The Royal Decree of 12 January 2017 (Belgian Official Gazette of 24 January 2017) was the last component required for the new legal framework to be applied.
In brief, this specific regime provides for a 20% taxation on some revenues from the sharing economy after deduction of a 50% lump-sum expenses, leading to an effective tax rate of 10%. The new regime only applies up to a yearly gross income of 5.100 EUR per person (3.255 EUR indexed for year 2017). If the threshold is exceeded, all of the sharing economy income earned is treated as professional income. However, the taxpayer has the right to demonstrate to the tax authorities that the income in question is not professional.
Taxes are directly withheld by the registered platforms as it is the case for wage tax.
The application of the regime is subject to strict conditions. It applies to all income earned for the supply of services by a taxpayer to a third person, outside of any professional activity, provided that the following conditions are met :
- The services have to be supplied by an individual for another individual;
- The service agreements have to be established via an officially registered platform or a platform managed by the public authorities,
- The payment of the services has to be made via the registered platform.
The new regime should, in principle, satisfy all the actors of this type of economy.
Components of the new regime
Type of services
The regime is only applicable to the supply of services. In this context, the preparation of meals that are meant to be taken away or home delivered is regarded as a supply of services.
Some services are however explicitly excluded, such as the renting, sub-renting or the lease of movable and immovable properties.
Supply of services
The new legal framework has been welcomed with more or less enthusiasm by the eligible service providers.
The service providers have to be individuals, acting outside of any professional activities.
Parliamentary works outline that an employee can provide services through registered platforms while benefiting from the said regime, while a self-employed person cannot provide services falling inside his scope of professional activity. A self-employed plumber could therefore provide gardening services through the platforms that would benefit from the said regime.
To qualify, platforms have to register and obtain an authorization from the public authorities.
The Royal Decree of 12 January 2017 specifies the criteria to register and obtain the said authorization :
- The platform has to be hosted by a company or a non-profit organisation established in accordance with the legislation of an EEA Member State ;
- The company or the non-profit organisation must have its registered office, place of management, or principal establishment within the EEA (or in a State with which Belgium has concluded an international agreement) ;
- The company or the non-profit organisation must be registered with the Crossroad Bank of Enterprises for the concerned activity;
- The firm must be registered for VAT purposes ;
- Directors (or managers) of the company or the non-profit organisation cannot have been prohibited from exercising such functions or have been declared bankrupt (except under certain circumstances).
The clarification of the legal framework will most likely attract more users on those platforms. Furthermore, the regime is also available to students and unemployed persons, who represent two categories of service providers locked in very restrictive labour frameworks.
Nonetheless, a burdensome back-office work awaits the platforms. At the very least they will have to set up powerful IT tools. Indeed, they will have to apply a withholding tax on any transaction, and issue information vouchers for every service provider. Those vouchers will have to be sent both to the service providers and the tax administration on an annual basis.
What to think about it ?
A first step
The fiscal and social security-related uncertainty around those activities had harmful tax and social consequences since many service providers did not report their income, avoiding to pay taxes (33% for miscellaneous income and up to 54% for professional income) and social contributions.
For a large majority of those providers, the automatic withholding tax will therefore be a game changer.
Platforms caught between a rock and a hard place
Platforms should in our view be pleased with the clarification of the tax and social framework in which their users will now evolve.
However, fears may arise that the user would only see the new tax framework as additional taxation on their sharing economy activity, since they did not pay any taxes previously (contrary to the law, obviously). Platforms will therefore have the task of clarifying that it is worth paying 10% tax in return for peace of mind with respect to tax and social security.
Public authorities, overall winners
Public authorities are without doubt the overall winners of this new measure.
By introducing the new legal framework, the government actually pursues objectives that are larger than administrative and tax simplification, or even the stimulation of entrepreneurship.
The tax authorities now have the means to tax transactions that were completely out of their view.
Furthermore, public authorities were laying the foundation for their very own sharing economy platform. The regime will indeed apply to both registered platforms and platforms organised by public authorities. Ten days before voting the sharing economy framework last July, the government launched “Bringr”, a platform organising the distribution of parcels by individuals to individuals (supposed to compete with Bpost). In this way, public authorities open the door to a workforce that is complementary to public servants.
There is no doubt that the economy of tomorrow will be largely a sharing economy.
This economy, more local and more accessible thanks to new technologies, will evolve extremely fast. This trend can also be seen in the field of crowdfunding.
The new framework is encouraging, and can be seen as the first meaningful step towards bringing tax legislation to the modern age.