SELF-EMPLOYED IN A SECONDARY OCCUPATION.

Transcription

1 SELF-EMPLOYED IN A SECONDARY OCCUPATION

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3 INTRODUCTION Working as a self-employed person in a secondary occupation is a growing phenomenon, also in the cultural and creative sectors. There are a great many good reasons for setting yourself up as a self-employed person in a secondary occupation. You can choose an activity as a self-employed person in a secondary occupation to benefit from an additional income on top of your salary as an employee. If you become increasingly engaged in your creative activity, but the income is still not enough to become fully self-employed, the secondary occupation can also be an intermediate step towards a self-employed activity in your primary occupation. This brochure explains what the ground rules are with respect to the secondary occupation What are the conditions? Who is eligible? What formalities must be observed? The tax implications of this status are also presented, as are the benefits and drawbacks associated with it. Kunstenloket vzw (non-profit organisation) is the contact point for business and legal advice for artists and creatives. The contents of this brochure, as well as other business information, can be found at For further questions, you can always contact one of our consultants. Jan Timmermans Director of Kunstenloket vzw 1.

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5 INHOUD INTRODUCTION 1 1. WHO CAN BECOME SELF-EMPLOYED IN A SECONDARY OCCUPATION? Based on one s own status Based on income replacement or a pension Sickness benefit Unemployment benefit Pension Based on derived social rights 7 2. HOW DO YOU BECOME SELF-EMPLOYED IN A SECONDARY OCCUPATION? Opening a financial account Joining a social security fund Registering with the Enterprise Counter Office Registering with the VAT Office Joining a health insurance fund HOW ARE THE SOCIAL SECURITY CONTRIBUTIONS CALCULATED? Provisional social security contributions Final amounts due WHAT SOCIAL RIGHTS DO YOU BUILD UP? In principle, you do not build up any social rights Exception: you pay contributions like a self-employed person in a primary occupation ARE YOU ALLOWED TO EARN AN EXTRA INCOME WITHOUT RESTRICTION? WHAT ARE THE ACCOUNTING AND TAX OBLIGATIONS? VAT Personal income tax DISCONTINUING THE SECONDARY OCCUPATION COMBINATION OF UNEMPLOYMENT BENEFIT AND SELF-EMPLOYED SECONDARY OCCUPATION Combination with an artistic activity Combination with a non-artistic activity COMBINATION OF PENSION AND SELF-EMPLOYED SECONDARY OCCUPATION Artistic services Non-artistic services 19 3.

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7 1. WHO CAN BECOME SELF-EMPLOYED IN A SECONDARY OCCUPATION? 1.1. Based on one s own status Anyone who engages in a professional activity as an employee, teacher or civil servant may request, for additional self-employed activities, the status of self-employed person in a secondary occupation. As an employee Alongside your job as an employee, you can additionally assume the status of self-employed person in a secondary occupation. The condition, however, is that your employment as an employee is at least equivalent, in terms of number of hours, to half of a full-time job. This corresponds to employment as a employee for a minimum of 19 hours a week. Someone who, for instance, works 19 hours a week as an administrative clerk can also have an extra income as a self-employed artist. The Belgian National Institute for the Social Security of the Self-employed (NISSE) will evaluate the conditions of part-time employment each quarter. Please note: When you no longer meet the conditions of part-time employment, the Belgian Government will regard you as a self-employed person in a primary occupation and you will have to pay social security contributions based on this status. The social security contributions of a self-employed person in a primary occupation are generally considerably higher than those of a self-employed person in a secondary occupation. Therefore, in the case of limited incomes, you had best check that the social security contributions will not become too high, especially if your occupation as an employee amounts to fewer than 19 hours a week. In such case, it is often better if you choose to discontinue the self-employed activity so as to avoid paying excessive social security contributions. In the education sector If you are in the education sector and have a permanent position, you must have a job that is at least equivalent to 6/10ths of a full-time work schedule. In the higher education sector, this often corresponds to a work schedule of 12 hours a week. If you are a non-tenured teacher, you must work at least 50% of a full-time work schedule. If you work as a contract employee, the rules for ordinary employees apply. 5.

