Increasing numbers of individuals provide services to other individuals as mini-entrepreneurs through apps and other digital platforms.
As Minister of Digital Agenda, Alexander De Croo wants to remove barriers-to-entry for this growing group of peer-to-peer service providers.
Alexander De Croo, Deputy Prime Minister and Minister of Digital Agenda and Telecom (Belgium):
“The sharing economy, or peer-to-peer economy, is developing rapidly. Through apps and digital platforms, individuals provide more and more services for their peers, from meal delivery to babysitting. Our current tax system has not yet adjusted to the reality of this new economy. A demand for clear and transparent regulation was heard. It is in place now. This is important, because it is a way for many people to earn a little extra on the side, or to get a sense of entrepreneurship on a small scale.”
Low Rate and Simple System
A tax rate of 10% will apply to services between individuals. This provides a legal framework for activities currently taking place in the “grey zone”, and helps combat fraud. Today, most activities in the sharing economy are subject to tax at a rate of 33%.
The new legislation will apply to income up to 5000 euro. This prevents unfair competition with small businesses and professional entrepreneurs.
Rather than requiring the individuals to report their income to the tax authorities, registered platforms will have to withhold taxes at source and send the information to the tax authorities.
Administrative charges will be minimal for the individuals who render the services. They will not be required to register with the Belgian Enterprises Register or apply for a VAT number. Those who want to turn a second job in the sharing economy into a profession must switch to self-employed status in a primary or secondary profession.
At the Forefront in Europe
With this new legislation for the sharing economy, Belgium moves to the forefront of peer-to-peer economies in Europe. Up to now, the United Kingdom has been the leader in stimulating the sharing economy. Last month, the British Minister of Finance announced a tax exemption of up to 2500 euro for incomes earned in the sharing economy. The French government recently rejected a proposal for advantageous treatment of incomes up to 5000 euro.
Details of Future Legislation
In Belgium, income from the renting of rooms is currently split over three categories of taxable income: immovable income, movable income and miscellaneous income. This remains unchanged. The new sharing economy scheme will only apply to the portion which qualifies as miscellaneous income. This portion is considered to amount to 20% of the total rental price and relates to e.g. the provision of bed linens, reception, changing bedding and providing breakfast.
The remaining 80% of the rental fee is considered as immovable income (48%) and movable income (16%), which are subject to tax under the existing rules and which should be reported in the annual personal income tax return.