The three levies you should not mix up
Plenty of freelancers talk about tax while blending three very different things. Separating them is the first step towards a correct calculation.
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VAT is not a tax on your income. You collect it for the State and you pay it back. It passes through your account, it is never yours.
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Social contributions fund your social status: pension, healthcare, incapacity for work, family allowances.
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Personal income tax applies to your net professional income, once your expenses and your social contributions have been deducted.
Step 1: calculate your net professional income
Start from your receipts excluding VAT for the year, then take out your deductible business expenses. What you get is your gross profit.
The social contributions you paid during the year are deducted next. The result is your net taxable income, the basis for everything that follows.
Receipts excluding VAT, minus business expenses, minus social contributions paid: that is your net taxable income.
Step 2: social contributions
You pay them every quarter to your social insurance fund. The base rate sits around 20.5 % of your net professional income up to a first ceiling, then a reduced rate of roughly 14.16 % applies above it. A management fee charged by the fund, in the range of 3 to 4 %, comes on top.
The mechanism surprises almost every beginner: you first pay provisional contributions calculated on your income from three years ago, then an adjustment lands once the administration knows your real income. A freelancer who takes off quickly therefore gets a heavy adjustment two years later, often at the worst possible moment.
You can ask to pay higher provisional contributions right away. It is the simplest way to avoid the catch-up bill, and those contributions are deductible in the year you pay them.
Step 3: personal income tax
Belgian tax is progressive: each slice of income is taxed at its own rate. Moving into a higher bracket does not tax your whole income at that rate, contrary to a very common belief.
A tax free allowance, in the range of 10,500 €, brings the bill down, and so do dependants. Municipal surcharges, between 6 and 9 % depending on where you live, are then added to the amount obtained.
Tax brackets, orders of magnitude
| Rate |
Net taxable income bracket |
| 25 % |
Up to about 16,000 € |
| 40 % |
From about 16,000 € to 28,800 € |
| 45 % |
From about 28,800 € to 49,800 € |
| 50 % |
Above about 49,800 € |
Bracket thresholds are indexed every year. The values above are an order of magnitude for setting money aside, not an official calculation.
Step 4: advance tax payments
Unlike an employee, a freelancer has no withholding tax taken every month. The State therefore expects you to pay your tax up front, across four deadlines.
If you pay nothing in advance, a surcharge is added to the tax due. The earlier in the year you pay, the bigger the benefit. Freelancers setting up in a main activity for the first time escape that surcharge during their first years.
The four advance payment deadlines
| Quarter |
Due date |
| First payment |
10 April |
| Second payment |
10 July |
| Third payment |
10 October |
| Fourth payment |
20 December |
How much should you set aside per invoice?
The most widespread rule of thumb is to move a third of every amount collected excluding VAT to a separate account. That third covers social contributions and tax. The real proportion varies with your income level and your family situation, but starting from a third avoids painful year ends.
Add the VAT you collected on top, and leave it untouched until filing day. Most freelancers in cash trouble have simply spent VAT that was never theirs.
The business expenses most often forgotten
Every euro of documented expense lowers both your social contributions and your tax. It is the most accessible lever, and the least used one.
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Computer and professional equipment, depreciated over several years when the amount justifies it.
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Vehicle costs, according to the deduction rules that apply to your car.
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The professional share of rent, electricity, heating and internet when you work from home.
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Software subscriptions, business banking fees and payment commissions.
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Training, professional literature and membership fees.
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Professional insurance and the voluntary supplementary pension for the self-employed.
The statutory flat rate for expenses exists, but as soon as you have equipment, a vehicle or an office, real expenses are almost always more favourable. That assumes you kept the supporting documents, which is something you win or lose all year long.
Stay a sole trader or move to a company?
There is no magic threshold. As a sole trader, the marginal rate reaches 50 % quickly. Corporate tax is charged at 25 %, reduced to 20 % on the first 100,000 € of profit when certain conditions are met, including a sufficient director's remuneration.
A company also brings fixed costs, accounting obligations and heavier administration. That calculation is made with an accountant, on your real figures, never on an average you read somewhere.
How Novadesko helps you see clearly
A correct tax calculation needs up to date figures. That is exactly what Novadesko keeps for you, throughout the year.
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Your income and expenses are centralised, with the supporting document attached to every entry.
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Purchase invoices are read automatically and filed by expense category, which limits year end oversights.
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A tax estimate gives you an order of magnitude of what to set aside, without waiting for the tax assessment.
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The export for your accountant is generated in one click, in the format they expect.
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You follow your real cash position, with the VAT collected and the tax provisions put aside.
Frequently asked questions
When do I have to file my income tax return?
The personal income tax return is filed every year, most often through Tax-on-web. The self-employed get a longer deadline than employees, and an extra deadline applies when the return goes through an agent.
Are social contributions deductible?
Yes, in full, in the year you pay them. That is why an extra payment before 31 December can lower the tax for the current year.
Does a freelancer with a side activity pay the same taxes?
The tax calculation is identical, but your freelance income comes on top of your salary and is therefore taxed in your highest brackets. Social contributions follow their own rules for a secondary activity.
What happens if I made no advance payment at all?
A surcharge is added to the tax due. It is not a fine, but it is an avoidable cost, and it grows every year the problem is put off.
Do I need an accountant to be self-employed?
It is not compulsory as a sole trader, but it is strongly advised as soon as the business grows. Software keeps your figures clean, an accountant interprets them and takes responsibility for them.
Read next
This guide is for information only. Thresholds and amounts are indexed every year, so check them with the FPS Finance or with your accountant before you act on them.
