Contracting in Belgium - A Short Guide to Tax and Social Security

[CyranoB]

Run away while you still can

I had to change my tax status nearly 3 years ago after loosing my expatriate status and starting a belgian Ltd company.

I only have one advice for you foreigner contractors: Don't come.If you're allready here: run away while you still can..

There is, starting last year and amplifying this year, a general clamp down on SME in general and freelancer and single trader companies in particular, with a goal to raise their taxes as high as possible. Most optimizations which were accepted before are now forbidden and heavily taxed (309%). Things which made belgian tax level bearable (like company cars, houses, etc.) are from this year so heavily taxed that some people are starting to give up.

My accountant described me the latests tax controls she had and it's really ugly. Controllers telling her they're sorry they know they're putting people into trouble, but their orders is to impose heavy fine on everything they can. Particular targets are single traders ltd, which are at risks to be requalified as employee/freelancer with retrospective taxes applied on the years controlled (generally 3 years). Imagine, after paying a fortune to tax experts and painfully managing to pay "only" 45% taxes for the last 2 years you see everything invalidated and have to pay at least 66% + penalties.
There is also a big change of mentality as the least taxed way is now not acceptable anymore and you're basically considered guilty until proven innocent. Of course this only applies to SME, big companies still enjoy single digit tax level.

Some accountants here are actually talking about closing shop in Belgium and going to Luxemburg, Netherlands, or even France... Yes, it's that bad.

If you come to Belgium, you have to be ready to accept 66%+ tax level. For those who are contemplating a 500EUR a day contract, keep in mind this will equal (sooner or later, whatever you want it or not) to 3000 EUR a month for you. This is not much more than what you would get unemployed with wife and children: is it really worth it?

[JohannM]

Hi All

So my situation at the moment is that I have an SPRL here in Belgium, and the reason I had opened one 2 years ago is because I was a bit "afraid" of using an umbrella company because I had heard some dodgy stories. However, 2 years after, and I can say that the tax system here is killing me, don't see about 65% of all my earnings! So I was wondering if anyone of you knows if after 2 years, can I make the switch to an umbrella company? I have talked to 2 umbrella companies and they told me its not possible since I am reigstered for social security here now. But I was wondering if any of you had a similar experience like mine, and maybe there is some other route I can legally take to pay less tax if possible.

Thanks

[portugueseinbelgium]

Boo,

I would like to thank you for your expert answer!

So, a little update.

At the moment I'm in Belgium and I have rented a place here, in my name. I'm trying to figure out what to do.

I have talked to an accountant in the first days here, who told me that my company should pay taxes in Belgium, as I expected. Even if I stay less than 183 days. He told me the only reason why the company who my ltd signed contract with, told me there would be no problem in doing so is because IN PRACTICE if you invoice through your ltd company for less than 183 days, they won't check or care. But of course, no one knows wheter your ltd company will be the one selected for auditing by BTA.

I have read and re-read the DTT PT-BE, and I am still getting informed with lawyers and accountants. So my conclusions are the following:

1 - My company should pay taxes in Belgium since I am living here and have a house contract here, means I am administering it from Belgium, unless I'm able to prove otherwise. (check Impots des societes here and read the conditions for a foreign company to be elegible for taxes here: http://statbel.fgov.be/fr/binaries/2...m326-66802.pdf)

2 - Since I am in Belgium the whole year, I will have to pay my personal taxes here, unless I can prove I'm a non-resident.

If my 2 assumptions are wrong, please tell me otherwise.



So some questions raise, once again:

1 - In the worldwide income, in belgium, do you declare only your base salary, or do you declare as well the per diem expenses my company pays me to live in belgium?

2 - What would happen in the following situations, in respect to taxes, and to penalties(if appliable):

Situation A - I find a way to be in Belgium less than 183 days a year, and I keep invoices of plane tickets and so on to prove it; at the same time I provide proof that I have administered my company, most of the year, in Portugal.

Situation B - I have a family member who has his own one man company in Portugal. What if he employs me. His company sends me to Belgium to work. I'm the company's only employee. This person is trying to develop a product in Portugal, to sell, and administering his company there. His company's only fixed income would be from my work in Belgium. Where should his company pay taxes? What kind of problems could this raise for him?

What's the worst that could happen? Could one go to jail because of this? Or pay more money in taxes+fines than you actually earned working?

Thank you!

I feel this is like asking for medical advice in the internet instead of going to the doctor lol

[BlasterBates]

You accountant is correct. Basically you need to pay tax for any business you do in Belgium. So if a Portugese company comes to do business, for anything more than a few days a month, then basically a subsidiuary needs to be setup and the employee needs to be a Belgium employee.

What you can't do is use a foreign company to do business in Belgium, even if you fly back from time to time. The authorities will argue that in spite of that because you are spending time in Belgium you effectively have a presence there and must register. They will expect to have two companies or two branches. One company to handle business in Portugal and one company to handle your business in Belgium.

What you could do is provide do some managment in Portugal for the Portugese branch/company and charge the Belgium co.

There isn't really a way round this otherwise every company in Belgium would be foreign owned where they could pay less tax.

