Expatica’s tax expert Gregory Goossens explains what business expenses you can deduct from your Belgian taxes when filing your tax return in Belgium.
If you are living and working in Belgium, you will be liable to pay Belgian taxes, although some foreigners may qualify to pay less Belgian taxes by claiming non-resident tax status. However, whether you are an employee or doing your taxes as a self-employed worker in Belgium, you can reduce your tax burden by claiming certain business expenses and deducting them from your Belgian taxable income. Here is a guide to which expenses you can claim and how to organise this when filing your Belgian tax return.
How to claim general expenses on your Belgian tax return
In order to generate an income, each taxpayer needs to make expenses, whether you work as an employee or a self-employed freelancer. You need to drive to clients, make telephone calls, meet over lunches, go on business trips, follow seminars and read books to improve your skills and so on.
The general rule is that an expense is tax deductible as long as you can justify that it was made for professional purposes with the goal in mind to obtain or retain taxable income.
For most employees, the employer will normally provide the necessary means, such as a company car, mobile phone and laptop or at least pay a reimbursement to the employee for expenses made within company regulations. In that case, you will not be able to deduct the expense as it is actually not you, but your employer, who paid.
In all other scenarios, business expenses can be offset by your gross income as taxes are only due on the balance. Net income generally implies total revenue minus total expenses in a given taxable period. Sometimes it is also possible that a loss occurred in the past, for example during a previous (not so successful) professional activity, that can still be deducted from the taxable amount in the current year (so-called ‘loss brought forward’).
Before a loss or expense can be deducted, several conditions should be taken into account. The Belgian tax authorities are of the opinion that a cost can only be deducted in the event that the conditions set forth in Article 49 of the Belgian income tax code of 1992, are fulfilled. This is a bit technical but briefly means that:
- the expenses should relate to a professional activity;
- they should have incurred or were born during the taxable period in which they are deducted;
- they were made in order to obtain or retain taxable professional income;
- the reality of the cost and the amount are justified.
In principle business expenses are 100 percent deductible, meaning that if the expense was, for example, EUR 1,000, the same amount can be deducted. However, for some expenses, the deductibility for tax purposes is capped. This is the case for restaurant bills (69 percent), representation costs (50 percent) and all car-related expenses (75 percent).
Other expenses are not fully deducted in one year but spread in time over several taxable periods. This is the case, for example, for investments of which only the annual depreciable amount is a professional expense. While there is no room to go further into detail here, keep in mind that certain investments can be depreciated not only for companies but also for individuals. If you use your private car for business purposes, it can be depreciated over a period of five years. This means that one-fifth of the purchase price of your car is deducted from your taxes every year.
Generally, you must keep records that support your deductions on a tax return until the period of limitations for that return runs out. Deducting your actual expenses means keeping records of all your costs. This can prove to be a difficult task as it is not always easy to obtain written proof of all the expenses made while running a business.
Lump-sum business expense tax deduction
What if you don’t want to make an effort of keeping track of all your business expenses?
Employees as well as company managers, assisting spouses and all self-employed individuals are always entitled to a standard business expense deduction in their annual individual tax return. In this deduction, you are not required to prove the professional character of your expenses, as it is a pre-set, fixed annual amount (a ‘lump sum’) depending on the height of your taxable income. When you file your tax return, you will be automatically allowed the deduction.
Evidently, using the standard deduction on your tax return is only beneficial if your actual expenses are less than the lump sum or if it is too difficult or impossible for you to prove your expenses. In all other cases, you should try to prove your actual expenses.
Some professional organisations (eg. for doctors, lawyers, bailiffs, etc.) have entered into collective agreements with the tax administration which stipulate the allowed expense deduction for that specific business category. These agreements cover expenses that are difficult to prove or for which it is not always easy to obtain written proof (eg. representation costs, car expenses, etc.).
It is also possible for the taxpayer to come to an individual agreement with the tax administration regarding the allowed expense deduction. Again, for some expenses, it may be difficult to provide documentation. The taxpayer should then only make it ‘plausible’ that he made the expense for business purposes. He should not provide written proof. The tax administration can always reconsider a previously made agreement, but only for future action never for the past.
Since the 6th state reform, the lump sum business expenses for employees will be gradually increased in tax years 2017 and 2019. As of the tax year 2017 (income 2016), the lump-sum business expense deduction for employees and self-employed individuals is the following:
|Gross salary or profit|
From EUR 0 up to EUR 8.450,00
|From EUR 8,450 up to EUR 19,960|
|Above EUR 19,960|
Maximum EUR 4,240
As of the tax year 2019 (income 2018), the lump sum business expenses will be calculated at a unique rate of 30 percent with a maximum amount of EUR 4,530.
The above-mentioned measure is not applicable to company managers (whose expenses are most of the time deducted in their company) and assisting spouses. As such, as of the tax year 2017, the deduction amount for company managers and ‘assisting spouses’ will be limited to EUR 2,390 and EUR 3,980 respectively.
If it is not possible to determine your tax-deductible business expenses on the basis of one of the above scenarios, the tax authorities always have the obligation to estimate your business expenses at a reasonable amount, even if you have no written proof at hand. Under no circumstances can you simply be taxed on your gross earnings if for some reason the standard lump-sum deduction did not apply. In Belgium, you are always entitled to some expense deduction so it pays to do your research before filing your Belgian tax return.
- Taxes in Belgium and filing your Belgian tax return
- How to calculate your total taxable income in Belgium
- Tax benefits for buying a house in Belgium
- Taxes and charges for freelancers and the self-employed in Belgium
Gregory Goossens is an attorney at Taxpatria, an independent service provider for the international community working and living in Belgium. Taxpatria is an alternative to the classic Big Four companies, and its aim is to establish a personal relationship with each client. On their website you can find a list of possible business-related expenses. Feel free to contact them for any related questions you have or see their example of a Belgian tax return in English.Meet the team behind Taxpatria®