More and more working Belgians are using tricks to pay less taxes, but there is a downside

It once started with managers, (dentist) doctors, lawyers, consultants and sought-after IT specialists, but now more and more (middle) managers no longer pay themselves as employees, but invoice their services to one or more companies through a management company. Today the counter already stands at 80,210, according to figures from Statbel and the Crossroads Bank for Enterprises. That is more than three times more than in 2018, when there were ‘only’ 26,206. The reform of company law may have something to do with this, because since then you can set up a company without minimum capital. Previously, you had to pay up 18,550 euros for a private limited company, for example.

Favorable taxation

The fact that so many people say goodbye to employee status and make the switch is mainly for tax reasons. In personal income tax, you fall into the highest tax bracket from a taxable income of more than 46,000 euros per year: in many cases, the tax authorities will skim off half of your income above that limit (on top of which are the social security contributions that are deducted from the gross salary). With a management company, on the other hand, you only pay 20 percent corporate tax on the first 100,000 euros of profit, and 25 percent on everything above that.

“On the condition that you grant yourself a salary of at least 45,000 euros gross per year. And you pay personal tax on that income. Even if you pay yourself that ‘wage’ in a tax-friendly manner, for example through dividends or liquidation reserves, you also pay 15 and 10 percent taxes on it. So you immediately have to nuance that tax advantage,” says tax specialist Gregory Henin of the Knowledge Center of accountancy and consultancy firm SBB. “If the tax benefit for everyone were really as great as some think, many more employees and executives would have taken the step longer.” Because such a management company also has a downside: “The accounting is more complex, you are much less well protected against job and income loss than as an employee, the latter also builds up more pension rights. It is true that you can also deduct more costs through your company, but the tax authorities are increasingly strict about this.”

The question at what income a management company is more fiscally interesting than a job as an employee cannot be answered unequivocally. But most financial advisors state that you should easily be able to invoice 9,000 to 10,000 euros per month. And as an employee, you will soon end up with a gross salary cost for the employer of more than 100,000 euros per year.

Bad for the treasury

That’s all assuming a new government doesn’t change the rules of the game. Something that the High Council of Finance (HRF) is already calling for in a new report, which La Libre was able to view. Based on the figures from the FPS Finance for 2023 income, the HRF calculated that the tax burden will quickly rise to 50 percent and even 55 percent for employees with a high income, while ‘entrepreneurs’ who pay themselves a low wage, but increase their income for example supplementing with dividends, would be taxed at approximately 30 to 35 percent. “The difference in tax depending on the legal form creates a distortion that in the long term weakens the tax base and reduces social contributions. Belgium could therefore consider reducing the gap by adjusting the tax on business income so that it is closer to the tax on labor,” reads the HRF recommendation.

Coincidence or not, the formateur’s memorandum of Bart De Wever (N-VA) also mentions new rules for management companies. The minimum wage would be increased to a minimum of 50,000 euros gross per year and that amount would also be indexed.