Seniority premium

If 25 years' service = 1x gross monthly salary
If 35 years' of service = 2x gross monthly salary

Click on the

label

for more information on the proposal.

Social security treatment

No NSSO contributions
Employee Taxation

Not taxable
Employer deductibility

Not deductible

Worker Taxations Description

Seniority premium granted in cash, in the form of a gift or gift vouchers are considered to be tax-exempt social benefits under the following cumulative conditions:

a) a maximum of 2 such premiums may be awarded during a employee's career with an employer;

b) the first grant of the premium occurs at the earliest in the calendar year in which the employees reaches 25 years of service with the employer and the amount of the premium amounts max. one month's gross salary;

c) the second grant occurs at the earliest in the calendar year in which the employee reaches 35 years of service with the employer and the amount of the amount of the premium amounts max. two months' gross salary.

If the maximum limit is exceeded (by one or two times the gross monthly salary - average or actual), only the part of the seniority premium that exceeds the set limit is considered a taxable benefit. The above-mentioned tax exemption does not apply to a premium paid on retirement or in the event of closure of the company.

In principle, the employee must have worked for the same employer for 25 or 35 years. However, the NSSO accepts (in a restrictive manner) that years of service with employers belonging to the same group or the same technical business unit may be taken into account.

By way of derogation, an employer may also opt for the formula which consists in fixing the benefit on the basis of the average gross monthly remuneration in the company. Employers who opt for this formula must, for each calendar year, set the average gross monthly remuneration in the company on the basis of the ratio between the remuneration paid and the number of full-time equivalents during the previous calendar year. During the same calendar year, an employer may not apply both methods of calculation simultaneously.

Employer Deductibility Description

A seniority premium that meets the conditions to qualify as a tax-exempt social benefit is not deductible as a professional expense.

If the employer grants a seniority premium that exceeds the set limit for exemption as a social benefit, the employer may deduct the excess as a professional expense provided that it includes the amount as a taxable benefit on the annual tax statements (failure to do so will result in the application of the special tax on secret commissions of 100%, which is not deductible as a professional expense for corporation tax purposes).

If an employer combines the two methods of calculating the maximum exempt amount of the seniority premium (on the basis of the gross monthly salary/on the basis of the average gross monthly remuneration in the company) during the same calendar year, the seniority premium constitutes a deductible professional expense (provided that it is included as a taxable benefit in the annual tax statements (failure to do so will result in the application of the special tax on secret commissions of 100%, which is not deductible as a professional expense for corporation tax purposes)).