How can I ensure that my corporate structure is aligned from the outset with the company's future development?
Companies that intend to grow often opt for an NV/SA, given the flexibility of this corporate form and the need to raise capital. The articles of association can allow the board of directors to establish a management committee, appoint a managing director, etc.
In addition, it is important that a clear distinction be made, internally, between the company's various "branches" of activity (or activities which could develop into separate departments, branches or subsidiaries in the future). In the event of a subsequent sale, divestment or funding round, financing can be allocated to the various projects and each "branch of activity" can grow at its own pace.
For tax purposes, depending on future development as well as the exit strategy, it may be advisable to allocate different assets (eg, IP, real property, financing, etc) to different entities in order to optimally benefit from Belgian tax incentives and facilitate, for example, a future takeover.Written by Elke Janssens
Which tax issues should I take into account to ensure the optimal financing of my business?
From a tax perspective, the main decision you will need to make when financing your business is whether to use equity or debt. For equity and equity-like financing (shares, warrants, options, etc), the contributor bears the business risk. For debt financing, however, the contributors are in principle ensured a periodic return and are paid back before equity stakeholders.
The holders of equity (instruments) qualify for dividends or share redemptions and the like. The holders of debt instruments receive interest. For the company, dividends are not deductible as a business expense, whereas interest on debt is. Leveraged financing can thus help to decrease the corporate tax base. To help level the playing field between equity and debt, the Belgian legislature created the notional interest deduction (aftrek voor risicokapitaal/déduction fiscale pour le capital à risque), which allows companies to deduct a percentage of their adjusted equity as fictitious interest.
In startups and research-intensive companies and joint ventures, mixed financing is often preferred (or even required by foreign investors and venture capitalists), whereby debt financing is initially used which can be converted into equity at a later stage (convertible bonds, etc).
As mentioned above, interest on business loans is in principle tax deductible. There are, however, several rules to avoid abuse of interest deductions, such as the thin capitalisation rule and the non-deductibility of excessive interest.
Certain types of financing are hybrid, meaning they are considered equity in one jurisdiction and debt in another. Such hybrid instruments can be particularly interesting from a tax perspective, as they may eliminate withholding tax or even qualify
for a double deduction of costs (one in each jurisdiction).
How do I know if I risk infringing a third party’s IP rights?
It is not always easy to identify an infringement of a third party's rights. Much will depend on the IP right concerned since, for some types of rights, information is publicly available, while for others (such as copyright), there are no public databases.
For patents, patent attorneys can provide assistance by conducting prior art searches and preparing an FTO (freedom to operate) report.
In order to avoid or dispute infringement claims, it is very important to keep track of the dates and times at which IP is created, so as to be able to establish prior rights, if necessary.Written by Christel Brion
How can I best avoid litigation if the contractual relationship does not evolve in the right direction?
When negotiating an agreement, it is important to insert a clause providing for a resolution procedure in the event of a dispute:
- first, management shall negotiate and discuss;
- if negotiations fail, mediation shall be started;
- if mediation fails, legal action can be taken.
To which extent am I allowed to use (electronic) databases, cookies, tracking devices and other on- or off-line tools in my marketing efforts?
The use of databases to enhance marketing efforts is very common. Such databases must be used in accordance with the personal data protection rules described above (see Question 23). Where data are obtained from third-parties, the company should always ensure that they have been lawfully collected.
Where personal data are used for direct marketing purposes by e-mail, the prior consent (opt-in) of the individual will generally be required, even in a B2B environment. An opt-out possibility (unsubscribe link) can however be sufficient for promotional e-mails sent to existing clients (as opposed to prospective clients) if the e-mail pertains to products similar to those already bought by the same client.
The use of other tracking devices for marketing purposes is subject to the individual's consent, after being provided with adequate information as to their use. The best-known example of such a tracking device is cookies, the use of which for (behavioural) advertising purposes requires the prior information and consent of the individual, generally through a banner on the homepage.Written by Tamar Van Colenberghe
What does litigation involve in terms of time and costs?
Regular proceedings on the merits generally take 12 to 18 months.
If there is a need for swift relief (a showing of urgency and irreparable harm), summary proceedings can lead to a decision within two to four months, on average. In some cases, it is also possible to apply for relief on an ex parte (unilateral) basis. Accelerated proceedings on the merits (so-called cease-and-desist proceedings), where available, can lead to a decision on the merits in two to six months' time.
At the appellate level, proceedings take much longer (18 to 24 months or more depending on the judicial backlog).
