Fiscal Issues (3): Social Security

Bart Van den Bossche writes:

Whether you are a self-employed individual or using a company, you will organise your own payments of social security (sometimes called social insurance).

This article looks at registering for social security and briefly explains how the system operates.

Social security registration

Self-employed lawyers are obliged to register for social security as soon as they commence their professional activity in Belgium.

There are several social security companies that you can choose to register with. Click here for a full list of available organisations.

How to choose a social security organisation

All social security organisations perform the same function: receiving and administering your quarterly social insurance contributions.

You pay an administrative fee to your social security organisation; it is a percentage of your quarterly social security contribution. This administrative fee can be between 3.5%-6%, varying by social security organisation.

While several social security organisations have political origins, these origins are irrelevant for the performance of their activity.

How to calculate your level of social security contribution

Your quarterly social security contributions are based on your official net income from three years earlier. So the social security system treats new arrivals differently from those who are already here.

Newcomers

For the first three years of your professional activity, your social security contributions are given a special status.

In this period, as there is no earlier income upon which to base your contribution, you choose how much you pay each quarter. For example, you can make the current (2007) minimum contribution of €497.92 per quarter for this three year period.

However, such a minimum contribution for self-employed lawyers, is not advised. At the end of the three year-period, an assessment is made of what your actual official income was during that period. If you underpaid your social security contributions, then a huge one-off contribution payment may be required to meet the shortfall in your contributions.

After three years

After the initial three year period has finished, you will pay a social security contribution based upon your net income from three years before. This contribution is fixed for each of the four quarters in the calendar year.

This fixed amount is determined according to the following formula (for 2007):

2004 net income x indexation of 7.79395% = Z

If Z is less than €47.830,21, then the amount to pay in each quarter is:

4.9125% of Z

If Z is more than €47.830,21, then the amount to pay in each quarter is:

(4.9125% of €47,830.21) + 3.54% of (Z - €47,830.21)

In 2007, the maximum quarterly social security contribution is €3,262.21 (or €13,048.84 per year).

Both examples do not include the administrative fee of the social security organisation.

Next article: (4) Income Tax

Author: Bart Van den Bossche ©
First published: 12 November 2005
Last updated: 14 February 2007