Making money in sharing economy
These last few weeks, there has been quite some commotion again about sharing economy platforms. There is still a great deal of uncertainty about what the sharing economy is all about and how the legal framework should be applied. However, legislation is not complicated if the platform you are using, has been authorized and meets all the necessary conditions. What exactly does the current legislation imply?
A brief reminder
In order to deal with the criticism regarding tax-free income earned by private individuals using sharing platforms in the hotel, restaurant, catering and courier sector, the Programme Act of 1 July 2016 was a first step towards a system of favourable tax conditions for services to and by natural persons not acting within the context of their professional activities. If these conditions are met and an authorized sharing platform is used, a favourable tax regime will be applied. Due to the lack of guidelines, this law has not been implemented immediately. We had to wait for the Royal Decree of 12 January 2017 for the first sharing platforms to be officially recognized. A list of all platforms that have since been authorized, can be found on the website of the Federal Public Service of Finance (FOD Financiën).
Since 1 March 2017, a withholding tax of 10 percent applies to income derived from the sharing economy that does not exceed an income threshold of € 5100 for the year 2017. For a service that costs € 10, a € 1-tax will automatically be withheld through the recognized platform and transferred to the government. In addition, a platform may also charge a commission for the use of the platform. The percentages withheld will depend on the platform you are using.
Meanwhile, work is continuing on the extension of the law concerning the sharing economy and some changes (with hopefully some clarification and improvement?) are still underway! The following proposals are ready to be voted: within the previously proposed legal framework, any individual will be allowed to earn a tax-free, additional income of up to € 500/month or € 6000/year, if he or she meets the conditions previously laid down. All income in excess of this limit will be added to a person’s professional income and taxed according to the personal income tax brackets. The plan was to have this law come into force as from 1 January 2018. However, the law has not been voted on and adopted yet!
What does this mean for you?
If you, as a private individual, earn extra income on top of your professional income by using a recognized sharing economy platform, you will still have to pay the 10% withholding tax for the time being and you will still be subject to limited taxes on your sales as a private individual.
If you are a professional, you will be allowed to offer your services through a sharing economy platform, but the system of advantageous tax conditions will not apply to you and you will not be subject to the tax-free regulation in the future either. If you pay, in your capacity as a professional, a private individual through the platform, you will not receive an invoice for this service because a private service provider is not subject to VAT.
Programme Law of 1 July 2016, B. S. S. 4 July 2016 (ed. 2):