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

[BlasterBates]

If you stay under 3 months, you don't have to be resident and double taxation rules do apply. So it is possible to work for 3 months without problems (for EU citizen) and no need for tax return (explicitly and personally told me by Belgium tax official). Get E101 certificate and no social security either.

Longer than that, you need to register, you get tax return and everything you said applies. So don't go to Belgium for more than 3 months.

That´s useful to know.

[nodric]

HUGE NEWS!

I went back to the sources of information, rather than just rely on quotes that cannot be substantiated and I found this!

THIS IS HUGE NEWS FOR ANY CONTRACTOR IN BELGIUM

Taken directly from the LIMOSA website!

Following the judgment of the Court of Justice of 19 December 2012 (Case C-577/10), the Limosa obligation to report a posting as an self-employed worker is temporary suspended. The impact of the judgment has been assessed and the obligation will be adapted shortly. The notification for posted salaried workers remains fully applicable.

In simple language this means that you no longer have to register for LIMOSA to work in Belgium as a contractor!!! This basically means you can be invisible there. Make sure you tell your agents, and if you are registered, de-register!

If you want to read the full court ruling it's HERE

This does not excuse anyone from their tax obligations/liabilities etc, and it does not make the various split schemes any more legal, but it does let you pop in, do a contract, and get out, without being on the radar

Residency rules and ID card rules still stand, but the simple fact is this. If you don't need a local bank account, only rent business flats, or live in an aparthotel, you can effectively get away without telling anyone you are there. It's the up to you to decide where and how to pay your taxes.

I would still advise strongly against using the split schemes as the investigations into them will not abate. The reality is if you are not registered in Belgium, and that's the effect of this court ruling, you can pay 100% of your taxes back home, and hope the Belgies don't ever find out.

However, are you really self employed?

In Belgium you can be self employed in the true sense. i.e. Not a LTD CO. UK agents however will normally not work with you unless you have a LTD CO. This means you are an employee of your own company, and not technically self employed.

The ruling states The notification for posted salaried workers remains fully applicable and this would suggest as a director of your LTD CO you should still comply with the LIMOSA obligations etc if your stay is more than 5 days per month.

Now maybe your company could sign the contract with the Agent, and then you could work as a self employed contractor and sub contract to your company, but if you are also an officer of that company, I'm not sure that would wash! Maybe you resign as a director, make your wife/partner a director, and then you sub contract to them

Better still, I'll form a UK LTD CO, and you can all sub contract to me, for a reasonable fee of course, and then you can all sort your own taxes out as self employed. Excellent business model, for me!

Oh the joys of avoiding taxation!

[nodric]

Here is the ruling.

On those grounds, the Court (Fourth Chamber) hereby:

1. Declares that, by adopting Articles 137(8), 138, third indent, 153 and 157(3) of the Programme Law (I) of 27 December 2006, in the version in force since 1 April 2007, namely by imposing a prior declaration requirement on self-employed service providers established in Member States other than the Kingdom of Belgium in respect of their activity in Belgium, the Kingdom of Belgium has failed to fulfil its obligations under Article 56 TFEU;

2. Orders the Kingdom of Belgium to pay the costs;

3. Orders the Kingdom of Denmark to bear its own costs.

So after reading the ruling in full (it's horrible, don't repeat my pain), it appears the EU Commission took action against Belgium as this law contravenes your Freedom to provide services and threatens you with criminal or other penalties if you don't comply.

This is not allowed it seems haha!

It seems the Danes were supporting Belgium, as they operate a similar scheme to LIMOSA, but they also lost.

[nodric]

The self employed definition

LIMOSA defined a self employed person thus:

‘For the purposes of this Chapter and its implementing decrees:

7. “self-employed workers” shall mean all natural persons carrying out a professional activity on account of which they are not bound by a contract of employment or service regulations.

8. “posted self-employed workers” shall mean:

(a) persons referred to in point 7 carrying out temporarily or partially one or more self-employed activities in Belgium without residing there on a permanent basis and who normally work within the territory of one or more countries other than Belgium,

(b) persons coming from abroad to Belgium for the purpose of carrying out there temporarily a professional activity as a self-employed person or of settling there temporarily as a self-employed person.

My take on this

So, if you as a director are not bound by a contract of employment or service regulations you may be able to claim you are truly self employed. Few one man LTD COs have such a contract in place!

Now if you are challenged it may be a costly legal battle to ensure you are not re-classified, but it is a tangible argument that a single director LTD CO is in fact the same thing as self employed under the definition laid down by the Belgians.

It's an exploitable loophole at the least. Hopefully someone will test this in the future.

[BlasterBates]

Yes but careful, not registering doesn´t mean they can´t find you. We are getting the odd post from contractors in Germany who´ve been caught by the tax man there, even though they didn´t register. Basically it is something they check on when they do an audit they check all the invoices from contractors and make sure the income has been declared on a tax return otherwise you get invited to the police station.

