In order to generate professional income, each taxpayer will need to incur certain expenses. Business expenses are the cost of carrying on a trade or business. Whereas income is normally reported gross, expenses will be subtracted from the gross income by the tax office before it is subject to taxation. If you prefer not toapply the standard business expense deduction that is automatically granted in your Belgian tax return, you can always write off your actual expenses.
For many entrepreneurs, the expense of renting an office or warehouse for their business will make up a substantial portion of overhead costs. As long as the rental property is used entirely for your trade or business, the rental cost is normally also fully deductible. If you do not have separate business premises available but prefer to use part of your home for this, you can claim a proportion of the rent you pay, as a business expense.
Generally, deductions for a home office are based on the percentage of your home devoted to business use. So, if you use one or more rooms in your house or apartment for conducting your professional activity, you need to figure out the percentage this represents compared to the total square meterage of your home. The surface area of your property is relevant for this.
For example, if your office takes up 20% of your living space, you can deduct the rent and any related expenses (e.g. utilities, insurances, taxes, etc.) for the same 20%. There is no maximum or minimum percentage that you can claim, but it should always be realistic. Everything depends on the factual circumstances, but a business use percentage of around 25% is quite common. If you also have in-person meetings with clients or customers in your home, this could justify a higher deduction.
An important element to consider is whether the rental agreement itself allows a business use of the property. In Belgium, the landlord is normally taxed on the ‘cadastral income’ (CI), not on the actual rental income, which means less income tax to pay. However, if (part of) the property is rented out for business use, the landlord is taxed on the actual rent received instead. To avoid this, rental agreements often include a clause that the property must not be used professionally. In that case you will not be able to deduct the rent as a business expense.
However, the rules are different in case your landlord is a company, because in that case the lessor is always taxed on the actual rent received, so you can deduct it without any problem.
In some cases, therent can be fully deductible, even if (most of) the property is for residential use. For example, if you rent a property close to your workplace during the week to avoid traffic on your commute or your employment contract requires you to live near your workplace.
TAXPATRIA® can assist with optimizing business expenses and filing your income tax return, and handle disputes with the tax office about certain disallowed expenses.