If you stay less than 183 days you wouldn't be taxable on worldwide income, just the income you have in Belgium. However you maybe exempt from social security and you may find you're paying a lot less tax because they don't count any other foreign income to calculate your tax rate.

[pmasoft]

Contracting in Belgium for the first time.

Hi all
I have been through a lot (and I mean a lot) of this thread.
My conclusion is:
If I work through a UK Ltd Co for up to 6 months/183 days and I have an A1 (E101 replacement) I am cool as I will not be resident for tax in BE and exempt from SS because of my A1.

This does mean no extensions and the initial contract must be for 6 months or less.

Anyone see a flaw in my conclusions?

[portugueseinbelgium]

PMASoft, I think the A1 is only to prove you can pay social security in the UK.

I asked for the A1 in my country but it is not easy to get. Free circulation of people and goods in the european union is not so straight forward.

To get the A1 my company needs to have 25% of income in portugal (this is nearly impossible right now during the crisis and even worse due to the difference of income between both countries); have at least one employee appart from administration; be administered from Portugal; proove the portugal it is willing to do business in portugal after business abroad; and something else that i keep forgetting.

I see this as being a way to prevent in the E.U. that you can pay less taxes, but I also see this is very unfortunate for small companies in poor countries, especially family companies which account for most of the companies in portugal. It is definitely unfortunate for a small company who just landed a client abroad.
A small belgium company whose sole shareholder decides to come to portugal to do business for less than 183 days has his life easier because income from Portugal would be much lower than belgium income, on his company.
On the other hand a Portuguese soleshareholder doing business in Belgium (which would be even good for our economy and for the growth of the portuguese company) can't easily get 25% of the total income of the company in portugal, because of the difference in income from both countries.
Just do the math. If IT Consultancy is paid at 150€/day in Portugal and at 350€/day in Belgium, how can he even things out? A portuguese company would need to have a lot of work done in portugal to even out things.

I'm thinking about what to do. They asked me for a bunch of papers and seems too much of an assle for less than 183 days of work. I even have to officially translate the contract which will cost me a load of bucks. Plus i'd have to come back to PT for 3 or 4 times before getting everything sorted out, which would be probably around the 4 month mark.
I decided to stop invoicing through my company after 6 months. I'm thinking even to return to my country and work on my company.
I was told usually there is no problem if you do this for less than 183 days even if legally you should be paying company taxes in belgium.

How easy is to get A1 in the UK?What if you get REFUSED and you are already working?You can always argue you never heard of A1 or that it goes against free circulation of people concept. I surely had never heard about it neither did my acctant in PT.
What should you do in that case?

[albert]

I have worked in Belgium for some time now as a detached worker. I'm paying my taxes in my home country and I have an A1(E101) form.

Now, I'm trying to understand the options that I have after the first 6 months of work here. I asked around and someone gave me this link:

w ww.securex.eu/lex-go.nsf/vwNews_fr/B663793E2EBD673DC12577BB00374418?OpenDocument#_ftn 2

where it says that you can work as detached for 24 months provided that you have the A1 form.

Also, in this period I've extended my work contract once since it was the company's policy to renew the contract every 3 months.

What are your thoughts about this?

(Mod note: Link removed. Copy and remove the space between 'w ww' to view.)

[jezosaurus]

Brilliant thread.

Just a few practical things from being a contractor in Belgium:
What I end up with in my pocket is roughly as much as it would be in the UK under IR35. That's because I have 3 kids (tax breaks and family allowance to go with them), and the company car is very tax efficient.

Company car tax, incidentally has changed this year. For my fully expense mid-range people carrier, that's a very marginal extra, but for people with a large top-of-the-range SUV, the tax hit has come in around €1000/month.

[JumpingIn]

Starting in Belgium and moving to UK later

Great thread - thanks.

I have a situation that I have not yet found mentioned here, and would appreciate some advice:

I am an EU national, employed in Belgium and living here for many years already. I had ex-pat status initially, but lost it recently, so am fully in the Belgian tax system. Wife and kids are here and we own the house where we live in Belgium.

I am now looking at leaving my employment and starting up my own one-man contracting company. My first client will be from the US, and the work will involve travel all over Europe, but initially the bulk of time will be spent behind the computer at home.

I plan to move to the UK within a year, taking my family with me, as soon as I can sell the Belgian house. Long-term, a UK Ltd seems the right way to go, but how do I handle the transition period?

Starting up a BVBA, only to shut it down again once I move to the UK, seems unnecesarily complicated and costly. Also, the client prefers to work with a UK Ltd than with a BVBA.

How will BTA treat that UK Ltd initially if I am the director and only employee, and resident in Belgium? Do I need to move myself immediately to the UK, leaving Wife and Kids in Belgium until I can sell the house here? Will BTA still consider me tax-resident if my family are here? ... do we need to divorce first and then remarry once she moves over to UK? :-)

Any advice on the best way to legally get most net income out of this situation?

- JumpingIn

[administrator]

Hi JumpingIn,

Welcome to the forum and good luck with your plans.

I am sure you will get some good advice on here but I would suggest you start a new thread for this one if you don't get enough answers here as a new thread will attract more attention.

Admin