The costs of litigation will depend on the complexity of the case. On average, the costs range between EUR 15,000 and EUR 55,000 or more.Written by Florence Verhoestraete
Link building: what to consider?
To drive more traffic to your website, it is important to think about your link building strategy and consider the following while implementing:
- Think about the keyword you are trying to link for
- Consider the quality instead of the quantity
- Write compelling anchor text
- Create valuable content that people want to share naturally
- Ask for linking by explaining the value of your content to their audience
- Create off-page content such as articles, guest posts and videos and link to your site
What to consider before launching an email marketing campaign?
- Build a qualified opt-in database
- Segment your database accurately, based on interests and analytics
- Send timely messages that are relevant to the subscriber, otherwise it will be considered as spam
- Send your message with the backing of a vast email campaign platform
We are running an IT project with an external supplier, however we do lack the proper project management skills in house to manage the external supplier’s service level. How do I best approach this?
In case you do have an internal project manager who needs the appropriate coaching, a project guidance role could come in handy. In case you don’t have any internal project management resource available, a more hands-on approach can be followed whereby your team is complemented with an experienced project manager able to manage your stakeholder expectations.Written by Geert Janssen
As a growth company I have internal IT resources, however their skill set is focused around infrastructure support, whereby I’m not confident that other ICT domains (applications,security,...) are covered well. How can I manage to deal with this?
Tax Shift: alleviation of your payroll starting from 2016!
The Federal Government recently adopted a series of decisions in its bid to reduce employer's tax and social security contributions over labour, referred to as the so-called tax shift.
The tax shift accord contains a number of specific measures in favour of new employers and SMEs in general intended to result in a significant alleviation of the employers' payroll bill starting from 2016.
Below we will explain the the principal measures that are of direct interest to employers, indicating what is new and what stayed unchanged.
I. What is new for hirings starting from 1 January 2016?
The initial hirings reduction is slashed in two ways:
- (nearly) full exemption for the first hiring, unlimited in duration.
- exemption for six hirings instead of the previous five;
As from 1/1/2016, ‘new’ employers can get as good as total exemption from employer's contributions when hiring their first employee. If the first employee is hired between 1 January 2016 and 31 December 2020, it qualifies for the “new”, more extensive exemption:
- the sum of the basic contributions and wage moderation is fully exempt (32.4% on 1 January 2016);
- the exemption is applied in each quarter throughout the full duration of the employment.
Please note that the first hiring is not completely “free” and that some contributions continue to be due,( p.e. fringe contributions, …).
For the second to sixth employees, greater reductions in employers' social security contributions are to be awarded:
- the exemption is a lump sum depending on the sequential order of the employee;
- the exemption applies in a maximum number of quarters during a limited application period.
No new procedures are introduced. What is certainly new about this is that, from now on a reduction is awarded for the sixth recruitment to boot. The second to fifth hirings are “upgraded” to a more favourable exemption.
II. What about hirings prior to 1 January 2016?
Parliament also wants to include 2015’s hirings (and only them) in the slashed reduction. As a result, the situation of some employers seems to have become especially complex. The crucial factor is the date of hiring of the employees qualifying for the right to the reduction.
For hirings up till 31 December 2014 (limited to five), the situation remains relatively simple. The attendant reduction is used up under the previous conditions.
Employers who already had the benefit of social security/tax reductions before 2016 for their first recruitment, will also qualify for the new reduced contributions/taxes for employees who joined their business in 2015, albeit for the remaining number of quarters they were still entitled to prior to 1/1/2016.
These measures are still in the draft phase and may yet undergo further amendment. Changes in social security contributions and social security reductions, fiscal measures, as well as possible secondary effects are insufficiently clear at this stage. We advise you to contact your professional service provider regarding this complex matter.Written by Johan Lemmens
What is the Tax shelter for investments in start-ups?
The tax shelter for investments in start-ups consists of a reduction in the investor's individual income tax through the grant of a tax credit. The investor is entitled to a tax credit of 45% of the invested amount, for an investment in a qualifying micro-company, or 30% for a qualifying SME, provided the investment is made during the first four years of the company's existence. The investment may be made directly in an SME or micro-company or indirectly through a qualifying starter fund.
Qualifying SMEs and micro-companies
A qualifying SME is a company with an average annual headcount of no more than 100 employees which meets at least two of following three criteria (on a consolidated basis):
- a balance sheet total of no more than EUR 3,650,000;
- turnover, excluding VAT, of no more than EUR 7,300,000;
- average annual employee headcount of no more than 50.
