Reducing the tax burden as a sole trader or one-man business

Assisting partner and self-employed assistant

If you are married or in a registered partnership and operate as a sole proprietor, you can allocate a salary to your partner for the work they perform within your business. This individual is then called an 'assisting partner'.

The advantage of assigning a part of the net profit to the assisting partner is that it helps to reduce the tax burden in higher tax brackets. Part of the net profit is taken from the highest tax brackets and taxed again at lower brackets for the contributing partner. In addition, the tax-free amount can be applied again to that part, providing an extra tax benefit.

If you do not have a partner but could use an extra pair of hands in your business, you can hire a self-employed assistant. This person assists you as a self-employed individual without being bound by an employment contract. It offers more flexibility in whether or not to utilize the assistant. Moreover, the costs in terms of remuneration are lower compared to those of a regular employee. The only cost you incur is the salary paid to the assistant. You do not have to pay additional social security contributions and the like. The assistant is often a family member. However, the assistant must establish themselves as self-employed.

Investments

If you make an investment in your sole proprietorship, you don't have to limit the depreciation to the number of days you owned the investment. This means that an investment made in December counts as much toward expenses as one made in January. This can be interesting if you want to reduce profits at the end of the year. Moreover, the depreciation annuity can be doubled once more, as degressive depreciation is also allowed in personal income tax.

Tax credit

If you finance your investments with your own resources, you may be eligible for a tax credit. This credit is granted if the increase of your own resources in the current year is greater than the highest increase in the previous 3 years. In this case, the tax credit is 10% of the difference between the own resources in the year of investment and the highest amount in any of the previous 3 years, up to a maximum of EUR 3,750. The tax credit must eventually be repaid. The same rule applies to newly self-employed persons who have been active for less than 3 years, but it is calculated on the basis of the growth of their own resources in the relevant tax period.

Capital gains from discontinuation

If capital gains are realized on (im)material fixed assets upon definitive discontinuation, they can be taxed at 10% in the following cases: when the discontinuation occurs at the age of 60 or older, upon death, or upon forced definitive discontinuation. If the discontinuation occurs at another time, a tax rate of 16.5% is applied to tangible fixed assets and 33% to intangible fixed assets (provided that the requirements of the '4x4 rule' are met).

If the asset (e.g., real estate) is used for private purposes for a number of years after discontinuation before being sold, the realized capital gain will no longer be taxed. Capital gains achieved during the duration of the sole proprietorship on tangible fixed assets held for longer than 5 years are also taxed at a rate of 16.5%.