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

[Sergeant Murphys Cosh]

You need to check that 183 day rule again, that wouldn't work in most places, basically if your contract runs longer than 6 months you'll probably be liable for tax. The only way to be sure is to see a reputable Belgian accountant. The other point to remember is if you leave before 6 months you're probably not liable for tax, but if you stay 6 months and one day you're liable for the full amount, not just the one day. Normally it is just easiest and best to pay local tax, then there are no problems.

No, not 6 months. 183 days.

If he goes back home every weekend, and therefore only arrives Sunday night and leaves Thursday evening (thereby only being in Belgium for 3 days of the week (you exclude the travel days, I believe)), it's going to take him a lot longer to reach the 183 days than if he stayed over the weekends.

[Sergeant Murphys Cosh]

But my question, is where has Nodric gone?

He seems to have been invisible lately.

[wogewwabbit]

You need to check that 183 day rule again, that wouldn't work in most places, basically if your contract runs longer than 6 months you'll probably be liable for tax. The only way to be sure is to see a reputable Belgian accountant. The other point to remember is if you leave before 6 months you're probably not liable for tax, but if you stay 6 months and one day you're liable for the full amount, not just the one day. Normally it is just easiest and best to pay local tax, then there are no problems.

I think that the 183 days rule defines (or in other words forces) the residency, but it is not about work contract. At least this is how I understand it.

[wogewwabbit]

BTW, I was wondering how could they check how many days I spent in Belgium? Do I have to keep all my train tickets and all proofs, that show when I arrived and left?

[Sergeant Murphys Cosh]

I think that the 183 days rule defines (or in other words forces) the residency, but it is not about work contract. At least this is how I understand it.

The 183 days pertains to you, the individual. Even if you didn't work, but spent 183 days there, you would still become liable for tax of your world-wide income after those 183 days. (Of course, they'd have to prove that you spent all that time there, which is another matter).


Ah, I see your next question is....

BTW, I was wondering how could they check how many days I spent in Belgium? Do I have to keep all my train tickets and all proofs, that show when I arrived and left?

I suppose ultimately if challenged, the onus is on you to prove it. Hugh nose what the Belgian tax man accepts as proof.....

[Boo]

You need to check that 183 day rule again, that wouldn't work in most places, basically if your contract runs longer than 6 months you'll probably be liable for tax. The only way to be sure is to see a reputable Belgian accountant.

I did just that and that's where I got the info on the Belgian 183 day rule. It did surprise me as well but it does seem to be true.

Boo

[Tyson]

Contract work in Belgium

Your Own LTD CO

If you intend to be here for any length of time, or if you have been self employed for longer than a year and are worried about the Social Security Trap, then forming your own company is highly recommended. Much as in the UK, your company earns the daily fees, pays you a salary, and pays for many of the necessities in life (cars, office etc).

In Belgium the list of deductibles is far more generous than in the UK. However, it's not the Holy Grail! You can though, get away with claiming for a whole multitude of things, many you would never expect. You can rent part of your home to the company as an office, claim part of all your domestic bills etc.

However, to set up a company, you need to be resident (rented flat is fine), have between 6K and 12K Euros in the bank to open the business account which, gets frozen in the business account for a couple of weeks while the company is formed, and have a University degree! The cost for creating a company is about 2K Euros. NO shelf companies here!

As everything has to be in Dutch or French, unless you are really fluent and understand local company and tax law, you need an accountant to do it all for you, and run the monthly books and payroll etc. Expect to pay 350 Euros a month for this service if you want someone who is good!

The key benefits of a local company.

You pay yourself a low salary to reduce Social Security and avoid the dreaded SS Trap.

Modest company profits are taxed at 23%.

You can get away with most things as expenses.

Almost no company car tax.

You can get a mortgage through your company, which can them claim the majority of all costs as a business expense. (Details too complex for this post)

The Pitfalls

Expensive to set up and impractical for a short term contract as closing the company is complex.

Complex rules necessitating a good accountant to do everything for you.

Not all landlords will allow you to run a business from your rented digs.

The VAT Game

Working in the EU for a UK Agency means you become a Net Receiver for VAT purposes. Working in Belgium requires you to be VAT registered, even if self employed, and regardless on income levels.

As an EU business when you issue an invoice to a company in another member state, e.g. the UK, you do not charge VAT. However, as a VAT registered business in Belgium you are entitled, indeed compelled, to claim all your VAT expenses.

In short you get all your VAT paid out back every 3 months.

Centre of Economic Interest

Can you avoid paying tax in Belgium? Legally NO! However, there is a loophole in Belgian (and most countries) tax law.

If you can prove your centre of economic interest lays outside of Belgium, then you are only liable for income actually sourced in Belgium.

Soooooo, if you have a UK LTD, send your employee (you) to Belgium to work clutching his LIMOSA paperwork, he will have to pay tax and SS based on his local salary. Your company however, having its centre of economic interest in the UK will only have to declare its income to Gordon and his mates. You of course may have to demonstrate that this is so, but assuming your wife/daughter/son/partner/dog is also a director, and you issue an odd invoice for some other work to a.n.other company, you can then show that indeed your UK LTD is in fact a bona fide UK based company with a clear centre of economic interest in the UK. You may however, have problems if you are a sole director, live in a bedsit, and never do any other work.

