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Business expense allowance for freelancers.

As from tax year 2019 (income year 2018) self-employed individuals and independent contractors can benefit from the same business expense allowance as employees. Before, freelancers were always required to prove their actual business expenses, as it was not allowed for them to deduct their professional costs on a flat-rate basis.

If you work as an individual freelancer and you generate profit which is taxable in Belgium, whether as a resident or as a non-resident, the percentage is currently 30% of your gross profit with a maximum allowed deduction of € 2.950 (basic amount). After indexation this amounts to € 4.720 for tax year 2019 (income 2018) and € 4.810 for tax year 2020 (income 2019).

The business expense allowance is calculated on the gross profit amount after the deduction of social security contributions and the purchase price of goods and raw materials. The total business expense allowance that self-employed can now deduct thus consists of three components: i) the business expense allowance itself, ii) any paid (and not refunded) social security contributions, and iii) purchased goods and raw materials for your business.

If you combine different professional activities (e.g. employee and self-employed), the business expense allowance for each category is calculated separately. Since the maximum amount then applies for each category separately, this can be quite advantageous for taxpayers.

As the tax authorities recently published an administrative circular on the matter (Nr. 2019/C/15 of 8 February 2019), they confirmed that the expense allowance does not apply to compensations received for the temporary loss of income or to profit from a previous professional activity. Neither does it apply to taxpayers (and their assisting spouses) who are already taxed on a flat-rate basis.