Advance payment on your taxes, your strategic move as a freelancer

Making advance payments on your taxes? It may seem counterintuitive and, to say the least, the last thing you wish to do. Yet that is the right thing to do if you are self-employed.

You actually earn money by doing so if you start as a SE natural person. You avoid punishing tax increases if you are a natural person since more than three years, helping spouse or getting revenues from your company as its owner. Companies subject to corporate income tax avoid an even higher tax increase by making these advance payments.

This is how the tax administration incites taxpayers to pay ahead of time. For you to take advantage of that system, you need to know the rules of the game and follow them. Here is all you need to know to win and save some hard-earned cash!

How do I make advance payments?

You pay

• 106% of your tax due for one year that same year, in four installments. This percentage applies to natural persons, owner of businesses, helping spouses, liberal professionals.
• 102% of your tax due for one year that same year, in four installments. This percentage applies to companies subject to corporate income tax.

In 2020, money must be on the tax administration’s bank account by

1. April 14
2. July 10
3. October 12
4. December 21

🔥Hassan Ayed, Certified Accountant, “You should make a first installment of 75% of the entire amount due for that same year.”🔥

The first time you make an advance payment, pay to the bank account BE61 6792 0022 9117 (BIC: PCHQ BEBB) and add as name and address for the beneficiary “Centre de Perception – Service des Versements anticipés”. In structured communication, add your enterprise number in this format. For the following installments, you will receive a payment form.

Are you a natural person? In your first three years of activity, you receive a bonus for making these advance payments.

The bonus is calculated as follows:

Installment of April 14 X 1.50%

+

Installment of July 10 X 1.25%

+

 Installment of October 12  X 1%

 +

 Installment of December 21 X 0,75%

💡That bonus is calculated on 106% of the tax due – if you paid that much – or less – if you paid under 106% of the tax due. The bonus calculation will not apply to anything you paid above 106% of the tax due. Make sure to pay exactly what you should, not more. Better invest that cash in your business!

You are self-employed, have a liberal profession, get revenues from your company as its owner, are a helping spouse? You receive a tax increase for not making these installments.

If you have not made these advance payments, you will have to pay a tax increase. That tax increase will apply to the tax you pay on the benefits or profits you get from your self-employed activity, your remuneration as a business owner or as a helping spouse.

The tax increase is calculated as follows: 106% of the tax due X 2,25%

For self-employed, tax increase is calculated on 90% of the tax due.  

💡Are you a starter, in the first three years of full-time self-employment? You are not at risk of a tax increase for those fiscal years. As mentioned earlier, you benefit from a bonus if you make advance payments.

Your company is subject to corporate income tax? In that case, too, you get a tax increase for not making advance payments

For revenues generated in 2018 (tax year 2019), tax increase is calculated as follows:

102% of tax due X 6,75% (increase rate)

💡Your company is a starter? Companies considered as “small company” in the Corporation Code do not have to make advance payments in their first three years.

Are you willing, yet not able, to pay?

Go see your banker, that is his/her job: banks lend money specifically to help self-employed make advance payments on their taxes. Interest rates on these loans are inferior to tax increases’ rates. In some cases, interest rates can fall under 1%. Obtaining that credit allows you to make advance payments at the right time, for the right amount. Now that you know all about tax bonuses and increases, that credit may make much more sense.

In short: no more excuses. Provided that you have a clear view of your finances, you can easily avoid losing hard-earned cash thanks to advance payments.