A financing contract for your advance payments: what and why?
As an entrepreneur, you make an advance payment on your tax every quarter. If you do not do so on time or your advance payments are too small, you risk a tax surcharge. A financing contract prevents this.
As a self-employed person, you usually pay your taxes in advance four times a year. If you make those advance payments in time, and if they are high enough, you avoid a tax increase.
Only if you are newly self-employed do you not have to worry about a tax increase yet. Have you been self-employed for several years? Then a tax increase can cost a pretty penny.
- For companies, the rate of increase is 6.75%.
- For the self-employed and liberal professions it is 2.25%.
Good to know:
- A company is also penalised from the first euro of tax if it does not pay or pays insufficiently in advance.
- For self-employed persons and liberal professions without a company, the increase is not due if it is less than 0.5% of the tax on which it is calculated or does not exceed €90.
What are the options for making advance payments?
There are 3 options:
- You can make an advance payment via your profile on MyMinfin.be
- It can also be done by bank transfer to account number BE61 6792 0022 9117 (BIC: PCHQ BEBB) of the 'Collection Centre - Advance Payment Service'. You do that with the structured communication found in MyMinfin or via this tool.
- Another possibility is a financing contract. With such an agreement, ING arranges your advance payments. ING then pays the full amount of your estimated taxes to the FPS Finance at the most convenient time (to avoid a tax increase).
If you are temporarily short of funds, ING grants you a credit so that you can still make the advance payments. This is useful, for example, if you are investing heavily or have insufficient funds in your account for some other reason.
A financing contract with ING can be attractive because the interest rate on the loan is lower than the tax increase rates. Moreover, the interest you pay is tax deductible as a professional expense. Another bonus is that there are no costs associated with a financing contract. There are two types:
- A formula whereby you repay the loan in 12 fixed monthly instalments. The first (refund) payment is then made before the advance payment is made to the tax authorities.
- A formula whereby you repay the loan in 8 or 12 fixed monthly instalments from the first day of the month following the deposit.
What if you paid too much in advance?
If you made more advance payments than necessary to avoid the tax increase, you will of course get the excess back (it may take a while).
If you expect a less good result for the new financial year, it is best to have the surplus paid back. In this way, you will again have resources at your disposal. If you expect a good result in the new financial year, you will probably want to pay as much as possible in advance in the first quarter, as this will reduce your possible tax increase.
When to make advance payments?
There are basically four times when you can make advance payments to the tax authorities. If your financial year coincides with the calendar year, then for 2022 these are 11 April, 11 July, 10 October and 20 December.
You could therefore wait until 20 December 2022 to make your advance payments. But that is not a good idea. This is because your advance payments reduce your possible tax increase. That percentage decreases, the later in the year you make the advance payment:
Deadline for advance payment
Benefit rate for entrepreneurs without a company
Benefit rate for companies
12 April 2022
12 July 2022
11 October 2022
20 December 2022
So it is best to pay as much as possible in advance in the first period in order to enjoy the maximum benefit rate. You neutralise 100% of the possible increase if you pay 75% of your taxes in advance in the first quarter.
Good to know: for financial years that do not coincide with a calendar year, the advance payments must, as a rule, be made at the latest on the tenth day of the fourth, seventh and tenth months and the twentieth day of the last month of the financial year (if it is a Saturday, Sunday or holiday, it is the next day).