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

[ajc001]

Response to Boo

Hi Boo,
thanks for the response.

to answer your questions...

I am and always have been resident in the UK to date.
My projected income is 150k euros per years assuming 221 days in the next year from Feb 2016 to Feb 2017.

I will be expected to pay all my living and travel expenses from that 150k euros.

On that basis could you advise me on the questions I posed earlier.
Thanks in advance.

ajc001

[Boo]

I am and always have been resident in the UK to date.
My projected income is 150k euros per years assuming 221 days in the next year from Feb 2016 to Feb 2017.

I will be expected to pay all my living and travel expenses from that 150k euros.

On that basis could you advise me on the questions I posed earlier.
Thanks in advance.

Can you arrange the contract so that you will only put foot in Belgium for 183 days or fewer in any given period running from Jan 1 to Dec 31 ? If so then you will only need to pay UK tax provided that you do not establish a "business seat" in Belgium. Otherwise you will pay Belgian tax rates which are something like 50-60%.

You can avoid establishing the seat of your business in Belgium by things like working for other clients in the UK, maintaining a UK base (your house / flat / wife / kids / UK car registration / etc etc). Also stay in B&Bs rather than rent a flat or house, this last will mean you are not sent a tax return by the Belgian Tax Authorities and this will save you the cost of hiring a belgian accountant in addition to your UK one.

But for me personally, as I said in my previous post, I would not travel to a foreign country for less than £180k pa and that is actually €240k pa so IMHO you are riding for a fall to even consider it.

Good luck,

Boo

[ajc001]

Response to Boo

Can you arrange the contract so that you will only put foot in Belgium for 183 days or fewer in any given period running from Jan 1 to Dec 31 ? If so then you will only need to pay UK tax provided that you do not establish a "business seat" in Belgium. Otherwise you will pay Belgian tax rates which are something like 50-60%.

You can avoid establishing the seat of your business in Belgium by things like working for other clients in the UK, maintaining a UK base (your house / flat / wife / kids / UK car registration / etc etc). Also stay in B&Bs rather than rent a flat or house, this last will mean you are not sent a tax return by the Belgian Tax Authorities and this will save you the cost of hiring a belgian accountant in addition to your UK one.

But for me personally, as I said in my previous post, I would not travel to a foreign country for less than £180k pa and that is actually €240k pa so IMHO you are riding for a fall to even consider it.

Good luck,

Boo

Hi Boo,
thanks for responding, you are my only responder, so much appreciated for that.

In answer to your questions

Q:Can you arrange the contract so that you will only put foot in Belgium for 183 days?
A:Possibly but if I like the job and the financial returns, I will want to do longer than 183 days

Q: Can I avoid establishing the seat of my business in Belgium by:-

1. working for other clients in the UK? A: Not simultaneously but potentially if I quit Belgium before the end of 2016 and get some uk contract or permy work.
2. maintaining a UK base? A: I have a uk house (and mortgage), wife and adult children at home and 2 UK car registrations in my name. I will be taking one of these cars to Belgium and will use a room in my uk house as an office. My wife will be bookkeeping.

Your last response suggests that I should not take this contract at 150k euros. But until now I thought that 150k euros was a reasonable rate as it equates to about 113k sterling. I dont have much choice in refusing the role as I have no other offers and have bills to pay and some work is better than no work. I calculate below that I take home net about 72k sterling. Are you saying in your opinion this is not enough money to be taking home or are you saying my calcs are wrong. I explain in some detail below how my figures were calculated.

Calculations and assumptions

I have adjusted the assumptions to work on the basis of 150k euros for 221 workdays invoiced for 12 months (basically assuming I don't work weekends or public holidays and take 4 weeks unpaid holiday)

So lets assume over the next year that:-
As before ...

I am invoicing a uk based employment agency, who are invoicing a belgian based service provider who is providing my services to the client, where the client is a global US/UK company with offices in Belgium.
My contract is between the uk based employment agency and my uk based company and is for 1 year,
I invoice the uk based employment agency monthly,
The yearly income to my company through these invoices is 150K euros.

... and the following rounded calculations (for simplicity) have been made:-

I pay myself as an employee of my UK company a salary of 20k euros (which is 12k euros net belgian salary, plus 8k euros belgian income tax at 40%)
I have employee expenses of 20k euros (for B&B accommodation, travel to and from belgium on eurostar, my own car's maintenance and use to commute from B&B to work, car and personal insurance and miscellaneous other low cost items)
I have business expenses of 5k euros (for accountancy, bookkeeping and admin costs)
I take dividends and uk corporation tax(at 20%) as a director of my UK company (equating to 84k euros net dividends and 21k euros as corporation tax).

