On 1 July 2016, Belgium became one of the first European countries to pass legislation on the collaborative (or sharing) economy (Program Act of 1 July 2016). Adopted under the leadership of Alexander De Croo, the Digital Agenda Federal Minister, this new legislation (“De Croo Act”) aims at providing a favourable tax system for income generated by activities in the digital economy.
There is no single definition of “collaborative economy”. As a rule, it refers to economic transactions between individuals (peer to peer) with the assistance of an online platform. In other words, it is a model whereby two individuals interact with each other to buy or sell goods and services, often involving online transactions.
Uber, Airbnb, Menu Next Door and ListMinut are a few of the online platforms that have emerged over the past few years, putting individuals into contact and allowing them to provide services or to sell goods to each other.
The De Croo Act introduces a flat-rate tax (10%) for income (not exceeding EUR 5,100 per year – amount for 2017 subject to indexation) deriving from activities carried out as part of the collaborative economy. This flat-rate tax is subject to the following conditions:
- The income pertains to services provided by one individual to another and not to the delivery of goods.
- The services are rendered to physical persons that do not act within their professional activity.
- The services are rendered by a (legal or physical) person who does not act within his/her/its professional activity.
- The services are rendered through an agreement entered into via an authorized online platform.
- The indemnities relating to such services are solely paid or granted to the service provider by the authorized online platform.
If one of the above conditions is not met or if the threshold of EUR 5,100 (2017) per year is exceeded, the income will be considered as “regular” income and taxed as such. It must be noted that the De Croo Act is not applicable to income pertaining to the lease of real or personal property (such as the rent for a room/flat booked through Airbnb).
Thanks to the De Croo Act, the service providers are not liable to pay social security contributions and are exempt from any VAT obligation.
The conditions of authorization of the online platforms as well as other tax-related issues were yet to be settled by way of Royal Decree.
It is now mission accomplished, following the adoption of two Royal Decrees of 12 January 2017. The first sets out the online platform authorization conditions; the second imposes on online platforms an obligation to deduct a 10% withholding tax from the indemnities collected through their accounts as well as to fill out an annual information form for every person providing services through their platform. Whereas the first Royal Decree has applied since 24 January 2017, the second will enter into force on 1 March 2017, making this new regime fully enforceable.
The De Croo Act has the merit of bringing some clarity to the tax and social security status of income deriving from such activities. Most of the time, this income was not reported, hence creating unfair competition for other economic players.
However, many questions remain and the legal text sometimes lacks clarity. What is “provision of services” as opposed to “delivery of goods”? How can you distinguish individuals providing services within (or outside) the scope of their professional activity? These issues were raised during the debates preceding the adoption of the Act by the Federal Parliament but were only partly answered by the ministers in charge.
We will keep you posted on the latest developments in our upcoming issues. No doubt the De Croo Act will be talked about in the months to come…