8 As a civil servant As a civil servant, you can become a self-employed person in a secondary occupation, provided you work at least 8 months or 200 days per year. In addition, the work schedule performed must at least be equal to half the number of hours of a monthly full-time job. Often, civil servants will also need permission from their employer to start a self-employed secondary occupation. Before starting an activity as a self-employed person, you, as a civil servant, had best check whether or not you have to ask permission from your employer Based on income replacement or a pension Sickness benefit If you receive sickness benefit, special rules apply. If you receive sickness benefit, your incapacity for work must be at least 66% to be able to start as a self-employed person in a secondary occupation. In addition, the sickness benefit received must be at least equal to the minimum pension for a single self-employed person. If you receive sickness benefit, you will generally need permission from the physician of the paying health insurance fund. This physician will more specifically examine whether starting the self-employed activity is feasible and justified from a medical point of view Unemployment benefit Starting as a self-employed person in a secondary occupation is, in principle, excluded for persons receiving unemployment benefit. However, there are some exceptions. For artistic services, this restriction does not apply. If you start a self-employed secondary occupation to provide artistic services, you can start at any time in conjunction with unemployment benefit. At you will find more info on the term artistic activity. If artistic services are not involved, you are over the age of 61 or demonstrate a professional history of 41 years, and you receive an exemption from the National Employment Office of Belgium (RVA) to be available for work, you can also become a self-employed person in a secondary occupation. You can apply for this permission using the C89 form Application for exemption based on age or professional history. More info at 6.

9 As from 2017, however, the conditions will become more stringent. To receive the exemption, you must be over the age of 62 or present a professional history of 42 years. If you were engaged in a self-employed secondary activity before you became unemployed, you may continue to engage in this secondary activity under certain conditions, even if non-artistic services are involved.the conditions relating to the combination with unemployment benefit are set out in chapter Pension Pensioners may also develop a self-employed secondary occupation. Pensioners are not technically regarded by social security as self-employed persons in a secondary occupation. After all, they do not have a primary occupation and they fall into the special contribution category of pensioners. The combination of a pension with a self-employed secondary occupation is further explained in chapter Based on derived social rights Those who are involved in few or no professional activities cannot, in principle, start a self-employed secondary occupation. You can then possibly rely on the derived social rights of a third party and thus still be allowed to start a self-employed secondary occupation. This concerns married persons, widows/widowers and students under the age of 25. The condition, however, is that the self-employed income does not exceed 6, euros (amount for income year 2016, indexed annually). If this amount is exceeded, then these persons are considered self-employed persons in a primary occupation. 2. HOW DO YOU BECOME SELF-EMPLOYED IN A SECONDARY OCCUPATION? With regard to obtaining the status of self-employed person in a secondary occupation, the same administrative obligations apply as for the status of self-employed person in a primary occupation Opening a financial account As a self-employed person, you must have your own current account that is separate from your personal account. You had best go along to your bank to open an additional account for your self-employed activity. You will preferably use this account solely for transactions in connection with your business. 7.