So, the income to me includes:-

• 12k euros net belgian salary
• 84k euros net dividends

giving a total 96k euros net income = 72k sterling (assuming £1=Euro1.33)

A 72k sterling net income to me. is quite good. I would be happy with that!

Referring to your last response - please note that I dont expect to get paid 240k euros per year. That is like 1100 euros a day - I dont know anyone who gets a day rate that good for IT PM work. I am used to a 60-70k sterling uk salary, so I am not sure why you think 150k euros is such a poor income.
Am I missing something here? Do my calcs above miss out some crucial expenses, taxes or other factor that have an impact on what I term my 'net income'?

How do these circumstances change (if at all) if I am working beyond 183 days in belgium between Feb and Dec 2016?

thanks in advance
ajc001

[Boo]

Q:Can you arrange the contract so that you will only put foot in Belgium for 183 days?
A:Possibly but if I like the job and the financial returns, I will want to do longer than 183 days

As I said in my respose to you, the test for whether you fall under the Belgian tax system is whether you are on Belgian soil for 183 days or fewer in any given period running from Jan 1 to Dec 31, I cannot tell you the answer to that, only you can.

I have adjusted the assumptions to work on the basis of 150k euros for 221 workdays invoiced for 12 months

If you are on Belgian soil for 221 daya in the period Jan 1 to Dec 31 then you will be liable to pay Belgian tax on YourCo's gross income. You should be able to offset that tax against what YourCo will owe HMRC under the Double Taxation Treaty which exists between B and the UK. This would mean you effectively pay no UK tax.

But you should be aware that you will pay the BTA a rate of approx 50% to 60% of your gross company's income if you are caught by the Belgian Tax System.

I have employee expenses of 20k euros (for B&B accommodation, travel to and from belgium on eurostar, my own car's maintenance and use to commute from B&B to work, car and personal insurance and miscellaneous other low cost items)

Your figure of €20k is a fatuous underestimate. HMRC reckon it costs £44k to stay in Brussels (£35k elsewhere) and this is for a 5 day week in Belgium. These figures exclude travel which will not be less than £7k as a minimum and might make £10k very easily. If as an alternative to weekly commuting between the UK and B you stay out for 7 days then your living costs go up instead to ~ £61k in Brussels or £49k elsewhere.

If you think you can do it for less than that's up to you but I am not going to comment on your figures except to say that I kept a complete score of all my living expenses for the year I worked in B and the difference between HMRC's scale rates and what I actually paid out was a few hundred quid only.

Given your expenses are such a complete work of fiction I am unable (and rather unwilling) to comment on your other workings but I think there is no way it is possible to work for that price in Belgium even if you can stay inside the UK tax system. If you spend more than 183 days on Belgian soil between J1 and D31 then you need to allow for Belgian tax of up to 60% of YourCo's gross income.

But feel free to prove me wrong, just don't end up having earned no income over your bare expenses at the same time as you incur a €90k debt to the BTA.

Boo

[ajc001]

Your figure of €20k is a fatuous underestimate.

Is the underestimate 20k you are referring to - the 20k employee belgian salary of 20k OR the 20k employee expenses
If you are referring to the 20k of employee expenses then my employee expenses breakdown as follows:-

• B&B accommodation - airbnb in a small town 30 miles southeast of brussells = 500-600 euros per month = 6-7k euros per year
• Travel to and from belgium on eurostar (one weekend per month) = 1-2k euros per year
• My own car's maintenance and use to commute from B&B to work. = 1k euros per year
• Car and personal insurance = 500 euros per year
• Miscellaneous other low cost items = 1k euros per year

Therefore the total planned expenses = about 10-12k euros, so 20k euros is a high estimate - not an underestimate. Please explain why the estimate is 'fatuous', based on my calcs above - I think they are quite reasonable and based on research I have been doing into eurostar and airbnb rates in the region I am working. Note that my company expenses (as opposed to employee expenses) which include things like uk accountancy fees etc... have been listed seperately as about another 5k euros.

What do you suggest is the best thing for me to do given that I wont be turning the offer down?
Join an umbrella company, form a uk ltd company, or ...!

