Belgian Tax Law

[renim]

In Australia these cars are called novated lease cars, they are very common here. Particulary for the premium models.

Novated lease cars were about 20% of the market by number, obviously much higher by value.

Essentially these are company owned cars for private use. They attract Fringe Benefit Tax but avoid other taxes (gst, personal income etc) but im not an accountant so i could be wrong or outdated. Company outsource the provision of these cars - hence the novation.

 

[NicoV]

I notice that in @Lycanthrope I imagine that this tax law in practice, strongly encourages individuals to own their own businesses rather than work for others. Do businesses then look more like partnerships and/or businesses that hire many contractors (who individually work for themselves)?

In Belgium (and I guess many other European countries too), the law says that two parties have the right to decide whether to work together in a company/employee relation, or via a company/subcontracting company relation. In the subcontracting case, the subcontractor needs an explainable level of independence (a topic of its own);

In the past, the tax situation was such that from a certain income level it was cheaper to choose the subcontracting route. So you’ll find a lot of such 1 person companies providing the same services as employees. I’m one of those people myself, a software engineer with his own consulting company, working mostly for 1 client at the same time.

Over time, the popularity of this system has increased, mostly with highly educated knowledge workers. As the popularity increased, the government introduced fiscal measures to lower the financial gap. Personally, with the way the fiscal situation is now, I can’ find a lot of fiscal/financial advantages anymore, and the main reason to go this route is because you like the extra independence more.

 

[cpa]

In Belgium (and I guess many other European countries too), the law says that two parties have the right to decide whether to work together in a company/employee relation, or via a company/subcontracting company relation. In the subcontracting case, the subcontractor needs an explainable level of independence (a topic of its own);

In the past, the tax situation was such that from a certain income level it was cheaper to choose the subcontracting route. So you’ll find a lot of such 1 person companies providing the same services as employees. I’m one of those people myself, a software engineer with his own consulting company, working mostly for 1 client at the same time.

Over time, the popularity of this system has increased, mostly with highly educated knowledge workers. As the popularity increased, the government introduced fiscal measures to lower the financial gap. Personally, with the way the fiscal situation is now, I can’ find a lot of fiscal/financial advantages anymore, and the main reason to go this route is because you like the extra independence more.

Our definitions of employee versus independent contractor are much more stringent. Without boring this forum with all the blood and guts, suffice to say that if the employer dictates many of the job requirements (like hours and priorities) and furnishes much of the necessary equipment or work space for the job, then the person who does the work is an employee and not an independent contractor. Since I determine which clients I work on, I have my own liability insurance, I have a professional license, I decide what to do, when to do it, and how to do it, I am easily a non-employee.

It sounds like you would be considered a common-law employee here in the United States given the facts you presented. We have other rules regarding employees where independent contractors are exempt. Unemployment insurance taxes (federal and state), worker's compensation insurance, and pension plan eligibility are among the most common. The employer portion of Social Security and Medicare taxes would likely be more for an employee versus independent contractor because the independent contractor can deduct business expenses, while an employee cannot. There might be a lot more $$ (or euros) at stake with our system than in Belgium.

If I recall correctly, Microsoft got hosed back in the '90s when the government came in and recharacterized thousands of "independent contractors" as common-law employees. Cost Billy Boy 8-9 figures if I recall.

 

[cpa]

On a tangential note, this came down the pike a few weeks ago:

Schoolteacher’s failure to file FBAR results in $800,000 penalty

Seems our fair schoolteacher decided to thumb her nose at the foreign bank account reporting requirements that have been around for ages. Instead of taking her medicine and paying her smallish penalty, she doubled down and pissed off the trial judge.

Does Belgium have similar foreign bank account reporting requirements? Over here, Congress decided to put some teeth into the laws after 9/11. The penalties became much more expensive, and reporting became more detailed. And from what I hear, most nations have joined forces to exchange information with each other so avoidance is much more difficult these days.

 

[renim]

On a tangential note, this came down the pike a few weeks ago:

Schoolteacher’s failure to file FBAR results in $800,000 penalty

Seems our fair schoolteacher decided to thumb her nose at the foreign bank account reporting requirements that have been around for ages. Instead of taking her medicine and paying her smallish penalty, she doubled down and pissed off the trial judge.

Does Belgium have similar foreign bank account reporting requirements? Over here, Congress decided to put some teeth into the laws after 9/11. The penalties became much more expensive, and reporting became more detailed. And from what I hear, most nations have joined forces to exchange information with each other so avoidance is much more difficult these days.

Unlikely, USA foreign bank accounting rules are crazy strict, significantly beyond the requirements of both australia and UK.

Actually, USA foreign accounting rules tend to be considered like an STD.

 

[NicoV]

Does Belgium have similar foreign bank account reporting requirements? Over here, Congress decided to put some teeth into the laws after 9/11. The penalties became much more expensive, and reporting became more detailed. And from what I hear, most nations have joined forces to exchange information with each other so avoidance is much more difficult these days.

Unlikely, USA foreign bank accounting rules are crazy strict, significantly beyond the requirements of both australia and UK.

Every individual needs to report their foreign accounts on their tax declaration every year.

Every year, in an effort to plug the hole in our nations budget deficit, the ‘very last opportunity’ to regularize ‘black’ money, mostly in foreign account is announced.
Every year, this results in a massive amount of money flowing back to the government mostly via settlements.
You’d think that with all the data exchange between banks and governments that some day this revenue stream would dry up but no.

 

[Tslynk67]

Edit: this is how I understand it from how my accountant explained it to me, I am not a lawyer.

Can't argue with any of that. My accountant said to not move it too close to the end of the year and try not to move it back too early - I guess to allay suspicions in case of audit indeed. As the SP dropped quite a bit since I did the transfer, I can wait a bit to transfer back, even if we had stellar delivery report, I don't think we'll be pushing much higher until the earnings call.

I'm not so bothered about the 9% interest, but having a large director debt does make the books look bad when it comes to getting company leases and loans, this is the main reason for it.

 

[cpa]

Unlikely, USA foreign bank accounting rules are crazy strict, significantly beyond the requirements of both australia and UK.

Actually, USA foreign accounting rules tend to be considered like an STD.

Looks like there is reciprocity between our beloved countries:

Foreign Account Tax Compliance Act