Working in Belgium via Connexion

[Rantor]

Jorge.

Got your message - awaiting reply from accnt.

Cheers

[NoMoreSleeplessNights]

Well the accountants confirm the numbers, and my SS will be higher next year because my 3 year average income will be higher. A few percent is interest & a small adjustment from a previous year, but that is the tax.

Nice little game the Belgians have there, highly talented people whose skills are in demand, come to Belgium on the promise of money, and end up in debt bondage.

What a ripoff, I'm outa here.

[wntr]

Hi Xsanch,

The woman is called Louise Hilditch. She runs a company here called LocalKnowledge (localknowledge.be).

Definitely saved me a good amount of time swearing at Belgian officials

Thanks

wntr

[wntr]

Wntr,

You still have to pay corporate tax on what remains after salary and expenses. Am I missing something?

Nikos

Ah yes of course, but the aim is that after wages, rent, car and expenses (there are a good few ways to pay yourself some expenses to lower the company profits as much as possible). Business tax will have to be paid but it is much lower than the tax on an independents tax.

My point is this: having a company here allows a decent lifestyle and allows one to save aside some money. I personally think it's better to be a small company here vs independent.

[wntr]

So is making a company the only legit option?

The market for my talents is mainly US/Germany/Switzerland, and I don't see how a Belgium BVBA would be useful outside of Belgium, which is a fairly small country.

I also don't see any tax efficient way of extracting the money from the company when I leave to start my next contract somewhere else. Let alone the capital equipment it has paid for, the car, house, computers etc. Also the EUR 12,400 initial blocked capital requirement is a pain to find right now.

I think paying rent from the company, just shifts the burden on that tax to the company. (Can anyone confirm?), so the company ends up paying the tax on that as a benefit.

When I looked at this company approach, it just seemed to stick a load of capital into Belgium and leave it tied up in Belgium, together with creating an expensive administrative nightmare for me. What happens if I only need the company for say, 6 months?

People in this thread have said it will only get my tax bills down to 50%, which seems too small to make it worth the hassle/risk.

All I really expected to do was work, live modestly, pay my taxes and leave with a little profit. Not a 9k a year loss, which is what my shortfall looks like.

Anyway, I meet with the accountants on Monday, so hopefully it will all be a big error and I can get the numbers to balance. I'll post the result on Monday.

I maybe wrong, but i'd heard it was now possible to set up a limited company here in Belgium without having to put in the 12k up-front?

[fosho]

is the Flood still coming?

Getting back to the original subject of this thread, working in Belgium with Connexions.
Are there any updates about the situation of the former/ current contractors using this ManCo.?

I have to admit that I've been quite concerned, after finding this thread some days ago.
So I've asked a former colleague who was with Connexions and had troubles during spring, how he got out of it.

He's been offered the following options:
-staying with Connexions – it means he'll have to declare and pay Belgium taxes for everything, icluding past income originating from Belgium.
-signing with another agency – he'll have to declare everything from the new contract in Belgium, but not past savings.

Obviously, he chose the second option- which means he's now paying about 45% taxes + 21% social security, but at least he's clean and gets to keep the Lux piggybank.

Also, when I signed a new contract in August, one of the option oferred by a big local consortium, to keep the independent status, was Luxembourg based ICC.
From what I've read here, ICC and Connexions are the same company. I'm glad I didn't go with them, but this shows they are still operating in Belgium, en-masse.



To summarize my understanding of the situation:

-Connexions is still alive and kicking, although they are not doing the splits anymore. Their former clients were allowed to make deals to come out clean, yet keep the previous earnings.

- No other Mancos operating in Belgium have been targeted as of yet.

-There's been a lot of talk on this thread about how the Belgian authorities were about to go all out on ManCos and their contractors, Germany- style. So far , this hasn't happened.


My question is , does anybody have credible informations that this is about to happen anytime soon?

Thank you for any reliable info.

[NoMoreSleeplessNights]

Ah yes of course, but the aim is that after wages, rent, car and expenses (there are a good few ways to pay yourself some expenses to lower the company profits as much as possible). Business tax will have to be paid but it is much lower than the tax on an independents tax.

Well I've read up on this, the deductible expenses seem to be similar to a freelancer, the corp tax is 33%, dividend withholding tax is 25%.

So after tax deductible expenses, our example contractor is looking at 48k - 15.84 corp taxes, leaving him 32k in the company, after 25% dividend tax, leaving 24k, that's about 50% tax.

Add the interest on the tax and extra expense from the running both the company and your own taxes and I guess his take home pay works out to be 22k. For which he needs to invest an initial 12400 minimum capital.

Compared to a freelancer he has 12.4k less capital to prepay his tax, and spent all the setup costs, so he is in worse shape for about 4 years when compared to a freelancer.

I assume that most people balance their payments, part PAYE, part dividend, but I think that is somewhere in the middle, like 55% and if you plan on retiring in Belgium you are simply trading your pension for the few percent tax saving.

Are these numbers correct? WNTR's comment makes me think he sees the company money as his personal money. But he has to extract that money and those assets from the company, which means buying the car from the company, or buying the house from the company, then paying taxes on that money to extract it again as a dividend or pay.

This is all great for Belgium and terrible for contractors. To turn a 60% tax rate into the 45% European average tax rate, you'd need 37.5% extra income.