10 2.2. Joining a social security fund You may join a social security fund of your choice. If you exceed the deadline for membership, the NISSE will ask that this still be put in order within thirty days. If your membership is still not in order, you will be automatically affiliated with the Belgian National Fund for the Self-Employed. This Fund will then collect the contributions. In case of late membership, you risk an administrative fine of between 500 and 2,000 euros. It is therefore strongly recommended that you ensure that your membership with a social security fund is in order before starting the self-employed activity. After four years of uninterrupted membership, you can always change social security funds free of charge. If you set up a company to engage in self-employed activities, you will require two memberships with a social security fund: one for yourself as a natural person and one for the company Registering with the Enterprise Counter Office Each self-employed person, both in a primary and secondary occupation, is obliged to register with a recognised Enterprise Counter Office. Consequently, the self-employed person will be registered in the Crossroads Banks for Enterprises (CBE). The Enterprise Counter Office will verify whether you, as a self-employed person starting out, meet the conditions for being able to engage in a certain activity or profession. A certificate is generally required which attests to the satisfactory knowledge of the business management. For certain professions, specific professional knowledge is also required. Before starting a self-employed artistic activity, an artist will not have to submit any business management certificate, because engagement in an artistic activity is considered a liberal profession. If all start-up formalities have been handled through the Enterprise Counter Office, you will receive, as a self-employed person, a unique business number. After activation, this number is also the VAT number. The fees for registration with the Enterprise Counter Office are set by law and are therefore, as a general rule, the same for each Enterprise Counter Office. The registration fee is euros (amount for income year 2016, indexed annually). The list of recognised Enterprise Counter Offices can be found at 8.

11 2.4. Registering with the VAT Office Self-employed persons who are liable for VAT may, after registration with the CBE, have their business number activated as a VAT identification number. Upon registration with the CBE, the Enterprise Counter Office can also activate a VAT number electronically against extra payment of a fixed amount. However, you can also activate the VAT number yourself. You can contact the VAT inspection office of the region where your business is established Joining a health insurance fund Each self-employed person must join a health insurance fund. The health insurance fund controls the contributions for health and disability insurance (doctors, dentists, pharmacists and hospital fees, etc.) and other additional services. As from 1 January 2008, all self-employed persons who correctly pay social security contributions to their social security fund are insured for all major and minor health risks. As a self-employed person in a secondary occupation, you are usually already a member of a health insurance fund through your status as an employee. Through this membership, you are therefore insured under health insurance. 3. HOW ARE THE SOCIAL SECURITY CONTRIBUTIONS CALCULATED? Self-employed persons in a secondary occupation must also pay social security contributions to the NISSE. Generally, the social contributions of self-employed persons in a secondary occupation are lower than the contributions of self-employed persons in a primary occupation. This is mainly because self-employed persons in a secondary occupation earn less, but also because the provisional social security contributions during the first three years of the activity are considerably lower. Unlike self-employed persons in a primary occupation, self-employed persons in a secondary occupation are almost never entitled to social security for the self-employed. Unless you, as a self-employed person in a secondary occupation, pay the same in contributions as a self-employed person in a primary occupation, these contributions consequently count as solidarity contributions. 9.

12 3.1. Provisional social security contributions As from 1 January 2015, provisional social security contributions are calculated on the net professional income for the year itself. Net income is the income after deducting all professional costs. For example, the social security contributions for 2016 are calculated on the taxable professional income for 2016 itself. Please note: A self-employed person starting out pays his or her social security contributions on a prorated or recalculated annual income. An income of 10,000 euros between 1 July and 31 December means a recalculated income of 20,000 euros. As long as the income for 2016 is not known, you can, as a self-employed person in a secondary occupation, pay a provisional contribution, either based on the income of three years ago (2013) or, if no self-employed activity existed yet in that year (2013), the fixed minimum contributions that can be found in the tables below. You can also calculate your income yourself and increase your provisional contributions through a flexible application or a simple extra payment. If you expect your income to be under certain thresholds and you can demonstrate this with objective evidence, you may request a reduction in social security contributions. Approximately two years later, the tax authorities will communicate your income to the social security fund. Once this income is known, an adjustment will follow. With this adjustment, the provisional contributions for 2016 are converted into final contributions, which are thus calculated on the income for that year. You will then have to pay, or you will receive, the difference. Please note: Those who enjoy reduced social security contributions and yet earn more, will not only pay adjustment contributions. Increases will also be charged for improper applications for reduced social security contributions 10.

