The Belgian tax regime governing the collaborative economy was introduced by the Programme Law of 1 July 2016 and was (from a practical perspective) only applicable as of income year 2017. During its lifetime, this specific regime has been subject to various changes. Following the most recent changes (Recovery Law of 18 July 2018, as amended by the Law of 30 October 2018), the regime was transformed from having a separate flat tax rate (after deduction of a lump-sum cost allowance) and a specific withholding tax obligation to a more to complex system with a tax-free threshold subject to certain conditions (applicable as of 1 January 2018). The current regime is now declared unconstitutional.
The collaborative economy
Individuals who are providing services to other private persons in a purely private context (outside of a professional activity) via a recognised electronic platform, without exceeding a certain income limit. This was the initial basis of the Belgian tax regime for the collaborative economy in 2016. The underlying idea was to extract the revenue, generated by the collaborative economy (which often remained undeclared and untaxed), from the “twilight zone” and to boost entrepreneurship for this type of economy, by applying a more favourable (tax) regime.
As of income year 2018, in addition to the income from services provided via a recognised platform, the framework of the “collaborative economy” was extended. It became possible to earn miscellaneous income from occasional services between citizens (small jobs by and for private citizens) or associative work (work for clubs, societies or associations) in a tax-free manner and exempt from social security contributions up to a yearly maximum threshold of EUR 6.000 (EUR 6.340 indexed amount for income year 2020). For occasional services between citizens and associative activities an additional monthly limit was introduced.
Annulment procedures before the Constitutional Court
As of its very introduction, many concerns were raised on the distinction made between the treatment of services rendered “within the scope” of this collaborative economy compared to similar services provided in another capacity (such as employee or self-employed person). Activities performed within this regime of the collaborative economy are exempt from income tax and social security contributions, are generally not subject to the provisions of Belgian labor law and do not result in the build-up of social rights. Especially, professional organizations and labor unions invoked various arguments with respect to infringements of the Belgian Constitution (principle of equal treatment and non-discrimination).
What did the Constitutional Court rule?
The Constitutional Court ruled that the law of 18 July 2018 regarding the collaborative economy is discriminatory (from different angles) and infringes the Belgian Constitution. The Court ruled that persons who perform the same activities in the context of the collaborative economy, or as employee or self-employed person, are treated very differently from a labour law perspective, social security perspective and an income tax perspective, without a reasonable justification for this difference in treatment.
Notwithstanding the above-mentioned infringements, the Court decided (and we see this more often in its recent case law) to maintain the legal consequences of the annulled provisions for the activities performed under the collaborative economy up to and including 31 December 2020, taking into account the budgetary and administrative implications of the annulment and the possible judicial proceedings.
What does this mean?
The Court thus annulled the law introducing sharing economy, but only for the future, i.e. as from 1 January 2021. As such, for and during income year 2020 it remains possible to provide services through the sharing economy exempt of social security contributions and income tax, albeit with respect for the applicable conditions and the thresholds.
In case of any further questions, please do not hesitate to contact Sandrine Schaumont or Philip Maertens.