Taxes on sole proprietorships
As an entrepreneur with a sole proprietorship, there is no distinction between your professional and personal financial income. You simply pay your taxes through personal income tax on your total taxable income. This is the income that remains after payment of your social security contributions, professional expenses and other possible deductions.
The personal income tax rate for self-employed persons is identical to that of employees. Belgian personal income tax is calculated progressively on the basis of tax brackets, which are indexed every year. The tax rate thus rises as your income increases. Below are the personal income tax rates for the tax year 2021 (income generated in 2020):
- Up to €13,440: 25%
- From €13,440.01 to €23,720: 40%
- From € 23,720.01 to € 41,060: 45%
- From €41,060.01: 50%
Example: You generate an annual turnover of €60,000 with your sole proprietorship. You deduct €20,000 in professional expenses and pay €8200 in social security contributions (in this example, 20.5% of €20,000) This leaves you with a taxable income of €31,800. After paying your personal income tax, you will end up with a net amount of €22,939.5.
Tax-free basic amount
Part of your income is completely exempt from taxes
. This is the so-called tax-free basic amount. Depending on your personal situation - marital status, children, disability,... - this amount may be higher. It will further reduce your overall tax burden.
In addition to the annual personal income tax, you must also take into account additional municipal taxes. This is set by the municipality or city in which you live. The rates for the additional municipal tax in Belgium can be found in this overview
Lower tax burden via a company
As an entrepreneur with a sole proprietorship, it often comes down to the fact that a large part of your turnover is taxed at 50%. Is your business doing well and is your turnover high over a longer period? Then a company can be a tax-efficient alternative
for your entrepreneurial career.