13 The provisional minimum quarterly contributions for 2016 for a self-employed person in a primary or secondary occupation are as follows:: Year primary occupation secondary occupation 1 666,80 euros 73,77 euros 2 683,06 euros 75,57 euros 3 699,32 euros 77,37 euros The figures in the table are based on the pay scale for the income year These amounts are indexed each year. More information can be found at You can also consult the most recent figures here: Exemption threshold A self-employed person in a secondary occupation does not have to pay any social security contributions if the net income is lower than 1, euros per year (amount for income year 2016, indexed annually). This is the so-called exemption threshold Final contributions due The final contributions due are calculated on the net income of three years ago. The net income of three years ago is revalued, however. This means that the income is multiplied by a coefficient that is determined each calendar year, based on the current economic situation. The law on measures for strengthening job creation and purchasing power introduces a gradual reduction in the contribution rate for the calculation of social security contributions for the self-employed. As from 2018, only the uniform rate of 20.5% will continue to apply. The contribution rate of 22% that applied to incomes of established self-employed persons in a primary occupation and in a secondary occupation has been reduced to 21.5% for That will become 21% in 2017 and, finally, 20.5% in The social contributions for 2016 are therefore equal to 21.5% of the portion of the revalued professional income for the reference year which does not exceed 56, euros. In any case, for their first year, the self-employed enjoy a reduced rate of 20.5%. The social contributions are equal to 14.16% of the portion of revalued professional income for the reference year which is above 56, euros, without exceeding 82, euros. You do not pay any more social contributions on the revalued professional income above 82, euros. 11.

14 4. WHAT SOCIAL RIGHTS DO YOU BUILD UP WITH A SELF-EMPLOYED SECONDARY OCCUPATION? 4.1. In principle, you do not build up any additional social rights. Usually, the social rights that a self-employed person in a secondary occupation builds up through this secondary occupation are rather limited. A self-employed person in a secondary occupation will often build up social rights as an employee, civil servant or pensioner. The social security contributions that the self-employed person in a secondary occupation pays into the scheme for the self-employed do not, as a general rule, result in social rights being built up in self-employed status. This is therefore a solidarity contribution in this case. Please note: As a part-time employee, you only build up a very limited pension in employee status. You also do not acquire any additional rights through social contributions as a self-employed person in a secondary occupation. You build up very few pension rights through this combination Exception: you pay contributions as a self-employed person in a primary occupation Only if you, as a self-employed person in a secondary occupation, pay the same as a self-employed person in a primary occupation can you build up social rights in self-employed status. This means that you at least pay contributions based on a minimum income of 13, euros. This could certainly be interesting for people who work part-time as employees or civil servants. 12.

15 5. ARE YOU ALLOWED TO EARN AN EXTRA INCOME WITHOUT RESTRICTION AS A SELF-EMPLOYED PERSON IN A SECONDARY OCCUPATION? In principle, there are no restrictions on the possibility to earn an extra income as a self-employed person in a secondary occupation. Neither in terms of income nor in terms of hours worked is there a limit set by law. Depending on the status, there are certain exceptions. - Civil servants, for example, will have to ask in advance for permission from their employer to be able to engage in a self-employed secondary occupation. The employer can impose possible restrictions here. - Those receiving sickness benefit must request authorisation from the advising physician to be allowed perform activities as self-employed persons. Moreover, there is limited potential to earn as a self-employed person in a secondary occupation without fully or partially losing the benefit. - For those receiving unemployment benefit or a pension, there are restrictions on income in certain cases. Cumulation with unemployment benefit and the pension is covered in chapters 8 and WHAT ARE THE ACCOUNTING AND TAX OBLIGATIONS? For a self-employed activity in a secondary occupation, basically the same accounting and tax obligations apply as for self-employed persons in a primary occupation. These obligations may vary depending on the turnover and the legal form. For example, a company will have more obligations at an accounting level than a sole trader VAT A self-employed person in a secondary occupation is, as a general rule, subject to the VAT regime. This means that he will have to charge VAT, make regular VAT returns and repay the VAT due to the VAT authorities. 13.

