The Programme Act of 10 August 2015 extends to principals the subsidiary joint and several (chain) liability for social security (and tax) debts for "works on immovable property" or similar works. From now on, anyone hiring an undertaking which in turn hires another undertaking may be at risk of being jointly and severally liable for payment of the social security debts of the latter undertaking. Only natural persons acting exclusively for private purposes do not need to worry.
What already existed
A regime of joint and several liability for social security debts had already existed for a long time in direct relationships, where a principal could be jointly and severally liable for the social security debts of an undertaking directly hired by the principal.
Experience has shown that undertakings outside the construction sector are often not familiar with this situation. They are often wrongly convinced that this regime only applies in the construction sector. However, any undertaking can be considered a "principal" whenever it orders "works on immovable property" or similar works (infra). Moreover, it is not required that the undertaking hired is active in what is traditionally considered to be the construction sector: it is enough that the hired undertaking performs, for example, certain maintenance and cleaning activities. Consequently, a notary, a baker or any other SME hiring a cleaning firm with social security debts is at risk of being held liable for the social security debts of the cleaning firm. The principal could only avoid this by fulfilling a withholding obligation: whenever the principal determines – through a database available for this purpose – that the hired undertaking has social security debts, the principal must withhold 35% of the amount due and transfer it to the National Social Security Office. All these provisions remain and are further extended.
First extension in 2012: Extension to other sectors and introduction of chain liability chargeable to the contractor
The Programme Act (I) of 29 March 2012 extended the joint and several liability in several respects with the aim of combating fraud. The King was given the authority to extend this regime to other fraud-sensitive sectors (e.g. the security and surveillance sector). A regime of joint and several liability was also introduced for wages. Finally, a regime of subsidiary joint and several liability was established for social security debts in connection with works on immovable property or similar works.
This subsidiary joint and several liability means that, whenever an undertaking does not comply with its obligations in the context of joint and several liability, the contractor who intervened in an earlier stage in the chain of contractors becomes jointly and severally liable for the social security debt.
In this context, any undertaking can qualify as a contractor. The concept does not imply a link with the construction sector; in this context, "contractor" refers to any undertaking working for another undertaking or principal.
The subsidiary joint and several liability is applied in chronological order. Hence, first, the contractor who hired a negligent subcontractor will be held liable. Subsequently, one moves up the chain, the next actor in the chain being held liable if the claimed amount is not settled within 30 days by the person who has been held liable to pay the social security debt. The joint and several chain liability stops, however, before the principal, who only remains jointly and severally liable for the social security debts of his direct contractor but not for those who are further down the chain.
Second extension in 2015: the principal himself is now jointly and severally liable for the social security debts of the entire chain
The Programme Act of 10 August 2015 (Official Gazette of 18 August 2015) further extends to the principal the subsidiary joint and several liability for the entire chain. In concrete terms, this means that in future, any principal (i.e. anyone who orders works to be carried out at a price) could potentially be held liable for payment of the social security debts not only of his direct contractor, but also of the subcontractors of the latter or of other subcontractors in the chain, at least where none of the contractors lower down the chain has paid.
For tax debts, the joint and several liability has been extended to the principal in a similar way.
What are works on immovable property?
Any company ordering "works on immovable property" (or certain other similar works) (see Article 22, § 2 of VAT Royal Decree No 1) can be considered as a "principal" for the purposes of the subsidiary joint and several liability. Typically, this refers, inter alia, to building, rebuilding, finishing, setting up, restoring, maintaining, cleaning and demolishing of immovable property. Similar works include, for example, central heating, sanitary systems, electrical installations and wall coverings. Thus, as already mentioned, the regime of joint and several liability is not limited to what is traditionally labelled as "construction". It is sufficient that the hired undertaking performs, for example, maintenance or cleaning activities on immovable properties. In the above example, the extension of the joint and several liability implies that the notary, the baker or any other SME who, as principal, hires a cleaning firm for his business premises, can also be held liable for the social security debts of any subcontractors hired by the cleaning firm, even if they are hired without the principal's knowledge.
What if you are held liable as a principal?
A principal who, based on the joint and several liability, is liable to pay a social security debt for the chain has a 30-day period to settle the sums claimed after the registered notice has been sent. Under the Programme Act of 10 August 2015, a principal who does not himself have any personnel or social security debts will nevertheless be listed in the database of the National Social Security Office as an "employer with social security debts" if he does not pay the sums claimed in the context of joint and several liability within this period of 30 days. The joint and several liability is limited to the total cost (excluding VAT) of the works entrusted to the contractor or subcontractor for whom the principal is held jointly and severally liable.
Can the principal avoid the joint and several liability?
Principals who do not want to be caught by surprise should be cautious when hiring (sub)contractors. The new Programme Act seems to be a good occasion for each undertaking directly or indirectly hiring other undertakings with personnel, to check whether they are at risk of being held liable for the latter undertakings' social security debts and to examine whether certain precautionary measures should be taken in order to avoid this as much as possible. A precondition, of course, will be to check whether the assignment given includes works considered as works on immovable property or similar works. If so, the principal could try to cover himself contractually. However, it is recommended that the principal should check which undertakings actually participate in performing the works.
Entry into force
The Programme Act of 10 August 2015 does not specify the date of entry into force of the extension to principals of the subsidiary joint and several liability. Hence, the new regime entered into force on 28 August 2015, i.e. 10 days after publication of the Act in the Official Gazette.