It’s more than likely that you’ve already heard someone tell you to “keep your receipts so that you can claim tax savings later on”. Wondering how those professional expense work?
Looking for answers on whether certain costs are actually deductible? Doubting on what to do with those bloody receipts? We help you get in the know in this less-than-10min-read.
Before you dive in, next to this post, we have also compiled a quick spreadsheet giving you all the details you need to know if you are looking for info on specific professional costs: basically what you can claim and how much deductibility you can expect.
You have suggestions? Send us an email at email@example.com and we’ll be in touch.
At its core, the principle of taxation for self-employed workers in Belgium is very simple: you get taxed on what you earn. In other words, the more you earn, the more you pay taxes.
As with everything in life though, there is a small but important nuance: Belgian tax authorities understand that you need to spend money to make your business grow.
They believe it should thus be the profit generated by your activity that should be taxed, not your mere revenue. In other words, it means that you will eventually be taxed on what you earn minus the expenses that you take on for your business.
It does also mean that the higher your costs, the lower your net income and the lower the amount of taxes that you will be paying.
If spending money may make you feel good, spending it wisely makes it even better – because, in the end, not every expense can be considered as a professional cost…
Professional expenses obey to a strict definition, defined by 4 criteria. For a given expense, should you answer “yes” to the 4 following questions, it means you can surely deduct it from your taxes:
There are business expenses that are easily recognizable, like the purchase of your toga when you are a lawyer, or safety shoes when you are working in construction. You would never incur those costs if you a normal citizen: these are professional costs.
Another straightforward example are your social contributions. You would not need to pay them if you were not self-employed: they are professional costs as well. All 100% deductible.
Naturally, it cannot be that simple: justifying expenses for your business might be complicated, especially if your business does not bear the relevant NACE codes to justify the expense: a consultant should not hold thousands of euros worth of photography material, unless he works as a photographer and is duly registered for this activity to the Central Bank of Enterprises.
Certain expenses cannot fully be attributed to your business: we call these expenses “mixed costs”. You will only deduct the “professional part” of those expenses to your taxes.
It works beautifully: for instance, you just arranged part of your house as your home office. The professional part, for example, can be calculated by taking the amounts of your home office compared to the proportion in square meters of your entire home.
Some expenses are only deductible for parts of the total amount: gifts to customers are deductible for 50%. Restaurant expenses are only deductible for 69%, the rest gets rejected. Those are the infamous “non-admissible expenses”.
Since all of these expenses might be a bit too much to remember together with how much they are deductible, we compiled a helpful list for you!
Finally, you also have to prove that you have actually incurred all these costs: an invoice, a proper VAT receipt, an expense report, even something simple as a receipt can be accepted.
Don’t forget to keep these documents though, the government can still ask for this proof 7 years after you have submitted it for the first time.
Time to get some extra shoeboxes! Or start using Accountable so you can capture them straight from the camera of your smartphone.
Thanks to the Digital Act, this is considered evidence in the first instance in case of an audit. Beware, auditors still have the right to ask for the paper version, if they wish.
Pro tip: If you make bigger investments, like a new computer, for example, you can write off the purchase of this investment over a number of years.
Any professional expense should have a direct link to your professional activity: for example, if a tax inspector sees a VAT receipt for a dinner in a restaurant on Valentine’s Day, the chances will be that she or he will get a little suspicious ;-).
The same thing applies to pay for restaurants in the weekend, by the way. Don’t give in to all those potential temptations that everyone, especially tax inspectors, knows!
If you tempt the devil, be ready to offer a bulletproof justification & potentially accept the requalification as a personal expense.
Since 2018 a lot of things have changed for self-employed workers in Belgium: all self-employed individuals can opt for fixed-rate professional costs instead of actual costs incurred.
In practice, this means that you no longer have to save all those receipts in your shoebox at home or your wallet.
If you are self employed with a commercial activity, You can simply deduct 30% (up to 4720 euro) from your income, excluding the purchase of goods for resale ( and any raw material) and social contributions. In other words, you can deduct the purchase of goods for resale (and raw material), your social security contributions and a maximum of 4720 euro from your base taxes.
If you are a liberal profession, you will be able to deduct a progressive % of your income, with a maximum of 4150 euros (for 2018)
There are some ground rules though. It only makes sense if you are a self-employed with very little costs – no more than 30% of your income (excluding social charges and the purchase of any material). With social contributions quickly reaching over 20% of your taxable income, this leaves little room to buy that new iPhone…
We have made keeping track of your actual cost so simple that it is nearly always better to opt for this regime. Check out the app if you wish to test us out.
Back at you. Let us know if you have any question & contact us on firstname.lastname@example.org