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

[Campus75]

New rules have been introduced in Belgium that will allow you to start a Belgian LTDCo for 1 Euro capital. If you have read the facts in this post, you will see that to start a company you had to show several thousand Euros in your bank account.

This has now been reduced for new starter companies, known as a SBVBA. Tailored for young people to start a business, it can also be used for IT Consultants.

This is a much easier way for you to start a local company and be compliant in Belgium.

Happy New Year


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Dear NODRIC,

Many thanks for the very useful information you provided and the huge efforts you made!! Especially this announcement of the new Belgian LTDCo.

1. Do you have an internet ressource where I can find more information?
2. May I can send you an PN, as I need some advise (incl. accountant) on my personal situation.

Many thanks and hope to read from you soon.

Best,
campus75

[veloearl]

my VPN connection initiates in Belgium, but that's it...

Thanks to all for the invaluable info in this post.

I am from the US and temporarily living in Belgium to be with my girlfriend. I will remain here temporarily; however, in order to not overstay my tourist visa, it was necessary to apply for residency. My girlfriend and I established legal cohabitation and I applied for residency in May 2009. I was granted residency in October 2009.

I have no job in Belgium; however, I am the sole shareholder of a US corporation that provides software development services. My clients are located in the US, invoices are paid in USD and proceeds are deposited into my US bank account. There are no ties between my corporation and my location here in Belgium except for the small detail that the majority of my billable hours are spent in front of my computer here in Belgium…

My corporation is a "subchapter S" corporation (similar to a UK Ltd co., transparent for tax purposes), and profits at the end of the year get distributed to shareholders (me) as an ordinary dividend. I do not draw a salary, and have no “wages,” only the dividend income at the end of the year. I also have US interest income.

After having read all of the info in this thread, I know I am missing something. As mentioned, I have no salary, just corporate dividends and bank interest. To my knowledge, the Belgian tax rates on those two forms of income are much more reasonable, and should approximate that of the US. SS tax would not apply. Can't I simply pay the taxes in Belgium; and thanks to the double taxation treaty, only pay the difference in the US? Maybe dividend income received from a "transparent for tax purposes corporation" doesn't work that way ?

I also think I can easily substantiate my center of vital economic interests as being in the US, as my home is currently sitting empty there; all bank, investment and credit card accounts remain there; and I am only here temporarily. That said, a potential problem is my legally cohabiting status. In fact, my residency is based on "family reunification." Sort of a gray area. But if the above assumption regarding treatment of income applies, what would be the advantage of being fiscally non-resident ?

Another thing I have stumbled on is in the tax treaty. Article 22 (Other Income) seems to imply my dividend income from my "transparent for tax purposes" US-based corporation would not be subject to Belgium taxes at all ?

NODRIC, would you be willing to pm me the info on the local accountant(s) who has assisted you?

Best,
veloearl

[nodric]

Can't I simply pay the taxes in Belgium; and thanks to the double taxation treaty, only pay the difference in the US?

I also think I can easily substantiate my center of vital economic interests as being in the US, as my home is currently sitting empty there; all bank, investment and credit card accounts remain there; and I am only here temporarily. That said, a potential problem is my legally cohabiting status. In fact, my residency is based on "family reunification." Sort of a gray area. But if the above assumption regarding treatment of income applies, what would be the advantage of being fiscally non-resident ?

Best,
veloearl

You sort of hit the nail on the head when you became a resident. As a resident you are required to declare your Worldwide income. As a resident Belgium will claim first dibs on that income! As a Belgian resident any personal income (i.e. Salary) is taxable in Belgium, including SS. The price of love eh

Dividends can be treated for tax in the States (I am amazed you think Belgium is cheaper for dividends), but the Belgians could levy a withholding tax of 25% (if memory serves) on any dividends. That's on top of any tax the US levy! You then have to justify why that withholding tax should not be applied.

This does start to tax my limited knowledge (no pun intended ) of your specific situation, so you do need to talk this through with a tax accountant who specialises in US/Belgian tax affairs. This is beyond the scope of a standard local accountant, and you should think about talking to someone from Ernst & Young. Yes it’ll cost a grand to get the advice, but it will be cast iron and ward off any unpleasant attacks from Mr BTA!

.

[jhughes]

May I be upgraded, so I can send a PM to nodric?

Thanks for your assistance

<admin note>Done</admin note>

[Lycanthrope]

Hello folks

This is a great thread, very informative!

