Social security contributions: should you pay privately or through the company?

Edwin Van Humbeeck   |  

Edwin Van Humbeeck

Edwin Van Humbeeck

Edwin is accountant en adviseur bij BOFIDI Brussels

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Our experts often receive questions about social security contributions and, especially, whether it is better to pay them privately or through the company. We are pleased to clarify it for you with a concrete example.

But first of all, what are social security contributions?

As a company director, you are obliged to pay your social security contributions every quarter. In addition, you receive a statement of these contributions from your social insurance fund annually once your net taxable income is known for certain. 

Social security contributions are calculated on your net taxable professional income, i.e. your gross professional income minus the social security contributions paid, the Free Supplementary Pension for the Self-Employed (FSPSE) and the fixed professional costs. Then a contribution percentage is applied to that, which comes to about 20.50% (to be increased with an administrative cost of approximately 3%).

Who pays the social security contributions?

You have a choice, either you pay your social security contributions privately, or you have them paid by your company. So, which is the best choice? Initially, it looks as if it is more advantageous to have the social security contributions paid by your company. But do you keep more net income then or not?

Let’s look at the details. The basic principles remain the same in both cases because no matter who pays the social security contributions, they always remain a deductible expense in the personal income tax returns.

Does it matter who pays the contributions?

We’ll show you with some concrete figures.

Situation 1: your social security contributions are paid privately:

  • Gross salary: 45,000 euros per annum.
  • The deductible cost for the company is therefore 45.000 euros

The company pays withholding tax on this gross salary of 11,200 euros, and the company manager receives a net salary of 33,800 euros.

With this net salary the company manager has to pay annual social security contributions of 7,600 euros. On balance, the company manager will be left with 26,200 euros.

Situation 2: the company pays the social security contributions:

  • Social security contributions paid by the company: 7,600 euros. This gives rise to a benefit in kind (BIK) for the manager that results in an additional salary cost of 7,600 euros.
  • Deductible cost to the company: 45,000 euros, for a correct basis of comparison for the two situations.  

As a result, the gross salary (excluding the BIK) drops to 37,400.00 euros. The withholding tax remains the same, namely 11,200.00 euros. On balance, the company manager receives a net salary of 26,200 euros.

Here are the results summarized in a table:

Situation for your companyContributions paid by the companyContributions paid privately
Gross salary€ 37,400€ 45,000
Social security contributions€ 7,600 
Total cost of salary€ 45,000€ 45,000

Private situationContributions paid by the companyContributions paid privately
Gross salary€ 37,400€ 45,000
Withholding tax€ 11,200€ 11,200
Net salary€ 26,200€ 33,800
Social security contributions payable/€ 7,600
Balance€ 26,200€ 26,200

Conclusion

In both cases the company manager is left with the same amount: 26,200 euros. So, it makes no difference whether your social security contributions are paid privately or by your company.

BOFIDI gets the best out of you and your business

Do you have a specific question about your social security contributions that you would like to discuss with one of our advisors? Then send us a message. We will be pleased to plan a meeting online or offline.

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