An interesting thought on FinanceWorld. Shall we all become authors and get paid royalties.
If you write regularly and receive royalties, these are not taxed as earnings anymore. Since 2008, they have a favourable tax regime of 15 %, at least for the first €51,915 (that is the figure for 2009).
And that €51,915 is calculated after deduction of a lump sum of €10,383, so that you can earn up to €62,298 and only pay 15% tax. In fact, on the first €13,844 you pay only 7.5 % and on the bracket between €13,844 and €27,688 only 11.25%
This tax regime applies to authors of books, comic strips, contributions to news papers and magazines, paintings, sculptures, theater plays, movies, scenarios, data bases, music, illustrations, photos, user guides, brochures, …
When a record label, a publishing company or a newspaper pays royalties to an author, it will deduct 15 % and the author must not declare those royalties in his tax return anymore.
In any event, the rules are not very clear. If a journalist works for two papers, each will calculate the 15 % on the first €62,298 because they do not know of each other.
The tax regime is not limited to independent authors or journalists. If the employment contract of a journalist who is on the staff of a newspaper, mentions that all copyright belongs to the paper, it is only normal that part of his earnings are royalties that are taxed at 15 % … but the taxman does not share that view.
Before an employer can hire an employee from outside the EEA (the European Economic Area includes the 27 Member States of the European Union as well as Norway, Iceland and Liechtenstein, he must apply for an authorisation and a work permit for the employee.
In 2007, the rules had been simplified for all management levels under the top two levels (project managers, leaders of R&D teams, planning engineers, assistant heads of the accounting department, etc).
With effect from 29 May 2009, managers of headquarters do not need a work permit anymore if they meet the following conditions.
The head office must inform the regional authorities of the manager’s arrival in Belgium.
In 1997, the tax authorities realized that auditing every taxpayer every two years did not work. They took another approach: taxpayers could expect a major audit every six years, and that audit would cover the last two years. However, even that appeared to be too ambitious.
The tax authorities are changing their strategy again. Instead of carrying out a routine check every six, years, each tax office will analyse the tax files of companies and individuals and determine their fraud-risk. Taxpayers with a high fraud-risk will be examined every year. The tax authorities manage to explain this as progress: in the past a tax defrauder risked an audit once every six years, as of now he may well get an investigation every year.
Since about five years, tax returns are processed electronically, leaving more time for audits. The tax returns that are not filed electronically via Tax-on-Web are scanned and controlled automatically. The data on the tax return are compared with information that the tax authorities have received from other sources: salary statements, pension statements, bank certificates about pension saving, etc.
That can become difficult, because the possibilities to grant a pension directly (without passing via a group insurance or a retirement institution (pension fund)) have been limited by law. The purpose of the law is to secure the pension of the employees in case the employer would not be able to comply with his obligation to pay the pension. The Loi Vandenbroucke (28 April 2003) has rendered the conditions for such undertakings very cumbersome and ordinary companies that are not specialized pension institutions are forbidden to promise to pay for such pensions.
However, the company can still promise to pay a pension directly to one of its directors if they are self employed for social security purposes. However, for directors who pay social security contributions as employees the company will have to pass via a group insurance or a retirement institution.
How does it work? The company will draft a contract with the director mentioning the amount promised, the mode of payment (capital or annuity), whether it is index linked, what happens when the director dies before his retirement, etc… And the company will have to make sure it meets the conditions for the tax deduction (promise the pension before retirement, make sure that the director is paid regularly and at least once a month, and calculate whether the pension is under the 80 % limit). And in small companies, the contract should not be signed by the beneficiary on behalf of the company.
This contract can be signed shortly before retirement, but it can also do so long before the date of retirement. And in that case the company must record a provision on its balance sheet for the cost of paying a pension capital upon retirement or an annuity. The amount depends on the type of pension promised, i.e. the net present value is not the same for an annuity and for a pension capital.
The Belgian government on May 8 decided to adapt Belgium’s rules on the participation exemption to fall in line with the decision of the European Court of Justice in Cobelfret v. Belgium (C-138/07). As a result, Belgian companies will be able to carry forward the dividends received deduction that they were unable to carry forward in the past with effect from 1992.
In Cobelfret the ECJ ruled that the Belgian participation exemption (the equivalent of the dividends received deduction) is incompatible with article 4(1) of the parent-subsidiary directive because it does not effectively refrain from taxing dividends in some situations. (click here to read the article)