Social Security - How to avoid it in Belgium

[nodric]

I thought about incorporating this into my main thread in Belgium, but this is more of an avoidance mechanism, rather than the 'right' way to do things.

After a long chat with the local accountants about the ever escalating cost of paying SS, I was introduced to a concept that could be exploited to avoid ever paying Belgian SS, at least on contracts lasting up to 3 years, although theoretically you could do it forever. The 3 years is too complex to explain here

Assuming you have a LTDCo over here (BVBA/SPRL) or equivalent, and pay yourself the minimum salary of 36K Euros a year, you will end up paying 8K - 12K Euros a year in Social Security (figures vary depending if you have a wife and kids etc. If you work as self employed (Independent), then it will be substantially more, assuming you are declaring it all, as SS is assesed on 100% of your income! Don't say I've never warned about this before

It turns out that you can defer payment of social security. Embarrassingly simple process to do this. You simply don’t pay. The totals continue to build up, and you get reminders and interest added etc. At some point later on, you ask Securex, or whichever agency you’ve chosen to administer your SS, to create a special account as you are deferring payment to a later time.

Now here’s the clever bit. The Belgian SS peeps cannot enforce collection of this debt outside of Belgium. They can’t even demand payment once you’ve left. Left meaning you have de-registered from the commune, and are no longer a resident.

Of course, if you ever come back in future years the whole ugly pot will still be in deficit, and you will have to address how to close the gap. As will all things in life, defer does not mean eliminate.

While I cannot advocate this as standard practice, it does however lend itself to these financially challenging times as a way to free up scarce cash flow. The whole reason I was investigating this.

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[Rantor]

I heard about this as well.

One thing that would have to be considered would be property ownership as belgohector can block property sales in cases where there is a tax dispute and/or alleged debt.

Would this apply to the social tax regime as well? I suspect not, but in reality I have nfi and I wouldn't like to put it to the test.

[nodric]

I heard about this as well.

One thing that would have to be considered would be property ownership as belgohector can block property sales in cases where there is a tax dispute and/or alleged debt.

Would this apply to the social tax regime as well? I suspect not, but in reality I have nfi and I wouldn't like to put it to the test.

Tax and Social Security are handled in different ways, and by different agencies. It is true that if you have outstanding income tax, the collector can seize other monies to cover it, such as refunds of VAT and other rebates. He does this at source so you never get your hands on the cash

As Social Security is collected by private/independent agencies this risk can be avoided by informing them of what you are doing, and agreeing some long term plan with them. Of course your long term plan may involve not being in Belgium, but probably best not to mention that bit

If you own property, or have your family here, talking this through with your local accountant is essential. Indeed you should never do anything too dramatic without first checking you've covered all your bases.

As I said before, this is a useful way to free up much needed cash flow in a difficult time. If you are single, or here by yourself in temp accommodation and intend to leave one day, then this could be used as a legitimate avoidance mechanism.

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[NoMoreSleeplessNights]

Just delays the hit

What happens when they make it recoverable abroad? All you've done is delay the payment and add interest.

Same with the Belgium SPRL/BVA route, you have to get the money out and take the tax hit eventually, you delay the tax hit not remove it.

Don't rely on extracting everything as expenses either, the accountant advised me that the tax office reviews expenses of companies closing and see what money it can get by challenging anything grey.

Even the Belgium 'zero up front capital company' introduced last years seems to simply defer the capital payment till later years. Again it just delays the taxes.

There's just aren't any Belgium based agencies offering 40% tax rate, if it was so simple to reduce tax why is that?

In the early 90's in Germany we all traded through our ltd companies. This stopped when the German tax man started raids to force contractor companies to be taxed in Germany.
Contractors walked. They decimated Siemens, which is a pitiful company today. It was only because Germany had huge taxes and couldn't handle the tax competition.

And that's the problem with the EU, all the talented people are stuck in their home country locked into complex tax structures to scrape tiny profits.
The ones in cheap tax countries won't work for long in high tax countries, and the ones in high tax countries have complex non portable structures they are stuck with.

Without the 5% highly skilled, the 95% low skilled jobs don't exist, and the next Google will not be German or Belgian.

Perhaps now the EU is majority voting, perhaps they will let our contractor companies trade across borders again. Freedom of movement for workers restored?

[nodric]

What happens when they make it recoverable abroad? All you've done is delay the payment and add interest.

