Freelance tax terms, explained

Plain-language definitions of the terms that decide how much of your revenue you keep in Belgium. No jargon, no prior knowledge assumed.

28 terms

Tax

Revenue: The total turnover your business bills clients before any costs or taxes are taken out.
Business expenses: The genuine costs of running your business that reduce the profit you get taxed on.
Corporate tax: Tax your company pays on its profit before any money reaches you.
Corporate tax rate: The percentage of company profit that goes to corporate tax — lower on a first tranche if conditions are met.
Taxable profit: What is left of revenue after business expenses and your salary are deducted — the amount corporate tax is calculated on.
After-tax profit: What the company keeps once corporate tax has been paid on its taxable profit.
Retained in company: After-tax profit left inside the company instead of being paid out to you this year.
Net in pocket: What actually reaches you personally after every tax and cost.
Effective keep rate: The share of every euro of revenue that ends up actually in your pocket, after every tax and cost along the way.
Investment deduction: An extra tax deduction on top of normal depreciation for qualifying new business investments.

Company vs sole trader: Two ways to work: through a company (BV) or as a one-person business.

Social contributions: Mandatory contributions self-employed people and directors pay toward their own social security.
Personal income tax: The progressive tax you pay on your own salary, on top of social contributions.
Director salary: The gross pay you set for yourself as company director, out of the company profit.
Net salary: What actually lands in your account after social contributions and personal tax are taken off your gross salary.
Copyright income: A favourable, separately-taxed way to be paid for original creative or software work you produce.

Dividend: A payout of company profit to you as a shareholder, separate from your salary.
Dividend withholding: A tax taken when the company pays profit out to you personally.
Net dividend: What you actually receive from a dividend after withholding tax is deducted.
VVPR-bis: A reduced dividend withholding rate that kicks in once your shares have been held long enough.

Liquidation reserve: A way to set aside company profit now at a small upfront cost, to pay it out later at a much lower tax rate.
Pension contributions: Money set aside today, with a tax break, to build your own retirement pot.
VAPZ: A personally-funded pension top-up for the self-employed that also lowers your taxable income.
IPT: A company-funded pension plan for the director, deductible for the company within a legal ceiling.

Meal vouchers: A near-tax-free daily benefit a company can give its director instead of extra salary.
Eco vouchers: A fixed yearly tax-free allowance a company can pay its director for eco-friendly purchases.
Home-office allowance: A tax-free monthly lump sum a company can pay a director who structurally works from home.
Bicycle allowance: A tax-free allowance a company can pay a director who commutes by bike.