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Contractor guide to contracting overseas: Belgium

Contractors who engage in contracts in Belgium may find that operating as a self-employed sole-trader is the simplest and most financially viable trading vehicle.

Operating via a limited company, based either in the UK or in Belgium, is an alternative option, although it comes with associated tax risks and is generally considered to deliver contractors more disadvantages than advantages.

“Contractors exploring opportunities in Belgium will find that it is generally quick and easy to make the transition,” notes CXC Global’s Belgian expert Charles Daw. “They are also likely to find that the most tax-efficient way of operating is to comply with local custom.

“Tax rates are higher than they are in the UK, but with the assistance of a knowledgeable accountant, contractors can take advantage of business expenses and take home a good percentage of their gross fees.”

Do contractors need visas to work in Belgium?

Due to the European Union’s (EU) principles of freedom of labour, citizens of the UK do not need a visa to work in Belgium. “Anybody who is an EU national can live and work in Belgium. There’s no need for a special visa,” Daw explains.

However, non-EU nationals would require a visa to live and work in Belgium. For contractors in this category, the process would initially entail getting a company to sponsor their work permit.

Any non-Belgian national looking to work in Belgium is required to complete what is known as a ‘LIMOSA declaration’. This is an online form which declares to the Belgian authorities who the contractor is and where in the country they are working, making it easier for the authorities to monitor non-Belgian citizens.

“Theoretically, completing a LIMOSA declaration should be a swift process, and it often is. But regular issues do arise with registrations, and so contractors are advised not to leave this to the last minute as it could take longer than planned.”

Daw highlights that with any form of self-employed registration, there are a number of documents that need to be completed and sent off to the authorities, so that the contractor can be issued with a tax number, social security number and a VAT number.

“The whole process can take up to six weeks. As a contractor, you can still be paid whilst the process is ongoing, so there’s no delay in payment. But the LIMOSA is pretty much the first step when registering to work in Belgium.”

LIMOSA completion is a legal requirement

Daw warns that completing a LIMOSA declaration is not just the first step in the registration process, but also a legal requirement, and failure to comply could result in heavy financial fines or even a prison sentence.

“The non-observance of the LIMOSA regulation is penalised by severe sanctions. A self-employed individual who fails to submit a declaration may be punished with a prison sentence ranging from eight days to a year as well as steep fines.

“Although it is the contractors’ obligation to comply with the LIMOSA declaration, everybody in the contract chain would be found jointly liable if the contractor were to be caught, in which instance fines could total up to €600,000.”

Daw also highlights that LIMOSA is an online portal linked to the Belgian Social security and Tax office and any information can be accessed for up to five years after it is entered, meaning contractors who fail to comply can be caught long after they have left Belgium.

Can contractors trade in Belgium using their UK-based limited company?

“It’s not something that we would recommend, but it is something that happens,” says Daw, who advises that contractors should always seek to pay their taxes in the country in which they are working. However, Daw does admit that it’s not always possible to do so, in which case using a contractors’ own limited company may be the next best option.

“For example, in Belgium, one of the requirements to register for tax is that you must have a degree qualification. This is because every course features a basic accountancy and business management module. If you’re self-employed, you’re ultimately running your own business and so they’ve included this pre-requisite by which registered self-employed workers in Belgium must have a degree certification.”

Those who do decide to work in Belgium under their UK-based limited company do run a risk as they leave their tax affairs open to the interpretation of the Belgian tax authorities, as Daw explains:

“Through the LIMOSA declaration, the Belgian authorities will have proof that a contractor is working in Belgium. If they should decide that the contractor should be paying their taxes in Belgium, they will issue them with a tax bill that they will be required to pay, regardless of the fact that the contractor is already paying taxes in the UK through their limited company. So why run the risk?”

Daw also highlights that one person limited companies should not be used in Belgium as they would not be recognised as foreign entities, meaning the 183 day rule – which stipulates that an individual is considered a tax non-resident providing they work in a country for 183 days or less - would not be applicable.

Consequently, the limited company contractor would be tax liable in Belgium from day one, which would require complicated dual declarations in both Belgium and their country of residence.

Can contractors set up a limited company in Belgium?

Similarly, a contractor could set up a limited company in Belgium, but it is not considered the most convenient route to take. Daw notes additional requirements associated with setting up a limited company in Belgium, as well as fewer benefits:

“Generally speaking, most limited company structures in countries in mainland Europe don’t have the same system of drawing dividends out of the company with added tax relief in the way that we do in the UK, and so there’s not the same financial benefit.

“In certain countries you may need the equivalent of a cash float, whereby you would be required to deposit, say, €10,000 into the company bank account to be able to open it. So, it’s a little more difficult than it would be in the UK where you can phone up Companies House and get a company within 24 hours for a small fee. Ultimately, we would advise contractors to operate on a self-employed freelance basis as the costs involved are far smaller.”

What contractors should do when starting a Belgium-based contract

Following completion of a LIMOSA declaration, a contractor would then need to complete the necessary registration for taxes and social security, for which they will need a qualified accountant for assistance. Arranging accommodation in advance is also fundamental, as Daw highlights:

“In most countries around Europe, and Belgium is no different here, you need to have a registered address in order to register for tax. This will obviously require arranging accommodation.

“It may also mean that, as part of your registration process, you’ll need to go to the local town hall and present yourself in order to get all of the necessary paperwork stamped and to have your registration and right to work confirmed.”

How contractors are taxed in Belgium

Contractors in Belgium are taxed through social security payments and income tax and can expect to have a more substantial rate deducted than they would in the UK. Contractors will pay roughly 22% in social security, while tax rates can range anywhere between 25% and 50%.

However, contractors are able to use things such as business expenses to reduce their tax bill, while social security is also tax deductible, as Daw highlights:

“If you had a contractor with €10,000 as their starting point, they might have a couple of thousand Euros for business expenses and then around 20% for social security. So, from that initial €10,000 they may only have €6,000 or so that is taxable as a result. It is because of this that the contractor needs a good accountant who knows what they are doing in order to optimise their tax.”

What expenses can be claimed when contracting in Belgium?

Business expenses themselves are fairly consistent with expenses in the UK. Travel, training courses and work-relevant subscriptions are all highlighted by Daw as allowable expenses. Contractors who are moving to and from Belgium from another country may also be able to claim allowable expenses on normal mobilisation and demobilisation costs at the start and end of a contract.

Daw does warn that, upon finishing a contract and leaving Belgium, contractors must ensure that they complete deregistration, otherwise they could risk being fined:

“If you were to leave your registration open, you are still living and working in Belgium as far as the tax authorities are concerned, and so they will still be expecting to receive a tax return at the end of the year, along with quarterly VAT returns.”

Published: Thursday, 5 November 2015

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