Very true, but that is a big if? The purpose of exploring this loophole, is mainly for cash flow reasons. However, until they change the law it does lend itself to avoidance. Retrospective legislation followed by overseas enforcement is a big ask, and will be years in the making. The risk is no worse than the risks that many contractors are already taking.

Same with the Belgium SPRL/BVA route, you have to get the money out and take the tax hit eventually, you delay the tax hit not remove it.

Don't rely on extracting everything as expenses either, the accountant advised me that the tax office reviews expenses of companies closing and see what money it can get by challenging anything grey.

Even the Belgium 'zero up front capital company' introduced last years seems to simply defer the capital payment till later years. Again it just delays the taxes.

The options are limited if you want to work in Belgium, and that’s the key! Do you want to work in Belgium? If the answer is yes, and whatever your reasons, you have to find the best way to do this.

Options 1. You could simply opt for declaring 100% of all your income as personal, and hand over 60+% of it to the BTA. This is Independent status.

Option 2. You could opt to stash it all in a Swiss Milk Churn, great in the short term, but once you bring the missus and kids along, or stay for a few years, you’ll have serious bowel issues!

Option 3. You could use a ‘split income management system’ and fool yourself that it’s better than option 1 and 2.

Option 4. You could trade via a BVBA. Yes you can’t spend all the income as personal, but there are many things you can pay for which will not be challenged. Dividends are taxed lower than salary as well.

Option 5. You work as an ex-pat through your own UK LTD, or someone else’s. This is the very best way to avoid high taxes etc. It is not simple and does take some skill to achieve. I have written about this in depth.

There's just aren't any Belgium based agencies offering 40% tax rate, if it was so simple to reduce tax why is that?

I assume you mean ‘management company’ as it would be very strange for the agency to pay you direct as an employee.
There are no management companies based in Belgium offering to employ you on the payroll as they would be subject to the same high taxes as you. They would also be clobbered for employers tax and SS contributions, which add another 35% or more to the cost of you. Net effect would be the same as working as an Independent.

There is one management solution based in Belgium. This is so far unchallenged by the Belgians, but it relies on you putting your stash into a Group Insurance Fund (special type of pension), which you can then draw out when you leave Belgium. I've covered this in other posts.

It seems that your post does not offer a solution, but warns of the hassles and perils of working in Belgium. You are not wrong in what you say, but for those that want to work in Belgium, they need to know the best way to mitigate their losses to tax etc.

I wholeheartedly agree with the rest of your post. The overzealous local tax men in the various high tax countries of the EU really need to get some perspective, and create a fair pan-European tax regime for floating consultants such as ourselves. Of course they never will as most of them are overstressed and underpaid ultra left wing socialists, who believe we are all low life scum who bleed them dry. I think the one word that sums them up is - Jealousy

OK rant over. The EU is slowly and progressively squeezing the life out of the entrepreneurial individuals under their governance. I wonder how many of you know that the VAT regs changed in January this year? Still to be fully understood and enforced by member states, but what it does do is force you to charge VAT locally, wherever you are delivering services.

Unlike products which are exempted from cross border VAT when dealing B2B, services are no longer treated as such. What this will mean is that every contract you take, you will have to register in that country for VAT purposes! Working through a management company, or services agent as the EU call them, will not exempt you from this. This should be another thread.

These and other measures to further restrict our ability to work will result in more and more contractors seeking work in tax friendly countries well outside the gaze of the EU. They will reap what they sow. Another brain drain.

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[ASB]

Unlike products which are exempted from cross border VAT when dealing B2B, services are no longer treated as such. What this will mean is that every contract you take, you will have to register in that country for VAT purposes!

You are quite right to point out that change. HMRC advice is here:- http://www.hmrc.gov.uk/VAT/managing/...s/services.htm

It's not as simple as you suggest. Whether you need to register is dependant upon the destination countries VAT rules. (and these of course depend upon the services being supplied). The place of supply rules also tend to kick in.

[nodric]

You are quite right to point out that change. HMRC advice is here:- http://www.hmrc.gov.uk/VAT/managing/...s/services.htm

It's not as simple as you suggest. Whether you need to register is dependant upon the destination countries VAT rules. (and these of course depend upon the services being supplied). The place of supply rules also tend to kick in.

I started a new thread about this topic, as it clearly is of critical importance.

Link is here

I'll also add you link to the post.

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