Micro-enterprise income tax vs. corporate tax in 2023

What is the microbusiness income tax?

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This is a fixed tax, calculated on the basis of the company's turnover and must be declared and paid quarterly. It is declared using form 100.

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In 2022, the tax rate was as follows:

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• 1% of total revenue for firms with at least one employee;
• 3% of total income for firms without employees.

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However, from 1 January 2023, the 3% turnover tax has been abolished and the changes look like this:

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• companies with at least one employee will continue to pay the 1% income tax;
• companies without employees will automatically switch to paying a 16% corporate tax.

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What conditions have to be met for a micro-enterprise tax to apply?

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In order to benefit from this scheme, the following conditions must be considered:

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• the income earned must not exceed the ceiling of 500.000 Euro;
• consultancy and management income must not exceed 20% of total income;
• it is mandatory to have at least one full-time employee;
• the company must have partners who own shares in at least 3 micro-enterprises, in the case of partnerships/shareholders with more than 25% ownership.

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Which activities can no longer use the micro-enterprise tax?

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To be eligible for a microenterprise tax, the company must not be engaged in the following activities:

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• banking activities;
• insurance and reinsurance or capital market activities, including intermediation in these fields;
• gambling activities;
• activities related to the exploration, development and exploitation of oil and gas fields.

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What is corporate tax?

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It is the difference between a company's total income and its total expenses, excluding non-deductible expenses. Corporation tax is 16% of a company's total profit.

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A corporation tax is paid and declared quarterly. The declaration is made by means of form 100 for the first 3 quarters and by means of declaration 101 for the fourth quarter, accompanied by the other three quarterly declarations.

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What should you know about the two systems?

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• Tax rate: the micro-enterprise tax has a rate of 1%, while the corporate tax has a rate of 16%.
• Employees: for a micro-enterprise tax to apply, it is mandatory to have at least one full-time employee, whereas there is no requirement for the corporate tax to have employees.
• Income ceiling: a company can only be considered a micro-enterprise if the ceiling does not exceed €500,000. However, there is no set ceiling for being taxed on profits.
• Compulsory expenditure: in the case of micro-enterprises, there are certain compulsory expenditure that must be taken into account, such as the micro-enterprise expense, the employee's gross salary and the labour insurance contribution (CAM) paid by the employer, and the expenditure on accounting services (internal or external). In the case of a corporation tax, compulsory expenditure includes the expenditure on corporation tax and the expenditure on accounting services (internal or external).

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