28th June 2019
While it may be famed for its beer and chocolate, in Belgium, contractors will also find a number of professional reasons to entice them. The destination is a hotspot for the pharmaceutical industry, with €2.89 billion invested in R&D in 2016, while financial services, data protection and cyber security professionals will also find there is high demand for their skills there. However, it’s important to bear in mind that the country is also strengthening its stance on tax and compliance. In fact, it’s been reported that Belgium’s famously secretive tax department has already issued 3,600 authorisations for the auditing of taxpayers’ bank accounts since banking secrecy was relaxed in the country in 2011. This is the first time that this data has been released, indicating that the country has been getting progressively tougher on tax. This is what contractors need to know about the Belgian tax crackdown.
Belgian tax crackdown: Record number of investigations
As reported in the Brussels Times, new measures introduced at the turn of the decade have made it far easier to access the bank accounts of those suspected of tax fraud. In fact, since 2011, the Special Tax Inspectorate (ISI) has made 3,613 investigations using these powers. Last year alone, the ISI investigated 1,661 cases, imposing taxes and sanctions of up to €1.01 billion, following collections of €2.12 billion in 2017 and €1.72 billion in 2016. Part of these measures allowed authorities to conduct investigations with far more ease, being able to proceed based on just one indication that a person is living above their official income. In fact, the ISI used this at the end of 2011 to examine the accounts of former European Commissioner, Karel De Gucht.
Belgian tax crackdown
However, this not the only measure that has contributed to the Belgian tax crackdown, with the country taking many steps to reform its tax system. In fact, in January, the European Commission ordered Belgium to recover a staggering 700 million euros ($763 million) from 35 large companies in back taxes, the EU biggest move to date in its efforts to crack down on tax avoidance by multinationals. The Commission said Belgium’s “excess profit” tax system, whereby multinationals’ economies of scale can enable them to reduce their tax bases by up to 90 percent, was illegal, and had been granted to a select number of large companies but not to smaller firms, distorting competition.
The legal bit
For those looking to work in Belgium, there are a number of compliance considerations to be aware of:
Employment law requirements in the country are generally straightforward. However, this can be complicated by laws such as the Limosa Declaration. Under this regulation, an employer sending an employee to Belgium and self-employed professionals working in the country are required to fill out a declaration before work begins. Failure to comply could see the employer, end client and the individual facing fines and criminal charges. These penalties can be extremely damaging, with charges reaching up to €300,000.
Furthermore, if you are entering the country as a self-employed professional, you will also be subject to strict scrutiny and will need to meet specific criteria in order to work in Belgium. For example, depending on where in the country you will be working, you must either have a university degree to register your self-employed status, or gain a ‘certificate of experience’ which demonstrates your educational or professional background, or sit an ‘equivalency’ exam on Belgian regulations and legislation. Also, please note that attempting to avoid the Belgian tax and social security system by using a UK personal service company (PSC) is illegal.
Be prepared for change
As we’ve seen across the board, employment and tax regulations are subject to constant change as authorities worldwide seek to clampdown on fraudulent behaviour. This tax crackdown is not particular to the region, with measures being taken across the globe to create tougher and more comprehensive tax systems. For contract professionals, staying ahead of legislative changes and ensuring you abide by local laws can be hugely challenging. However, the penalties for getting compliance wrong make taking correct action critical. Therefore, if you’re seeking contract work overseas and want to make sure you are compliant in your chosen destination, we strongly advise the use of an expert contractor management service.
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