16 The exemption scheme for small enterprises ensures that you, as a self-employed person, are largely relieved of the administrative and tax obligations for those liable for VAT. The condition, however, is that the annual turnover figure does not exceed 25,000 euros, excluding VAT. Starters who wish to enjoy this exemption will report this to their VAT inspection office at the time of start-up. When you choose this exemption scheme, you do not have to charge any VAT, nor do you have to make any VAT returns. However, before 31 March each year, you must submit a VAT list and, if applicable, make an intra-community VAT return. This exemption means, however, that you cannot receive any VAT deductions either. All your invoices must, in addition, contain the following wording: Special exemption scheme for small enterprises. For artists/self-employed persons, there are quite a few more VAT exemptions and reductions. You can find information on this at Personal income tax Personal income tax rates are the same for the self-employed as for employees, regardless of whether the self-employed activity is performed in a secondary or primary occupation. The income from the two activities is aggregated for tax purposes. This aggregation can lead to a higher tax rate when certain income thresholds are exceeded. If an employee with a full-time salary becomes a self-employed person in a secondary occupation, the tax rate for the income as a self-employed person may be high as a consequence. The tax rates for personal income tax are progressive and range from 25% to 50%. As a self-employed person in a secondary occupation, you must, like any self-employed person, make a quarterly advance payment in order to prevent tax increases. If you have just started as a selfemployed person and are under the age of 35, these increases will not be charged. Just like a self-employed person in a primary occupation, as a self-employed person in a secondary occupation you have the choice, if it is a case of a liberal profession, to either deduct actual professional costs from the earnings or to opt for fixed-rate costs based on the income received. The actual costs are the professional costs, for which one can actually provide evidence, in relation to the accumulated income. 14.

17 Fixed-rate costs (income year 2016, assessment year 2017): from 0,01 to 5.760,00 euros 28,7% from 5.650,00 to euros 10% from tot euros 5% from euros 3% The maximum fixed-rate professional costs amount to 3,980 euros. More information on fixed-rate and actual professional costs can be found at and via 7. DISCONTINUING THE SECONDARY OCCUPATION The self-employed secondary occupation can be discontinued at any time by notification to the Enterprise Counter Office and the social security fund. The Enterprise Counter Office will charge a fixed-rate fee for this. Sometimes, the secondary occupation is discontinued before the self-employed person concerned has made any significant profits. This is, for example, because the secondary occupation does not achieve the anticipated success. If the secondary occupation only yields a limited income and the secondary occupation is discontinued, the NISSE may allow the social security fund to reimburse all or part of the social security contributions already paid. The self-employed person does have to make an explicit request to this effect to the NISSE. This request can be made by ordinary letter to the NISSE or through the social security fund. 8. COMBINATION OF EMPLOYMENT BENEFIT AND SELF-EMPLOYED SECONDARY OCCUPATION The NEO can allow someone receiving unemployment benefit to engage in a self-employed secondary occupation. The condition, however, is that the activity has to have been engaged in for at least three months before this person became unemployed. However, an exception to this is made for those who are engaged in an artistic activity. 15.

18 8.1. Combination with an artistic activity If you are engaged in an artistic activity as a self-employed person in a secondary activity, you may cumulate this income with unemployment benefit. You can start this artistic activity at any time during unemployment. Whether you are entitled to unemployment benefit for the days that you are engaged in an artistic activity depends on the kind of activity. Kind of activity State on the control card? Artistic creation No, except for the days: - When you are present at a public exhibition under an agreement with a third party that commercialises the creations or in the case of an exhibition on premises intended for the sale of such creations and you, as an artist, are responsible yourself for the sale. - When audiovisual works are recorded. Artistic performance or interpretation for a public audience Yes Entitled to unemployment benefit? Yes, except for the days indicated on the stamp card. No If the net taxable income from the self-employed artistic activity does not exceed 4, euros annually (income for 2014, indexed), you will receive full unemployment benefit that has not been reduced. If the net taxable income exceeds 4, euros annually, the daily benefit rate for that income year will be reduced by 1/312th of the extra amount. If one earns a significant amount as a self-employed person in a secondary occupation in addition to unemployment benefit, this may, in certain cases, consequently lead to reimbursement of all or part of the unemployment benefit. 16.