So I'm English, been living in Brussels 10 years and working permanent. Got fed-up with the lack of career progression, got a nice contract opportunity, so have decided to take it. I contracted before in UK before I moved here so I'm not totally wet behind the ears, but of course different country different rules.

Now I'm looking at the best way to do my invoicing. I've been approached by several Mancos offering different schemes, some shady, some totally illegal, maybe one or two compliant. However I really don't want to do anything under the table and I want to keep it clean, so for that I guess I need a BVBA, or maybe an SBVBA (although I'm not sure that's up and running yet??).

But I still have this nagging doubt in my stomach that I'll be throwing away all sort of tax and SS by doing this.

I guess the normal way to work with BVBA is to pay the minimum salary to get SS benefits, maximise expenses and draw the rest as dividends - any thoughts on that?

I've also the option maybe to work through a friend's company who's also contracting, but I guess I'd have to be made a director and I could imagine it might be messy?

Finally, could I start trading as an independent until I get some cashflow, then switch to BVBA?

etc.

Cheers!
Dave

[nodric]

Hello folks

This is a great thread, very informative!

So I'm English, been living in Brussels 10 years and working permanent. Got fed-up with the lack of career progression, got a nice contract opportunity, so have decided to take it. I contracted before in UK before I moved here so I'm not totally wet behind the ears, but of course different country different rules.

Now I'm looking at the best way to do my invoicing. I've been approached by several Mancos offering different schemes, some shady, some totally illegal, maybe one or two compliant. However I really don't want to do anything under the table and I want to keep it clean, so for that I guess I need a BVBA, or maybe an SBVBA (although I'm not sure that's up and running yet??).

But I still have this nagging doubt in my stomach that I'll be throwing away all sort of tax and SS by doing this.

I guess the normal way to work with BVBA is to pay the minimum salary to get SS benefits, maximise expenses and draw the rest as dividends - any thoughts on that?

I've also the option maybe to work through a friend's company who's also contracting, but I guess I'd have to be made a director and I could imagine it might be messy?

Finally, could I start trading as an independent until I get some cashflow, then switch to BVBA?

etc.

Cheers!
Dave

Hey Dave,

ManCos
First off you’re a resident here, and so you need to maintain a level of income that would not rouse suspicion. For instance, if your salary is now 7K a month, and suddenly as an Independent you start earning 3K a month, you’re going to raise some unwelcome eyebrows. So, this more or less rules out the ManCOs, as they all rely on shooting a big chunk of your dosh offshore somewhere. If you intend to cut and run in the next 12 months or so, then use a ManCo, bank the cash in a Swiss Milk Churn, and leggit before they notice. This is the only way to avoid paying big tax and SS bills.

If your family and life is here, and especially if you own property here, you going to want to avoid this route.

To operate a BVBA, or work as an Independent, you must have a recognised degree translated into one of the local tongues! If you don’t then you will not be able to register as either. This would leave you with no other choice but to work for someone else, or via a UK company for instance.

BVBA Route
The (S)BVBA route is the most obvious choice, as this will allow you to remain 100% compliant, and reduce taxes and SS in the process. You would have to draw the minimum salary of 36K a year, and that would cost you around 12K a year in tax and SS depending on factors such as a wife and kids etc. You then can use the BVBA to pay for your car, a big chunk of your bills, and part of your home. These all become tax free expenses, as opposed to paying tax on income, and then paying the bills. There is a host of things you are allowed to claim, and lots of tricks you can do.
To further reduce your taxes you can funnel a large slice of cash annually from the BVBA into a Group Insurance. This is a fund for you, and is effectively tax free. Payments into this fund are made from the BVBA before tax.

Dividends from the BVBA are taxed at a much lower rate than salary, so this is how you take large sums you need for personal use. No SS on dividends either!

VAT
If the agency is not in Belgium, you can then avoid accounting for VAT, and will become a Net receiver, something that makes me about 1500 Euros a quarter. I’ve covered this earlier in the thread.

Capital
The capital to start a BVBA simply means you have to put that much cash into the bank account to open the company. It is not lost and can be used immediately. The SBVBA allows you to defer this injection of capital to a later time. It’s not locked away, so should not concern you at all.

The downside with a BVBA is the costs of accountancy. It’s a complex thing to run, and unless you understand all the intricacies well, you are going to have to pay for this. Budget on 300 Euros a month.

Independent
If you do become Independent you should think of this as very short term. It could also have a major impact on how SS is calculated in the coming years. You need to talk this over with an accountant first. If you personal net income shoots up, then it will increase your SS for years to come, even if your income reduces soon afterwards. Read my section on the SS Trap.

