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Belgium introduces a Tax Regime for the Sharing Economy
 
The sharing economy, or peer-to-peer eco or peer-to-peer economy, is booming business. Digital platforms and aps (Uber, MenuNextDoor, Airbnb, AirBsit, ….) allow individuals to provide new services from sharing cars, cooking takeaways for their neighbours, renting rooms or babysitting, etc…

However, the tax regime of the income they made on these peer-to-peer marketplaces was far from clear and often escaped taxation. A private sale of off cast-off clothes or a property is not liable to capital gains tax as long as it occurs within the normal management of one’s private estate. The private letting of property is taxed as rental income. As long as the income is not made as part of a professional activity, such income from an occasional was, in principle, to be characterized as “miscellaneous income” that was liable to tax at a fixed rate of 33%. Understandably, many taxpayers who had been providing takeaways or babysitting services forgot to declare the income from this occasional activity.

 The Programme law of 1 July 2016 (Belgian State Gazette 5 July 2016) sets up a framework for the sharing economy that will be adapted to the income received from this sharing economy. That consists of an advantageous (but limited) tax regime for individual service providers who operate through a digital platform and a tax withholding at source by the digital platform. The law realises a twofold objective. It sets up an adapted and transparent tax regime to manage these peer-to-peer marketplaces, while enabling Joe Six Pack to try his hand at entrepreneurship in a small side-line activity. The sharing economy allows him to start a new activity without any starting capital and with little or no risk.

The Law introduces a new type of income in the category of “miscellaneous income” for income from the sharing economy that will be taxed at 20% after deduction of a 50% allowance. In fact it is an effective tax rate of 10% as long as the income does not exceed 5,000 per year.

To qualify for this new tax regime, the income must have been provided, outside a professional activity, by way of services by an individual to another individual (who is also acting in a private capacity), on the basis of agreements that have been put in place by a recognised digital platform or a digital platform set up by the authorities, and payment is exclusively organised through the digital platform. A service provider who also offers his services via other channels than the digital platform, or to legal entities or to professionals, will be disqualified.

The 10% tax will be withheld at source by the digital platform and paid to the tax authorities. This requires a commitment of the start-ups of the sharing economy; they will have to register with and be approved by the tax administration, and they will have to ban cash payments. All transactions are to be paid electronically so that payments can be traced.

When the income from this activity exceeds 5,000 per year, the entire income will be deemed to constitute income from a professional activity and be taxed as business income. The text of the law is restrictive; it is limited to services in the sharing economy. The supply of goods (e.g. takeaways) falls outside the scope of this legislation. Moreover, the mere letting of real property or movables is excluded. That means that income from Airbnb and car sharing are respectively income from real property and income from movables. However, if the Airbnb host provides breakfast, that part of the income would fall within the scope of the income from the sharing economy. And while car sharing would fall outside the scope of the law, Uber services would fall within.

When an Airbnb service offer bed and breakfast, and does not charge separately for the services, he will have to split the income in real property income, income from the letting of the furniture and income from providing services. If there is no clear division, the income from the services will be deemed to be 20% of the total cost.

Royal Decree 38 of 27 July 1967 that governs the social security regime for self-employed is adapted to exclude individuals who earn less than 5,000 euros from the sharing economy from social security. They will not have to register as self-employed and will, therefore, not have to pay social security contributions

They will not have to register with the Enterprises’ Database and they will not have a Business Number. The income from the sharing economy will be VAT exempt (the VAT threshold is 25,000) so that they will not have to charge VAT (but they cannot recover the input VAT). Furthermore, they will not have to file an annual client listing.

The new rules apply from 1 July 2016, and for 2016 the limit is set at 2,500 instead of 5,000.

Brussels, 8 July 2016
Marc Quaghebeur
De Broeck Van Laere & Partners



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