Withholding tax - What's that all about?

Have you negotiated a great salary as a freelancer with your client? That’s wonderful news! However, it’s important to understand that your gross salary is never the amount that will end up in your bank account. Various deductions, including withholding tax, will be made from your gross pay.

Firstly, the gross salary on your payslip isn’t the final amount you’ll receive. A number of mandatory deductions are made from that amount. These deductions apply not only to permanent employees but also to freelancers, whether you’re employed through payrolling or working as a self-employed contractor.

The first deduction from your gross salary is the contribution to social security. This contribution helps cover healthcare costs, pensions, and unemployment benefits. The remaining salary after this deduction is known as taxable income. From this taxable income, withholding tax, also known as income tax, is deducted.

What is ‘withholding tax’?

Withholding tax is essentially an advance payment on your personal income taxes. Each month, your employer deducts a portion of your salary and sends it to the tax authorities. If you’re employed as a temporary worker or if Tentoo handles the administrative and financial processing of your work as a self-employed individual, we take care of this obligation.

Why is this deduction made “at the source”? The difference between your gross and net income can sometimes be surprising. It’s wise to have a realistic percentage deducted in advance to avoid being caught off guard by a hefty tax bill at the end of the year.

Choosing the right percentage for you

Withholding tax and taxes are closely tied to your personal tax situation, including the amount of your taxable gross salary (gross salary minus RSZ) and your family situation. Legally, temporary employment agencies or partners like Tentoo must withhold a certain minimum from your salary. For temporary workers, this minimum is set at 11.11%, though a standard rate of 18% is applied according to a sectoral agreement. For comparison, permanent employees typically have a withholding tax rate of around 30%.

As a freelancer, artist, or temporary worker, you can choose your withholding tax percentage. Opting for the minimum withholding rate means you’ll take home a higher net salary compared to permanent employees. However, there’s a catch. You may end up owing a substantial amount in taxes at the end of the year.

To avoid this scenario, you can opt for a higher withholding rate. Depending on your professional activity or family situation, we can help calculate the most appropriate percentage for your situation. The scale of your taxable income plays a key role, as does your family composition, marital status, or other family responsibilities. Additionally, any income from work outside of your assignments with Tentoo should be considered. Only you have a complete overview of what you’ve earned or expect to earn from other employers, agencies, or as a self-employed individual.

Want to know how much you’ll earn net as a freelancer? Our salary simulator allows you to see in a few clicks how much you need to invoice and what you’ll take home after withholding tax.

Can I opt for 0%?

No, as mentioned, the legal minimum withholding for temporary work is set at 11.11% (with a standard minimum of 18%). Moreover, choosing an excessively low withholding rate isn’t advisable. While a higher net pay may be pleasing initially, that satisfaction might fade when your tax bill arrives…

What if I’ve chosen too high a percentage?

Sometimes, it turns out that too much has been withheld, perhaps due to a change in your family situation or if your partner becomes unemployed. If too much withholding tax has been deducted, you’ll simply get a refund from the tax authorities.

One more tip: You can easily view the tax rates per income bracket for Belgian residents here: Tax rates. This can help you estimate the most suitable withholding tax percentage for you.

If you have any questions about withholding tax or want to contact Tentoo in general, don’t hesitate to give us a call: Tentoo Contact.