Some young people cannot wait until they have graduated to set up their own company. Until now, however, there have been no special rules regulating tax and social security contributions with regards to these student entrepreneurs. For the parents of these students, this situation has also often entailed the loss of the tax benefit for dependent children. However, from now on, thanks to the Act of 18 December 2016, self-employed students still qualify as dependent children. They can also enjoy a special arrangement with regards to social security contributions.
New statute for self-employed students
The Belgian legislator has introduced a special status for self-employed students that regulates taxation as well as social security contributions. Self-employed students are (1) students between 18 and 25 years old (2) enrolled at a Belgian or non-Belgian institution for at least 27 credits or 17 hours per week, (3) who regularly attend lectures (with confirmation by certificate provided by the place of higher education) and (4) who exercise an independent activity without being subject to an employee/employer relationship.
Exemption from/ reduction of social security contributions
Self-employed students can be exempted from paying social security contributions if their net taxable earned income (i.e. gross pay less social security contributions and actual costs or flat-rate (3%) costs) do not exceed EUR 6,648.12 (figure for 2017). However, to enjoy this exemption, an application must be made to the Belgian social security office requesting an exemption from social security contributions. If an application is not made, then the provisional contribution for a secondary job is charged at +/80 EUR per quarter.
However, a reduced social contribution is charged if the net taxable earned income is greater than EUR 6,648.12 but less than EUR 13,296.25 (figure for 2017). The reduced contribution of 20.5% (first year of self-employment) or 21% (from the second year of self-employment) is payable on the difference between the net taxable earned income for that year minus EUR 6,648.13 (as of 2018, the percentage for each self-employed person is equated to 20.5%).
Once the net taxable earned income reaches EUR 13,296.25 or more, the self-employed student no longer enjoys an exemption from or reduction of social security contributions. In this case, the same contributions are payable as for a self-employed primary activity; therefore, at least the minimum contribution for a main job will be payable.
Tax benefit for dependent children
On the fiscal side, the new regulations affect the assessment as to whether or not a self-employed student can be considered as a dependent child.
For a child to be considered as dependant, the net subsistence amount defined by the Belgian tax authority may not exceed EUR 3,140 (2017 tax year). To determine the amount of subsistence, the salaries of employed students in the first bracket of EUR 2,610 (2017 tax year) are not included. From the 2018 tax year onwards, this first income bracket will also be disregarded for self-employed students.
Spouses who assist cannot benefit from the self-employed student system under the new legislation.
Likewise, the income of self-employed students does not qualify for the purposes of the tax credit for low-income activity.
The legislator has also anticipated that a student receiving remuneration as a managing director cannot be considered as a dependent child in certain cases. More specifically, this exclusion applies if the following conditions are cumulatively met:
• The managing director salary received by the self-employed student qualifies as a company expense;
• The self-employed student is the managing director of a company in which another managing director is the person on whom the self-employed student is dependant;
• The person on whom the self-employed student is dependant moreover 'controls' this company;
• These managing director salaries exceed EUR 2,000 per year and make up more than half of his/her taxable income, except for the maintenance payments.
Entry into force
This new regulation entered into force on 1 January 2017. The tax provisions apply from the 2018 tax year onwards.
In order to benefit from the self-employed student legislation, a specific application must be submitted.
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