The case

A freelancer has just set up a management company. Now he faces the challenge of optimizing his remuneration package.

Not only does he want to receive a well-defined net monthly salary, but he also wants the cost of his business to be as low as possible. In addition, he wants to free up money in his business for an investment in real estate. Finally, he needs to decide how best to finance his company car and what type of car is most advantageous.

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Thechallenges

The challenge is finding the right balance between:

• the (gross) management fee per month;
• the financial scope to provide a loan for remodeling work and under what form this loan can be most advantageously provided;
• The short- and long-term impact of the choice of company vehicle on depersonal and corporate taxes.

To arrive at an optimal remuneration package, you must first and foremost consider the impact from both personal and corporate income tax. In practice, the focus is only on personal income tax, whereas in the case of management companies it is precisely the overall picture that is relevant.

Moreover, it is impossible to arrive at an optimal remuneration package by adjusting the amount of the management fee and the type of company car in a series of linear calculations. The number of scenarios is far too large for human computing power. An Excel spreadsheet cannot solve this either, because there are too many rotating parts that impact each other.

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Fiscalo - tax optimization engine from hukaroi

To bring such optimizations to fruition, you need considerable computing power. That's why we developed Fiscalo.

Fiscalo is a tax optimization engine that can intelligently calculate hundreds of thousands and even millions of scenarios and select the optima from a range of possibilities. Fiscalo is a software translation of Belgian taxation into mathematics.

The way Fiscalo works has two major advantages:

• You don't actually need any prior (para)fiscal knowledge to calculate an optimization. You should be able to answer questions such as what amount of cash you need monthly, whether you are considering real estate investments, what your expected turnover is, etc.
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• Fiscalo examines the policy choices of the self-employed person (e.g. does the self-employed person want to focus on short- or long-term income or a balanced distribution) in order to calculate optimizations. How the net income then takes shape is just what Fiscalo calculates and suggests. For the accountant, it is an exponential acceleration of the calculations that are currently done in a linear way, for which tax expertise is needed.

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Result

The freelancer was able to accumulate over EUR 6,000 extra on an annual basis in reserves within the company, while receiving exactly the same remuneration net.

The financing analysis gave the freelancer the insight that between the payment of a dividend and a 5-year fixed-term loan, there is a difference in financing cost of EUR 14,000.

Through the scenario analysis of the total cost of ownership (TCO) for different candidate company cars, the best fitting car for the freelancer was identified. In doing so, the freelancer realized a potential savings of EUR 5,000 over the 48-month lease term.

The self-employed person in question, like his accountant by the way, was given access to the online platform, including reporting where the accountant could finalize everything together with the self-employed person and turn it into concrete action.

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How did we arrive at that result?

Well, we went to work with these questions and associated challenges and came up with the following solutions.

Optimization of remuneration

We made several adjustments to the managerial remuneration:

• The rental excess was greatly reduced to avoid recharacterization as professional income. This leaves more funds in the company.
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• The gross management fee was adjusted downwards (below the limit of EUR 45,000 gross per year). Indeed, since it is a newly created company, this condition should not be met to benefit from the reduced corporate tax rate.
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• Realignment of social contributions, the premium for VAPZ and the withholding tax on professional income to the new remuneration package. The maximum premium for IPT was also recalculated - all in line with the (changed) 80% rule.
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• The impact of the changed was visualized in a clear dashboard with scenario analyses. Because it is one thing to calculate the premium for VAPZ and IPT, it is a challenge of another level to make its urgency and importance clear to the self-employed.

Investment in real estate

To invest in real estate as efficiently as possible, we calculated the various financing options, including:

• an ordinary interim dividend;
• a fixed-term loan provided by the management company; and
• a bullet loan where the capital would be repaid over 5 years with the VVPR bis dividend paid.

Commercial vehicle

We simulated the impact of leasing different types of company cars (internal combustion engine, hybrid, electric) at the level of both personal income tax of the company manager and corporate income tax. This already included the company car taxation changing in 2023. This exercise took into account the total cost of ownership (TCO), as any other measure provides incomplete or distorted information.