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Contracting in Belgium - A Short Guide to Tax and Social Security
OK so it's not so short any more. This information has been compiled based on experience, and expert advice. In response to the numerous emails and PMs I get concerning the fluid and uncertain environment for working in Belgium, I have tried to summarise the issues and pitfalls, and tried to offer some ray of hope for those of you that want to come here to work.
I hope this is of some use to you.
Registration is only required if you are not a resident in Belgium. If you are a resident, which means you have registered for an ID Card at the local Commune, then you will automatically receive a tax return.
LIMOSA was introduced to catch the wave of immigration from the Eastern EU countries. I.E. those manual workers who do cash in hand trade.
However, if you are working via your non Belgian LTD CO or similar, via a scheme of one form or another, or intend to come here as self employed, intending to avoid paying Belgian taxes , then you have to register. It's their way of making sure you pay what you are supposed to in Belgium!
If on the other hand you are already registered in Belgium, working for a Belgian company and paying tax here, or are setting up a Belgian LTD CO, then you don't need to worry about LIMOSA. They will already know about you!
You will fail LIMOSA registration, or be unable to set up legally as self employed, or form a Belgian LTD CO equivalent unless you have a minimum university degree, or equivalent level of education. No, GCSEs or A Levels won't cut the mustard, nor will an MCSE! In fact it is incredibly hard to show professional skills as an acceptable alternative for a degree.
The 183 Day Rule
For a long time the UK has applied the 183 day rule to determine if you are resident for tax purposes. Basically if you are in the country for 183 days in any calendar year, or an average of 90 days a year in any 4 year period, you are deemed to be tax resident.
A similar test exists in most EU countries. Travelling days are normally excluded, so only full days spent in country are counted. Gordon changed that in the UK recently by reducing the number of days you could claim as travelling.
This test is only really a problem if you intend to work in Belgium as self employed, and pay your taxes back in your home country. If you work under LIMOSA registration, or via your UK LTD CO as a foreign worker on assignment this is unlikely to be something to concern you.
Being Self Employed (The Social Security Trap)
WARNING if you trade in Belgium as self employed, and most do as it's the easiest thing to do, and costs nothing to set up, you will end up in the Social Security trap if you stay for more than a few months.
Social Security in Belgium works on a sliding scale. The more you earn the more you pay. OK so no great revelation there. BUT! For the first 2 years you can get away with paying almost nothing, a minimum payment or estimate on future charges. 99% of contractors do it this way.
Then it hits like a thunderclap. You get the Avis de Regularisation.
This is the document that says, you ain't paid enough ole chap. Please pay the shortfall by 31/12 of the current year. If you don't pay then it's 10% interest monthly, plus enforcement.
Social Security is based on your annual personal income. As a self employed person all your income is personal. On a legal minimum income of 36K a year, the social security bill is around 10K. If your income hits 50K expect to pay about 14K. Now lets say your daily rate is 500 Euros, 110K annually based on 220 days. Expect to pay about 30K in Social Security. Tax comes next, see section later.
Now back to that paying the minimum for the first 2 years. You bob merrily along getting renewals and loving the life here in Brussels. You then enter year 3. The social security police then check back and bam, please pay the shortfall for year 1. Then year 4 comes and bam, please pay the shortfall for year 2. Then year 5 comes and bam, please pay the shortfall for year 3.
In addition, the social security for year 4 onwards is no longer estimated, it's calculated for you by the social security Gestapo. So, your year 4 social security is now based on what you should have paid in year 1, year 5 on year 2 etc. Even if your income falls below what you earned in year 1,2,3 etc, you still pay the new calculated amount!
How do I know? I'm paying it! In the last 3 years I have had to pay over 50K in back social security, on top of the 12K a year I am now paying. This based on a declared income of 50k ish a year.
Can you avoid the Social Security trap? Yes, by paying the full amount from day one. This means having an accountant calculate the correct amounts based on your monthly income, and paying over the amounts in advance.
Daily rates start to look a little less now don't they?
Can you avoid paying so much? Yes, see section on forming your own LTD CO.
Last edited by nodric; 18th November 2009 at 13:20.
I am not an expert, just someone who has experienced things first hand. If you need expert advice then seek out a qualified expert. My opinions are just that, my opinions. I could be wrong, and laws change, so trust nothing I say