How do you lower the tax burden for your sole proprietorship?

Cooperating partner

Do you have a sole proprietorship and are married or legally cohabiting? Then you can pay your partner a salary for the work he or she does in your business. By giving part of your net profit to the collaborating partner, you reduce the tax burden in higher tax brackets. This is because the distributed amount is taken away from the highest tax brackets and taxed again in lower brackets with the collaborating partner. Another plus point: the tax-free allowance is again applied to this distributed amount, providing an additional tax benefit.

Independent helper

This principle also applies to someone who helps you on a self-employed basis – for example, a family member – without being bound by employment contracts. Employing an independent helper combines flexibility of deployment with lower remuneration costs compared to a permanent staff member. After all, you do not pay social security contributions on the salary you give an independent helper. Note: a helper must establish himself as a self-employed person.

Investments

Do you invest in your sole proprietorship, such as in office equipment, machinery or inventory? If so, you should not limit the depreciation of these costs to the number of days you owned the investment. In other words, an investment in December 2024 has the same weight in terms of costs as an investment you already made in January of the same year. This provides interesting opportunities to reduce your year-end profits. Moreover, the depreciation annuity can be doubled even more, since degressive depreciation is also allowed for personal income tax purposes.

Tax credit

If you make the above investments with your own funds, you are eligible for a tax credit. You are entitled to this credit if your own funds in the current year have grown more than the highest growth in the three previous years. In this case, the tax credit amounts to 10% of the difference between the equity in the investment year and the highest amount from any of the three previous years, with a maximum of 3,750 euros. You must eventually repay the tax credit. Are you a beginner self-employed for less than three years? Then the same rule applies, but calculated based on the growth of your equity in the relevant taxable period.

Cessation surcharges

Do you permanently discontinue your sole proprietorship and realize capital gains on (in)tangible fixed assets? Then these can be taxed at 10% in the following cases: when the cessation takes place at the age of 60 or older, in case of death or in case of forced definitive cessation. For discontinuation at any other time, you must take into account a tax rate of 16.5% applied to tangible fixed assets and 33% to intangible fixed assets (provided that the requirements of the “4×4 rule” are met).

For your information, the 4×4 rule means that you are going to compare the cessation capital gain you achieve on such intangible assets with the sum of the net gains you realized in the four years prior to the cessation.