19 At you can find the formula for the portion by which the unemployment benefit will be reduced if the above amount is exceeded. If you receive unemployment benefit and are additionally engaged in an artistic activity as a selfemployed person in a secondary occupation, you must declare this activity to the paying institution or the NEO, using the C1 Artist form. On this form, you must indicate the kind of activities you wish to perform. You must make this declaration when applying for the benefit or from the time you start the selfemployed activity or commercialise the creations (e.g. publication of a book or CD) Combination with a non-artistic activity If you receive unemployment benefit and, in addition, wish to perform a non-artistic activity as a selfemployed person, you must meet several conditions: You must declare the activity at the time of application for the benefit. You must have been engaged in the secondary occupation for at least three months prior to unemployment. It is therefore not possible to start a secondary occupation during unemployment, unless you fall into the exception categories in Chapter You may only engage in the secondary activity after 6 p.m. and before 7 a.m. Moreover, it may not be a typical evening occupation or an occupation that is expressly excluded by law (e.g. catering, insurance agent, market vendor, etc.). These activities are, however, permitted if they are of a minor nature. On Saturdays and Sundays, the restriction in terms of hours does not apply. On these days, you may work without restriction, but your benefit will be reduced by the number of Saturdays and Sundays that you have worked. The income limit of 4.190,16 euros (income for 2014, indexed) also applies to the combination of unemployment benefit and a non-artistic self-employed activity. For the combination of unemployment benefit and an occasional (non-professional) activity, you do not need to make any prior declaration to the NEO. You must, however, tick the boxes on your control card that correspond to the days worked. You are not entitled to any benefit for these days. 17.

20 9. COMBINATION OF PENSION AND SELF-EMPLOYED SECONDARY OCCUPATION 9.1. Artistic services If you combine a pension with providing artistic services as a self-employed person in a secondary occupation, you may earn an extra income without restriction in addition to the pension if: The income has no effect on the labour market (measurement of competition). You, as an artist, are not a trader (an artistic activity is not, in principle, a commercial act, unless trading is considered). You will, of course, have to pay the required social security contributions as a self-employed person and you will remain subject to tax obligations Non-artistic services In the past, strict conditions applied for cumulation of a pension with a self-employed secondary occupation. In recent years, these rules have undergone some radical changes. Those who are aged 65 and above and enjoy a retirement pension or those who have retired based on 45 years of career may earn an extra income without restriction. For those who do not meet these conditions, cumulation limits will continue to apply. These people will also retain their right to a pension. The pension amount to be paid out is, in these cases, reduced by the percentage by which the limits are exceeded. The limits for cumulation of the pension can be found at or in the tables below (figures for 2015). 18.

21 A. Income authorised before 65 years Only retirement pension or retirement and survivor s pension No dependent children Dependent children Self-employed person < 65 years euros euros Employee < 65 years euros euros Only survivor s pension No dependent children Dependent children Self-employed person < 65 years euros euros Employee < 65 years euros euros Retired with 45 years of career No dependent children Dependent children Self-employed person < 65 years No restriction No restriction Employee < 65 years No restriction No restriction B. Income authorised after 65 years Only retirement pension or retirement and survivor s pension No dependent children Dependent children Self-employed person 65 years No restriction No restriction Employee 65 years No restriction No restriction Spouse of the person entitled to a family pension No dependent children Dependent children Self-employed person 65 years euros euros Werknemer 65 years euros euros Only survivor s pension No dependent children Dependent children Self-employed person 65 years euros euros Employee 65 years euros euros 19.

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23 The brochure Self-Employed in a Secondary Occupation is a publication by Kunstenloket vzw. Kunstenloket vzw Sainctelettesquare 19 (7th floor) Brussels T info@kunstenloket.be Publication date: May 2016

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