted by the main contractor. The same system is applied in the relationship between the latter and the subcontractor he has called on and so forth.
The contracting authority’s responsibility is now more important as liability will become successive. In other words, if the principal contractor does not pay for the fiscal and/or social debts of his subcontractor, the contracting authority will become automatically jointly liable for them.
From now on, the contracting authority who concludes a contract with [Belgian or Foreign] contractors that call on [Belgian or Foreign] subcontractors must be twice as vigilant. When concluding the business contract and before paying any invoice, he will systematically have to verify if the principal contractor and/ or the subcontractor of the latter has/ have incurred any fiscal and/or social debts.
If the principal contractor [or his subcontractor] has contracted fiscal and/ or social debts, liability amounts to 100% of the value of construction works at the very most, excluding VAT. This liability can be avoided by complying with the legal requirement to withhold and pay 35 % for social debts and 15 % for fiscal ones.
New Joint Liability for Wage Debts
A new type of joint liability for wage debts has made an appearance in the Belgian legislation according to which the contracting authority becomes jointly liable for wage debts [that is to say for the payment of the worker’s earnings and the social costs related to] of his principal contractor and the latter also becomes liable to the ones contracted by his subcontractor.
This joint liability, which is not confined to the contractual value of construction works, becomes effective once the contracting authority receives a notification from the Belgian social authorities which specifies that the main contractor or his subcontractor has failed to his obligation of paying the workers’ salary within the deadline. Paying a lower salary than the minimum wage will be considered as a serious breach.
The contracting authority is required to pay in due time the unpaid earnings of said workers regarding the work they have performed as well as the social taxes related to their activities at the risk of paying a penalty from € 300 to € 3.000 and/ or an administrative fine up from € 150 to € 1.500.
Example
A Belgian company calls on a German main contractor to perform construction works in Belgium. This main contractor in turn calls on a Polish subcontractor to carry out part of the mission.
The German company [the main contractor] has to make sure that the latter has no fiscal and/ or social debts in Belgium, when concluding the subcontract and before paying any invoice issued by the Polish company. It has to provide the information to the Belgian company [contracting authority].
In case of debts incurred by the Polish subcontractor, the German company becomes jointly liable, unless it complies with its legal requirements to withhold and pay at the very most 50 % of the amount due to the Belgian fiscal and social authorities. Moreover, it will be bound to pay the salary of Polish workers if the Belgian social authorities summons it to do so.
If the German company does not fulfil its obligations, the liability is transferred to the contracting authority. Therefore, it is the latter who will withhold all these sums from the amount it has to pay to the German company.
Conclusion
The main contractor has to be vigilant with the subcontractors he is calling on. Payment default of fiscal, social and wage debts of the latter automatically leads to withholding obligation or, failing that, to a joint liability of the said contractor. This joint liability can be transferred to the contracting authority in case of non-payment from this contractor.
As a matter of fact, Belgian and Foreign companies carrying out activities in the construction sector have to take all the required measures to avoid such a situation:
- When concluding the contract, make sure that the subcontractor does not have incurred any fiscal and/ or social debts. Moreover, it is of particular interest to them to write out contracts, in which contractual commitments are made regarding these measures [e.g.: the consequences of notifying a joint responsibility, the duties deriving from the obligation to declare, etc.].
- Verify, when implementing the mission and before paying any invoice, that the subcontractor does not have contracted any fiscal and/ or social debts.
- In case of fiscal and/ or social debts, withhold 50% [35% for social debts and 15% for fiscal ones] from the amount and transfer it to the Belgian authorities.