Mates BVBA
The option of working for your mates BVBA has some big challenges. If you become a Director you become jointly liable for all his debt. He also gives you voting rights etc. If you simply worked as an employee he would then be hammered for employers contributions that would erode any additional income you were making., and of course no concept of dividends for you. Bonuses get taxed higher than salary so that rules that out as well!

Via the UK
The final option if you don’t have a degree, is to set up a UK LTD Co. I’ve covered this earlier, and it all comes down to centre of economic interest, and the companies seat. Not easy if your entire life is in Belgium. However, your dad/mum/lover/someone else you trust, could open a UK company, pay you a salary in Belgium to maintain compliance here, and keep the company profits in the UK. Dividends are then paid to you via the UK. There are ways to avoid being taxed in Belgium on UK dividends.

What you really need is a UK Brolly that operates in Belgium. Maybe I should set one up!

Next Step

See an accountant before you start the contract, or at least in the first weeks of starting the contract, AND before you bank any cash!

[Lycanthrope]

Thanks Nodric!

Having slept on this another night, and with the benefits of a few good Belgian beers, I'm totally convinced I need my own (S)BVBA. I really have little or no ties any more with the UK and I'm not sure I want the hassle of setting up a Ltd there. I'll see if I can do the SBVBA as I have very little money at the moment and will need all I've got to bridge the gap between permie and revenue coming in to the company.

I'm seeing an accountant next Monday - Classic Finance from Overijse - they seem totally above board. I was also recommended the famous Roland, but now I read that there have been some problems...

I do have a degree - well a degree equivalent, which has got me by so far in Belgium, so I would assume it's fine for this too.

One question - what's the tax rate on dividends, is it 33%? Can dividends be taken quarterly or is that frowned upon?

Cheers for your help!
Dave

[Lycanthrope]

One additional, I've now heard about a GVC compnay that essentially the same a BVBA, but with liability. Also seems to have a lightened accounting load and needs little capital to start-up...

[nodric]

Thanks Nodric!

Having slept on this another night, and with the benefits of a few good Belgian beers, I'm totally convinced I need my own (S)BVBA. I really have little or no ties any more with the UK and I'm not sure I want the hassle of setting up a Ltd there. I'll see if I can do the SBVBA as I have very little money at the moment and will need all I've got to bridge the gap between permie and revenue coming in to the company.

I'm seeing an accountant next Monday - Classic Finance from Overijse - they seem totally above board. I was also recommended the famous Roland, but now I read that there have been some problems...

I do have a degree - well a degree equivalent, which has got me by so far in Belgium, so I would assume it's fine for this too.

One question - what's the tax rate on dividends, is it 33%? Can dividends be taken quarterly or is that frowned upon?

Cheers for your help!
Dave

You can take dividends as often as you like. More flexible that Hector

I know the people at Classic very well. They are honest, but be warned, they also operate their own 'scheme' to pay you X in Belgium, and put Y into a Group Insurance in Luxembourg. It's on the very edge of being compliant, and is more suited to non residents. i.e. Those here for the short term.

The monies they pop into the 'fund' have to be declared for tax once you pull them out. Not an issue when you are leaving Belgium via the tax haven of 'who cares' before you land in another country, but if you're still living in Belgium you'll loose more than half of it! If you don’t declare it, then… well you know the risk.

Given that your cash flow dictates that you will need some of this cash on a regular basis, I would avoid any discussion of this way of working. They favour it as they make a healthy profit on the monies invested in the Luxembourg scheme, by way of commissions.

I am not aware that Classic offer standard accountancy services either. The old guy (Alan) that started it is an ex accountant, but most of their business is centred around their ‘scheme’ and by selling you investment and insurance products. This is their core business.

If you want pure accountancy and company formation services, they will refer you to an accountant called Marc An********n, who I also know very well. He then pays them a monthly commission while you remain a customer of his.

His costs for the company formation is ballpark 1000 Euros, plus 700 Euros for the Notary. The Notary will want cash! The other you will get an invoice for, and 30 days plus to pay.

.

[Lycanthrope]

Indeed, they mentioned their Lux scheme on the phone, but only when I prompted them, before that they were talking about straight accountancy. They seemed professional, not pushy and it's a big bonus that they have English people as my FR and NL are rubbish...

I'm too new here to PM you, but I'd be very interested if you have any accountant recommendations.