Joint liability for the debts of your contractor
When you enter into an agreement with a contractor, you may have a liability for his fiscal and social debts. This regulation as such is not new. However recently some modifications were made. As from now you are also jointly liable for the salary debts of your contractor. Contractors themselves become liable for the fiscal and social debts of their subcontractors. Below we explain how this works.
You can be held jointly liable for the debts of your contractor. Does this mean that all his creditor can turn directly to you? No, fortunately not. In the first place it only concerns certain creditors: the social security office (RSZ) and the tax authorities. Only if your contractor doesn't pay, the tax authorities and the RSZ can turn to you. Afterwards you can turn to your contractor, since you have paid his debts.
How can you as principal avoid this? You check whether your contractor has fiscal and/or social debts via a public database (www.socialsecurity.be). If your contractor has debts at the time of payment, you should withhold 15% for the fiscal debts and 35% for the social debts. These amounts are not paid to the contractor, but are transferred to the tax authorities and/or social security office.
The above regulation only applies to companies and legal persons. When acting as a principal/private individual for pure private works, you will not be held liable for the fiscal and social debts of your contractor. If works are performed in your private house, but your (real estate)company acts as principal, the above regulation applies.
Possible extension to other sectors
The joint liability for debts of contractors was introduced in the real estate sector in the battle against fraudulent companies.
Also other 'risky sectors' exist. Therefore the possibility is foreseen to expand the system also to the meat sector, hotel and catering sector and the security sector.
Now also for 'salary debts'
The liability will as from 2013 also apply to the 'salary debts' of the contractor, additionally the cleaning and transport sector would also fall within the scope. We still have to wait for the Royal Decrees which will contain the precise executive measures (a.o. which activities and sectors will fall within the scope).
You as a principal will become liable when the contractor is severely in breach with his obligation to pay its personnel correctly and in due time. It should concern:
a shortcoming: when the contractor pays salaries which are lower than the sectorial wages scale or when there are overdues;
which is severe: the inspectors have a certain freedom of judgment when assessing whether the shortcoming is sufficiently severe to make the principal jointly liable.
The inspection service will send you a notification. Fourteen days upon sending this notification the period of the joint liability starts. This period last for maximum one year. You are only liable for the salary debts which became due during the period of the joint liability. When you receive a notice from the inspection or from the employee, you should pay the salary and the social security contributions within five days.
However you are not liable for all salary debts of the contractors. The following debts you should not pay:
overdue wages which date from before this period;
premiums to which the employee has right in the framework of ending of the labour contract.
This regulation neither applies to a private individual working with a contractor for private purposes.
Contractors and subcontractors
Previously you were as principal or contractor only liable for your co-contracting party, in other words the next subcontractor in the chain (and not all other subcontractors). For contractors and subcontractors a supplementary joint liability is introduced: when the joint liable person doesn't pay neither, someone else in the chain will be held liable. Even when you have correctly withheld the 15% or 35%, you will be held subsidiary jointly liable.
Imagine a chain of (sub)contractors going from A (the main contractor) over B and C until D. The last one has fiscal and social debts which he doesn't pay. But also his co-contracting party C (to whom will be turned first) doesn't pay D's debts. So they will turn to B. If B doesn't pay neither, the tax authorities and the RSZ will finally turn to the main contractor A. A will consequently pay the debts of D (in the old system A was only liable if B didn't pay his debts).
Imagine that B also has fiscal debts. A has as legally foreseen withheld 15% and 35% and transferred the amounts to the tax authorities and the RSZ. A will not be held liable for the debts of B. But when C and B do not pay the debts of D, A can still be held liable for the fiscal and social debts of D.
However as a principal you should not worry. You will not be held liable for the debts of the subcontractors of your contractor.