[Rantor]

Well I've read up on this, the deductible expenses seem to be similar to a freelancer, the corp tax is 33%, dividend withholding tax is 25%.

So after tax deductible expenses, our example contractor is looking at 48k - 15.84 corp taxes, leaving him 32k in the company, after 25% dividend tax, leaving 24k, that's about 50% tax.

Add the interest on the tax and extra expense from the running both the company and your own taxes and I guess his take home pay works out to be 22k. For which he needs to invest an initial 12400 minimum capital.

Compared to a freelancer he has 12.4k less capital to prepay his tax, and spent all the setup costs, so he is in worse shape for about 4 years when compared to a freelancer.

I assume that most people balance their payments, part PAYE, part dividend, but I think that is somewhere in the middle, like 55% and if you plan on retiring in Belgium you are simply trading your pension for the few percent tax saving.

Are these numbers correct? WNTR's comment makes me think he sees the company money as his personal money. But he has to extract that money and those assets from the company, which means buying the car from the company, or buying the house from the company, then paying taxes on that money to extract it again as a dividend or pay.

This is all great for Belgium and terrible for contractors. To turn a 60% tax rate into the 45% European average tax rate, you'd need 37.5% extra income.

No, they are very, very wrong.

The information is public domain on the fgov websites and can be worked out from previous posts.

Corp tax rates vary depending on a) Whether you draw dividends and b) Your pre-tax profit;

Witholding tax on dividends is 15% dropping off to 10% if you keep the cash in the company until winding it up (can't recall the time period)

The capital you put up is a proprtion of the nominal capital of the company (IIRC a bit more than 7k had to be paid up front) and this can be used as company capital.

No offence intended, but your posts are veering into tinfoil balaclava territory and you should maybe step back and get some perspective rather than posting stuff that seems designed only to convince yourself how screwed you are.

Firstly, why are you in the situation you are in now - has it not occured to change the way you are working before letting it get this bad? As far as I can see, you are 100% independent and this has got to be one of the worst tax set-ups in Belgium, if not the world As tax avoidcance is endemic amongst the many Belgian independents, you're probably in a pretty select category as well.

Go and see an accountant who deals with Belgian contractors.

For what it is worth, I am better off running a ltd co in Belgium than I ever was running the same set-up in Britain.

[NoMoreSleeplessNights]

No, they are very, very wrong. ///Corp tax rates vary depending on a) Whether you draw dividends and b) Your pre-tax profit; Witholding tax on dividends is 15% dropping off to 10% if you keep the cash in the company until winding it up (can't recall the time period) The capital you put up is a proprtion of the nominal capital of the company (IIRC a bit more than 7k had to be paid up front) and this can be used as company capital.

Rantor I have a good outside-Belgium solution (~33% tax), this is just an academic exercise to see what would have been possible in Belgium given 20-20 hindsight and a time machine

Here's a readable explanation of Belgium tax I Googled:

https://www.pkf.com/site/webdav/site...ide%202009.pdf

The one I guess you guys try for is to get the reduced corporation tax, and take as much out as possible by dressing personal expenses as company expenses and charging them to the company. The company will pay corp tax on this, but at the reduced rate.

So our example guy, 60k into company, 48k after his 20% business costs, lets say he gets 9k out of the company as extra expenses, company pays the reduced 25% instead of 34% corp tax, i.e. 2.25k on these.

48-9-2.25 = leaving 36.75k salary, which is above the 36k lower limit needed to qualify for the reduced corporation tax. So about 8k in SS and 10.5k is tax.

That is better ~43% tax very close to Euro average.

[nodric]

Back for a while...

I've been out of town over the summer and busy with more important stuff.

I've been catching up on this thread and have little more to add on the pros and cons of different structures in Belgium. My posts cover all the essentials. The only overriding advice is seek professional accountancy help ASAP. Working in Belgium can be a nightmare without the split schemes, or without using a company structure.

Best advice for short term contracts is either, don't accept them, or keep it out of Belgium (use your UK LTdCo or work in the black until you see it as long term).

On the Connexion front. They are operating again from new premises under a similar name, some old staff, trying to get new business and cling on to some old timers. Up to you if you want to put your trust and life in their scumbag hands again!

There is a strong rumour (coming from accountants) that the Lux authorities are going to turn over 'useful' data' to the BTA at the end of this year. This could then allow the BTA to track down the worst offenders of the old split schemes. If this does happen it could mean one day a knock at the door. On the other hand, few resources, lots of contractors (many who have already left), and the sheer complexity in investigating and proving fraud means it could take years (as everything does in Belgium) to actually be a problem for one of us.

If they do come then you have simple choices.

Denial, stand and fight.

Run, in other words leave Belgium.

Give in and accept whatever they throw at you, pay if you can, go bust if you can't. BVBA/SPRL = LtdCo so going bust is not the end of the World.

If you are Independent and get investigated, leave ASAP!

If you are a single guy and have been splitting money for years, best to leave as soon as you can find another role. If you are tied to Belgium, family/kids/house etc, then you have little choice to sit tight, hope for the best, and keep schtum! Burden of proof is for the BTA. Only a fool volunteers information. Penalties will always be in the 10s of Ks so fessing up is not going to save your skin, or your ability to pay!

For all those who have PM'd me consider the messages old and if you want to contact me send me a new message.

Remember, I am not an expert and you should always seek advice from those that are.