A micro-company is a company that meets at least two of the following three criteria:
- balance sheet total of no more than EUR 350,000;
- turnover, excluding VAT, of no more than EUR 700,000;
- average annual employee headcount of no more than 10.
Moreover, it must be an unlisted Belgian company or a company with is registered office, principal place of business or headquarters in the European Economic Area and an establishment in Belgium. In addition, only investments in companies established from 1 January 2013 can qualify for the tax shelter.
For the sake of completeness, it should be noted that certain types of companies are excluded from the tax shelter regime. These include: companies created further to a merger or division, companies involved in financing or cash pooling activities, management companies, and companies facing insolvency proceedings. The collected amounts may not be used to pay dividends, acquire shares or grant loans.
Maximum amount collected through the tax shelter
A start-up can collect a maximum of EUR 250,000 through the tax shelter. In addition, only investments in newly issued shares are eligible, and contributions in kind are not allowed.
To qualify for the full tax credit, the shares must have been held by an individual for at least four years. In addition, the investment is limited to EUR 100,000 per year.
The investor's family members and the start-up's employees can also benefit from the tax shelter, but not shareholders.
Investments in so-called start-up funds are also eligible for the tax credit. To date, however, there are no such funds meeting the criteria set out in Article 48 of the Act.
On his or her income tax return, the investor must prove that s/he meets the criteria set out above. A royal decree will clarify how this should be done. Investments made from 1 July 2015 onwards are eligible for the tax shelter.
What is the favourable tax treatment for loans through crowdfunding platforms?
For interest on a loan of up to EUR 15,000 (for interest received in 2015) granted through a qualifying crowdfunding platform recognised by the FSMA, an individual investor can benefit from favourable tax treatment (i.e., a tax exemption for the interest on the loan), provided:
- the loan has a minimum term of four years and interest is paid annually;
- the loan was granted to an SME (see above);
- the SME is still in the start-up phase (i.e. it has been registered with the Crossroads Enterprise Database or a similar register in the European Economic Area for no more than 48 months).
The investor is entitled to the favourable tax treatment for loans granted up to an amount of EUR 15,000 per year, regardless of whether it is invested in the same project. It is important to note that company directors and key personnel who are shareholders in the company can also benefit from the exemption for loans granted to their company.
This measure entered into force on 1 August 2015.Written by Kurt Demeyere
What is the partial exemption from the obligation to remit income tax on salary?
During their first years of operation, start-ups are partially exempt from the obligation to remit taxes withheld from salary. During the first four years of their existence, micro-companies qualify for a 20% exemption, while SMEs qualify for a 10% tax exemption.
The employer withholds 100% of the taxes due from the employee's salary, but only has to transfer 90% (or 80% in the case of a micro-company) to the treasury. Similar favourable tax measures already exist for qualifying researchers (an incentive which substantially reduces the salary cost of researchers working on qualifying R&D projects).
Employers registered with the Crossroads Enterprise Database for up to 48 months can benefit from this measure. In addition, the company cannot be in liquidation, bankruptcy or judicial reorganisation, an indication of (financial) difficulties.
This measure entered into force on 1 August 2015.Written by Kurt Demeyere
Is a financial plan a business plan?
One of the legal obligations when establishing a private company with limited liability consists of drawing up a financial plan that justifies the capital for the company and provides an estimate of needs and revenue. In short, this preliminary plan must state the means the founders of the company have foreseen in order to guarantee the company's financial viability during the first two years of operation.
The founders may be held personally liable for the company's obligations in case of bankruptcy during the three years following the foundation due to insufficient funding during the first two years of the company's existence.
However, this legal obligated financial plan is not the same as a business plan. A real business plan is much more then a financial plan.
A business plan is the formal blueprint of the financial and operational objectives for the company's near future and it forecasts how to reach those goals. Furthermore, it usually contains information about the company, the management and the organization; the mission and vision; the products or services; a market and competition analysis; a swot-analysis; the strategy and an executive summary describing the elements of the business.
So one can say that the financial plan is a part of the business plan.
Some entrepeneurs believe that passion, optimism and good ideas are enough to build a successful company, however make no mistake: professional investors, such as venture capitalists, are going to require a business plan.Written by Johan Lemmens
Which reflexions do I need to make before starting my business?
Setting up your own business can be an exciting time. Before you start, save yourself time and money by being aware of what's involved in running a business.
Operating a business needs also management skills, industry expertise, technical skills, finance and of course a long-term vision to grow and succeed.
