Do I pay tax or social security in Belgium as a foreign contractor?
Multinational companies and international organizations are in constant need of short-term contractors, often with an IT or engineering background. Companies contract with temporary work or recruitment agencies to hire interim workers from both within and outside the EU. Contractors typically operate as individual freelancers or through their own limited company. They are contracted in a B2B context on a fixed-term basis, usually to work on specific projects, typically for a couple of months, but sometimes for several years.
If you are a contractor operating in Belgium as a sole trader registered in your home country, or with a foreign limited company, you should make sure you are compliant with local regulations, and your tax affairs are in order. Any contractor who is active in Belgium on a more permanent basis would normally be expected to pay social security, VAT, and income tax in Belgium.
Depending on whether you work as an individual freelancer or with a limited company, there are personal as well corporate tax consequences to consider. If the Belgian tax authorities determine that your business is operating in Belgium continuously rather than just sporadically, you face the risk of having a ‘fixed base’ or ‘permanent establishment’ (PE) in Belgium liable for income taxation. The fact that you would also pay tax on your professional earnings in your home country, even with a double tax treaty in place, would not be a valid argument in this case.
In general, the chance of creating a PE for VAT purposes is less likely, but you should make sure that a PE is not triggered inadvertently. If you fail to meet the legal requirements when invoicing a client in a cross-border situation, this could make you liable for Belgian VAT as well.
In respect to social security, you may be exempt from this in Belgium, if you have successfully obtained a ‘PD A1’ from the social security authorities in your home country. With this document in hand you continue to be covered by a foreign social security system while working in Belgium. This ‘PD A1’ would normally be valid for a maximum of 24 months. Any foreigner working in Belgium, paying social security abroad, would have to complete a LIMOSA declaration at the same time. This allows the authorities to monitor the foreign workforce that is active in Belgium. If you opt to pay social security in Belgium, the LIMOSA declaration is not necessary.
Any contractor active in Belgium, whether as a sole trader or via a limited company registered abroad, is likely to be confronted at some point with questions from the Belgian authorities, a potential double tax issue, or social security claim. Therefore, it is better to anticipate and overcome these challenges before they actually emerge.
Different options are available for anybody who wants to take on a contracting assignment in Belgium. We assist you with registering your foreign business in Belgium or establishing a Belgian legal entity, as well as any relevant accounting, VAT filing, and tax filing requirements.