Sharing economy: the legislation has arrived!

The fiscal aspect of the Programme Act of 1 July 2016 introduces a new tax system specific to a certain income arising from the sharing economy.

What does the sharing economy mean?

Within the sharing economy, people mutually consume, produce and trade products, services, knowledge and money facilitated by peer-to-peer market places, business-to-business market places and cooperatives.

Peer-to-peer market places are usually web-based platforms where transactions of goods and services are carried out between equal parties. The platform brings together demand and supply. It is maintained and developed by a third party that often intervenes in the financial implementation of the transaction.

The question that arises is how the revenue that is generated through such activities is ranked for tax purposes.

Earned income or various income?

The ranking as earned income is a question of fact, taking into account the nature and frequency of the transactions carried out, their interrelationship, their importance and the organization that they require, the fact whether or not borrowed capital is used, whether or not there is a collaboration with other persons and whether or not it regards a secondary activity closely linked to the main activity, etc.

Given these (sometimes uncertain) facts, the government has decided to introduce a specific system of rules for revenues from services such as garden maintenance, mending clothing or giving guitar lessons, provided by a private individual to another private individual through the intermediary of a recognized on-line platform.

Characteristics of the new specific tax system

Provided that certain conditions are met (explained below), the income referred to is subject to a specific tax system effective since 1 July 2016. It is taxed at a rate of 20 %, after application of a flat-rate amount of occupational expenses of 50%, provided that:

• the services are granted only to natural persons not acting in the course of their business;
• the services are only granted pursuant to a general framework of agreements that have been established through the intermediary of a recognized web-based platform or a web-based platform that is organised by a public authority;
• the fees with regard to the services are paid or granted to the service provider only through the platform or through the intermediary of that platform.

Important: double threshold amount

• This specific tax system applies only to the income below a fixed threshold (starting amount: € 3,255/year indexed to € 5,000 for the income in 2016, however reduced to € 2,500 in 2016 since the system only became effective on 1 July). As soon as this threshold amount is exceeded, all income for the current year will be considered as normal earned income (normal rules);
• If the threshold was exceeded during the previous calendar year, the income of the current period, irrespective of the amount involved, will be regarded as 'normal' earned income.

In order to assess whether the threshold of € 5,000 has been exceeded or not, the gross amount of the fees paid or granted for the services will be taken into account. That gross amount equals the amount effectively paid or granted by the platform itself (or through its intermediary) to the service provider, increased by the amounts that have been withheld (withholding tax, expenses, commissions, other taxes, etc.).

What formalities?

The platforms acting as an intermediary will have to deduct a withholding from the fees that have to be settled through them, and will have to remit this withholding to the FPS Finance.

Each platform will also have to draw up an annual information sheet which is provided to the tax administration and the service provider.

These new provisions are applicable to the income paid or granted as from 1 July 2016, however they still have to be translated into implementing measures.

Sources: Programme Act of 1 July 2016, Belgian Official Gazette 4 July 2016 (ed.2) and explanation of the reasons for the draft Programme Act of 2 June 2016 (Chamber of Representatives doc 54 1875/001).

Author: Isabelle Caluwaerts

07/07/2016