It is also important to think about how you might protect your future business in times of crisis or change. Smart business owners prepare for potential risks and unexpected events in future, such as selling, acquisitions, retiring, business continuity and exit-events.
Before you chose your business structure and type, you should ask yourself a number of these non-exhaustive questions in order to refine your project:
- Analyse your business environment (Who are your competitors, what services do they provide, who are your potential customers, what are the potential trends in your field of activities, how might your industry evolve?);
- Market your idea (what products and services will you offer, what pricing policy will you adopt, where will your products be available, how will you promote them, how will you manage orders and deliveries, how will you manage complaints?);
- Organise your company (who will manage your company, where will it be based, are you going to recruit staff?);
- Identify the access conditions for the profession you wish to practice. Do you need to apply for specific permits or licences?
- Finance your project (what investment do you need, what will you charge, what is the minimum margin you need in order to cover your costs, what are my fixed costs, what type of financing will you choose: external or own funds?)
After the fine-tuning of your project you still have to fulfill the main business start-up steps:
- Choose a legal status: sole proprietorship or company (and type)?
- Opening a current account with a bank or other financial institution
- Articles of incorporation (notarised deed or private deed)
- To prove some basic management skills to a ‘business counter’ (guichet d’entreprises/ondernemingsloket)
- Deposit articles of incorporation with one of the FPS Finance’s registration offices.
- VAT registration
- Registering with a social security fund
- Request a licence/permit if necessary
- Insurance issues
- Register with The Crossroads Bank for Enterprises (BCE/KBO)
Am I elegible for certain subsidies and tax measures?
When you start a business, there will usually be a period when you’re investing lots of time, effort and money before you start making a profit.
Be aware in that case that you might be able to get help from a government-backed support scheme or subsidy if you need for example some initial funding to test or develop your business idea or to start-up your business.
Both Regional and Federal authorities offer support via direct subsidies and tax measures.
Tax reductions belong to the core business of the Federal Authorities (p.e. notional interest deduction and investment deduction).
The Regional Authorities and their Agencies support new and existing companies by means of subsidies and they also can provide risk capital.
You can also appeal on som private investors/ business organisations which offer these kind of services and risk capital.
On the one hand they try to encourage innovation through financial support, networking and by facilitating international cooperation.
On the other hand they might offer financing solutions to certain companies under certain conditions. They are willing to cover a company’s entire development cycle, from its earliest inception to its growth and internationalization, depending on the situation, nature or purpose of company in question.
There are many subsidies/financing solutions for different kind of (start-up) companies. To be eligible you must first find out which government/agency/organisation is responsible. Furthermore detailed application forms and financial information must be completed and discussed with these them. All these subsidies and fincancing solutions have also conditions and consequences in the further life of your company We advice you to contact specialists to help you make the right decision.Written by Johan Lemmens
How can I make sure that my ICT is managed well and potential risks are properly mitigated even though our company size does not allow for a full-time dedicated ICT resource?
We are in need for a consistent approach & tooling to assess the maturity of the company from an IT perspective. How do we approach this?
From a People / Process / Technology point of view, multiple maturity models can be applied (Cobit, CMMi, ... ). When looking at the functional maturity of your product, a roadmap review or industry benchmarking can be executed together with a SWOT analysis and / or function point analysis. At the technical maturity of your product an application audit can be performed.Written by Geert Janssen
We have developed our own business application together with a small, local IT boutique. Is there any risk in doing so?
Be aware that custom developed code might be a risk in itself in case your local IT boutique would cease to exist. Mitigate risk by assuring the future of your business critical software applications. As a software user, you trust your supplier to provide support and maintenance for your applications. However, this dependence can represent a significant risk, particularly where business-critical applications are concerned. A trusted escrow agency can help you to eliminate these risks. Make sure to select an escrow agency who does perform the necessary validations / checks. The source code for your licensed software, the expertise to implement it and the rights to your software belong to your software supplier or developer. This creates a potentially disastrous situation if the software fails and your software supplier is unable to carry on supporting and maintaining the product due to a merger, acquisition, legal dispute or insolvency.
An escrow agreement is a simple contract between a software supplier, end user and independent third party escrow company designed to mitigate this risk and protect all parties involved.
With escrow you can be sure that you can access the source code of your key software applications should you ever need to do so. This means that you will be able to use that source code to continue to maintain the software either in-house or by engaging with another supplier, whether that be for further bespoke software development or to fix any issues.
Setting up an escrow agreement is easy and done in three simple steps:Written by Geert Janssen