Social-security contributions, explanations and calculation
On 1 January 2015, the method for calculating the social-security contributions of the self-employed was reformed for ALL the self-employed! Starters and established self-employed.
Henceforth, the self-employed will pay yearly contributions based on income for this same year.
This is done in two stages.
Provisional contributions:
The starter pays his/her contributions based on a statutory minimum income or based on higher income that he/she declares himself/herself.
The established self-employed person (after the first three years) will automatically receive a provisional contribution based on his/her (indexed) income from three years ago.
He/she may decide:
- to accept this proposal,
- to pay more, if he/she considers that his/her income for this year will be greater than it was three years ago,
- request to pay less, if he/she estimates that his/her income has dropped. For this, he/she must present his/her fund with a dossier that proves, based on objective elements, that his/her income for this year is less than it was three years ago. The fund will consider the dossier. There is no free choice of reduced income because he/she can only contribute based on minimums which are defined for his/her category (full-time self-employed, part-time,…).
Example: A full-time self-employed person will have no choice but to contribute on income of €12,870.43 or €25,740.86 (2014 figures). It is that or nothing…
Definitive contributions:
Two years later, the fund receives notification of income from the tax administration. It will then make the definitive calculations and will claim or reimburse the difference.
A self-employed person who has contributed the amount that his/her fund initially requested will not pay any penalties relating to the adjustment, if he/she has to top up the contribution. Neither will he/she receive any interest on amounts over-paid that the fund will reimburse.
However, watch out for the situation where a self-employed person has requested and obtained a reduction if it proves, two years later, that he/she nevertheless earned more. He/she will pay penalties of 3% per quarter from the year following the provisional contributions +7% at each overrun of a 31 December.
An example will illustrate the latter case:
A self-employed person receives an invitation to pay a provisional contribution of €2200 per quarter, based on his/her indexed income 3 years ago.
He/she requests a reduction on the double floor (€1,400) and he/she pays it on time.
Two years later, it turns out that he/she has income greater than the double floor and he/she should have paid €1,800 per quarter.
After a detailed calculation, he/she owes €1,600.
Given that he/she wrongly requested the reduction of the double floor, he/she will pay penalties of €448.
Rate of social-security contributions.
From 2018, the rate of social-security contributions stands at 20.50% on net professional income (after deducting professional expenses).
Good advice for the self-employed: “Determine your income with your accountant around the months of November – December and make a free payment if necessary.” (Even if you have obtained a reduction)