[nodric]

Yes but careful, not registering doesn´t mean they can´t find you. We are getting the odd post from contractors in Germany who´ve been caught by the tax man there, even though they didn´t register. Basically it is something they check on when they do an audit they check all the invoices from contractors and make sure the income has been declared on a tax return otherwise you get invited to the police station.

I agree.

This loophole lets you contract in Belgium without registering for their modest tax system, but it does not absolve you from any liabilities. Of course you need a financial adviser to tell you what they are. As mentioned a few posts back, the fisc can approach companies and agencies and ask for lists of contractors, and of course when they raid the split scheme providers (remember Connexions!) they get your name if it's in their database!

The only saving grace with non registration, is they cannot easily locate you. Short of arresting you in the company you are working in, and that has never happened and probably isn't legal anyway, then you are pretty much able to cut and run when the heat gets too much for you to bear.

The Belgies currently do not trace/enforce across borders, and unless there is a court order for tax fraud or taxes due, then they have nothing to enforce. You are under no obligation to turn up for an invitation to be interviewed if you are not a resident of Belgium, and they cannot come get your from the UK or another country. Extradition is not something you should worry about LOL

So if you get fingered, then simply get the hell out of Dodge, and don't go back!

Germany is another story, and fiddling the system there will get you in jail, and they will relentlessly track you across Europe for every Euro you owe. The golden rule is 'don't mess with the Germans'!

I do wonder though, if this has now been proven in the EU Courts, can the Germans still insist you register? Of course paying taxes is another thing.

[Brussels Slumdog]

Risk assessment

Yes but careful, not registering doesn´t mean they can´t find you. We are getting the odd post from contractors in Germany who´ve been caught by the tax man there, even though they didn´t register. Basically it is something they check on when they do an audit they check all the invoices from contractors and make sure the income has been declared on a tax return otherwise you get invited to the police station.

It also depends on the contracting chain

Example You- agent- wipro- Siemens germany
You have a contract with wipro

Contracting direct may get you a better rate but you may have a greater chance of being investigated

If wipro does not maintain an office in Germany then when they raid the Siemens office then they won't find your invoices,timesheets etc. They will only find an Invoice from Wipro

Example You- agent - Siemans
Then when they raid Siemens they will find your invoices and timesheet

[BlasterBates]

It also depends on the contracting chain

Example You- agent- wipro- Siemens germany
You have a contract with wipro

Contracting direct may get you a better rate but you may have a greater chance of being investigated

If wipro does not maintain an office in Germany then when they raid the Siemens office then they won't find your invoices,timesheets etc. They will only find an Invoice from Wipro

Example You- agent - Siemans
Then when they raid Siemens they will find your invoices and timesheet

My experience is that the invoices through third parties explicitly have your name on, they are usually matched up with internal client timesheets. I wouldn´t rely on that, not that you would know. I did actually once accidentally see an invoice.

[nodric]

My experience is that the invoices through third parties explicitly have your name on, they are usually matched up with internal timesheets. I wouldn´t rely on that, not that you would know. I did actually once accidentally see an invoice.

The reality is that the agent, billing co, or anyone else in the chain, isn't going to give up their liberty for you, me, or anyone else.

Sure, if they're in Dubai (the only split biller I'd use if I had to), they can just ignore any request or contact for information, but the likes of iTecs, Globo, whatever incarnation Connexions is in these days, are going to spill their guts to the authorities if interrogated, or if they get a court order of some sort.

The audit trail for AML and other liability reasons is maintained. i.e. The end client is linked to the agent, is linked to the middlemen, are linked to the contractor. There is a traceability along that line. There has to be or you'd never get paid

The only chance you have is if the middle man keeps mum on the whole topic. If they are in any remote way inside the EU, they won't if the heat is turned up. This is how Connexions got caught. They had a Belgian individual linked to a Director which meant there was a Centre of Economic Interest. I digress.

If Hector (the taxman) goes raiding and seizes computers and paperwork, there will be a trail that links you between them (the payroll solution) and the agent/client. We already established that the legitimate agency and the end client are not going to cover for you, or hide facts.

So the only really safe way is to contract to some entity outside the EU, which bills the agent/client, and if investigated they are outside the reach of Hector and his Police friends. Now if you also control that non EU entity, even better, but I already covered that line of thought over the years in this and other threads.

[sleek]

Just decided to let you know. I have read from here quite a few times that when calculating this 183 rule for determining which country can tax, travel days are not counted. I wanted to verify this and asked this from Belgium tax office. Travel days ARE counted. Any day you spent any time on Belgian territory, is counted. Even if it's only 1 hour, it's counted.

So this effectively makes it impossible to avoid Belgian taxes by traveling a lot (leaving on friday night, arriving on monday morning). Even if you commute every day from another country, it won't work. Though this will cause pretty interesting situation when two countries can claim that they have right to tax since person spend more than 183 days on their territory.