This way of working is something the old Itecs used to offer. By using their LTD status you worked for them as an employee. As an expat you paid your SS (NI) back in the UK, and drew a small salary in belgium, on which you paid tax. You could then claim some expenses to get a little extra tax free. The rest went into an (insert any name for it you like here investment trust fund), which you could draw on at a later date. Problem was that once you drew from the investment you were supposed to tell the tax man.

It is perfectly legal (I have checked and had it confirmed by Securex in Belgium) to operate as an expat employee through a UK LTD and maintaining your Centre of Economic Interest in the UK. Securex are one of the main bodies that administer and collect Social Security for the Belgian Government.

This can also work on an individuals basis, but might be a lot harder to do. On top of showing that your main residence, wife kids etc, are all based economically in the UK, and that Belgium is a temporary assignment, you would also need a legal mechanism of separating the income from you! As self employed, all your income is yours, and by definition you earned it in Belgium, so it's all 100% sourced in Belgium, and taxes and SS are due on the full amount. Oh, I'll use an umbrella company or management company and do a split income scheme, I hear you scream. Hmmmm, read about that later.

As Belgium is a self assessment society, it's up to you, or your accountant, what you fill in on the tax return. So you declare what you believe you have to declare. However, the section that asks for details or other Worldwide income does exist, and as an individual you are supposed to fill it in truefully.

Nodric please advise

I am just about to complete my first 6 months work in Belgium. I signed a limosa to that effect. I am not registered anywhere else for the moment. At present I am working through my LTD company here in Belgium. I am been offered another 3 months extension. They insist that I sign another Limosa for the 3 months. What way should I set myself up?

Should I continue working through my LTD company in England & pay myself a modest salary & pay all the related taxes & insurance in england
or
should I continue working through my LTD company in England & pay myself a modest salary & pay all the related taxes in belgium and my insurance in england

With both options above I would try & claim that my center of economic interest is in England.

Should I change my set up completely & set up a local belgium LTD. company. At present I am been offered 3 months. There may be 18 months work coming yet!!

[Brussels Slumdog]

183 day rule

Nodric please advise

I am just about to complete my first 6 months work in Belgium. I signed a limosa to that effect. I am not registered anywhere else for the moment. At present I am working through my LTD company here in Belgium. I am been offered another 3 months extension. They insist that I sign another Limosa for the 3 months. What way should I set myself up?

Should I continue working through my LTD company in England & pay myself a modest salary & pay all the related taxes & insurance in england
or
should I continue working through my LTD company in England & pay myself a modest salary & pay all the related taxes in belgium and my insurance in england

With both options above I would try & claim that my center of economic interest is in England.

Should I change my set up completely & set up a local belgium LTD. company. At present I am been offered 3 months. There may be 18 months work coming yet!!

Once You go over go over the 183 days you will become liable
for your WORLDWIDE income
All your income from LTD company plus dividends plus bank interest plus other income for the financial year
Your LTD could now be declared Belgian

Also

If you are a UK tax resident you will also be liable to tax on your worldwide income

Now you will need a tax expert to sort out whether you end up
as a Belgian or UK tax resident

Why dont you just look for a contract in another country and save yourself all the hastle and sleepless nights

[Boo]

Should I change my set up completely & set up a local belgium LTD. company. At present I am been offered 3 months. There may be 18 months work coming yet!!

AIUI, the question is : can you perform all your duties in Belgium whilst only working there for 183 days in the year ? (Those days to exclude travelling days). If the answer is yes then you can continue to work for your UK Ltd Co. If no then you need to see a Belgian accountant pronto. Google "accountant" and "Belgian City Name" in region .be and see what turns up that you like the look of.

Hth,

Boo

[Tyson]

Contract work in Belgium

Thanks to both Brussels Slumdog & Boo for your replies. Brussels slumdog i know you said to head for a different country but I could have a few years work here & I am happy in belgium. Can you please give me your thoughts on the following:
The option that I would like to use is as follows: basically the way i feel i know best.
Stay working through my own UK based company declaring that I am an employee of my company that has been sent on a foreign mission to belgium to complete an initial 6 month contract. Now it's been extended for anther 3 months. Prove that my Centre of Economics Interest is the UK where I have worked for the past 10 years through my LTD company, I have a part time employee based in my UK company, will source about 20% of my company revenue for 2010 & 2011 in the UK, 80% in Belgium, etc.
I have signed the Limosa for the first 6 months & will have to do so again for the 3 months extension and so i assume that I will be in the belgium system!!! Is this correct & what does that mean for me personelly? I assume that means I have to pay belgium tax on only the salary that my company pays me & not the gross I earn for my company??
I have completed my E101 for the initial 6 months & will do so agin for the 3 month extension in the knowledge that this excludes me from the Belgium SS system? Is this correct or do i also need to register as an ex-pat executive on a temporary mission in Belgium? What does register as an ex-pat mean & what does it involve doing?
Actually if i was accepted as a registered ex-pat executive, then does that mean i can stay in my current set -up?
I know I need to talk to a good local accountant. Can you recommend a good accountant that deals with these types of contracts? Im based about 1.5 hrs from Brussels on train to the North west. If you have a good accountant in Brussels, Antwerp, Lier, Mol...i will travel to meet them.
Is it to late at this stage for me to register as an ex-pat executive considering I am just completing my initial 6 months this week.
If the above option works is there a time limit on it. Could I work that way say for 3 years

Hi guys i know i am asking a lot of questions & i really do apprecriate your views & thoughts on the above issues. It's hard to just find out what works without exposing yourself or your Ltd company!
thanks guys