Thanks AJC001

[Boo]

Is the underestimate 20k you are referring to...

The employee expenses. You have made the prime mistake of assuming that the cheapest deals you can find on the web are the deals that will apply to you. In fact when you try it you will find that €75 per night is a cheap B&B and you will not be able to book the cheapest train tickets either. I am completely certain that HMRC have done a better job of estimating costs than you have, but it is your funeral...

What do you suggest is the best thing for me to do given that I wont be turning the offer down?
Join an umbrella company, form a uk ltd company, or ...!

My advice to you is to go quietly bankrupt in a country where you speak the language rather than a foreign land.

Boo

[ajc001]

I agree that my 6-7k euros for accommodation is wrong - it should be more like 10k-14k per year.

Looking at this url below shows air b&b rates where i am working. Most are about 30-50 euros a night and up to 40 % discounts if you stay per month, with some and upto 50% discount with others. Even if I get a plush 75 euro a night bnb I could probably get that discounted to maybe 60 or 50 euros a night if I pay for a month at a time. If I assume I sign up to a 50 euros per night airbnb (discounted at 25% per month) that is about 37.5 euros a night, which implies about 1125 euros per month. So, I accept that anywhere between 8k and 13.5k euros for accommodation for one year is possible.

https://www.airbnb.co.uk/s/Ottignies...Neuve--Belgium


Eurostar tickets are about 50-80 euros one way for standard tickets. If I make about 20 trips, that is about 2-3k. So, I accept that my 1-2k for eurostar was optimisistic.

The revised figures then are :-

• B&B accommodation - airbnb in a small town 30 miles southeast of brussells = 800-1100 euros per month = 10-14k euros per year
• Travel to and from belgium on eurostar (one weekend per month) = 3k euros per year
• My own car's maintenance and use to commute from B&B to work. = 1k euros per year
• Car and personal insurance = 500 euros per year
• Miscellaneous other low cost items = 1k euros per year

So now my total expenses have now reached about 20k euros... but I think you would argue that they are still an underestimate. Accomodation takes the lions share but air bnb options really do look a lot cheaper than the hmrc estimate of 165.5 euros a night for Brussels and 80% of 165.5 (ie 132 euros) for outside Brussels. The 132 euro price is at the opulent end of the market when talking about the town I will be located in, so I dont think my estimate is unreasonable.

Are you able to offer me any constructive feedback on the analysis above.
For instance, if you now accept that 20k expenses is achievable, are you able to tell me whether the conclusions reached in my Calculations and assumptions section of this thread are valid, namely that my net income would be 72k sterling (assuming £1=Euro1.33)

A 72k sterling net income to me. is quite good. I would be happy with that!

but currently I dont understand from your responses whether you think my calcs are completely wrong still.

ajc001

[stek]

There is no 183 day rule for one man businesses, forget that. Local tax from day one.

[Boo]

There is no 183 day rule for one man businesses, forget that. Local tax from day one.

Liar. The tax position for one man band UK Ltd Companies is clearly set out. Your repeated assertions (without evidence) to the contrary are not helpful and very misleading.

Boo

[Boo]

but currently I dont understand from your responses whether you think my calcs are completely wrong still.

I think your clsulations are hoplessly optimistic and there is no chance that you will meet them inpractice, whatever the adverts say. For instance, does your car insurance cover you for buainess use out of the UK for protracted periods ? MIne didn't and changing it to a more suitable policy doubled the price. Do you have the Europe-wide version of your roadside recovery insurance ? That was hugely more expensive for me than the cheap policy I had at the time. How much will fuel cost each time you drive back to the UK ? I filled my car twice a week...

Do the B&B's you've costed permit you to cook on site ? If not then you need to allow for meals out, either at the works canteen or in a restaurant every night. Otherwise you will need to allow for supermarket sandwiched, readymeals, pre-packaged salads etc etc which is a lot higher cost than eating in.

The long and short of it is that only you can perform your expenses calculations, if you are sure you have covered everything then that's great, go ahead. I'm not going to check them for you but ISTM that if your calcs and HMRC's calcs differ by much then it is you who is likely to have got them wrong. As I said above, my experience was scale rates vs my own actual expenses were about the same.

If the rate seems good to you then go ahead, fill your boots. Just remember that there is a tax risk involved in working abroad and if you don't price yourself to take that into account you could end up in the brown smelly stuff.

Boo