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Non-Commercial Profit (NLC): tax regimes and reports

Verified 13 janvier 2021 - Directorate of Legal and Administrative Information (Prime Minister), Ministry of Finance

Covid-19: exceptional measures to accompany undertakings

Businesses and self-employed persons in difficulty during the period of the coronavirus epidemic can apply for the deferral or remission of payment of certain taxes .

It is possible to adjust the payment of CVAE instalments .

Companies in certain sectors may benefit from CFE reduction.

Non-commercial profits (NLCs) are a class of income tax applicable to persons engaged in a non-commercial professional activity, either individually or as partners. They are part of the taxable income. No distinction is made between the profit of the individual undertaking and the remuneration of the trader. They are subject to reporting obligations which depend on the applicable tax regime: micro BNC or normal.

Turnover below € 72,600 (micro-BNC)

The non-commercial profits tax (NCA) applies to the following revenues:

  • Benefits professional
  • Revenue from offices and offices (e.g. notaries, bailiffs, clerks, auctioneers)
  • Copyright and income of certain professions in the communication and information sectors (e.g. advertising creator)
  • Industrial property income received by an individual
  • Income of priests
  • Revenue of intermediaries or transparent agents acting on behalf of their clients
  • Incidental income received by non-commercial professions in the course of their business.

Liberal professionals can use different statutes: individual entrepreneur, classical society, but also specific structures, such as the professional civil society (SCP) or the liberal accrual society (SEL).

The Liberal accrual corporation is subject to the capital corporation regime and is subject to corporate tax except option (option for a family URL or SARL).

Commercial or agricultural income, received in the course of a professional activity, may also be taxed in the NLC category. They must then arise from non-commercial activity, the revenue of which must remain paramount.

The situation is different for an employee.

The taxable profit is variable depending on the annual turnover (actual turnover).

Conditions: annual revenue excluding tax (CAHT) less than €72,600

Income to report: gross revenue (excluding VAT, without deduction) + any gains or losses realised

Tax Returns:n°2042 C pro in the "special BNC diet" and No 2042

A professional subject to the micro BNC, can opt for income tax exemption. Income tax is 2.2% of monthly or quarterly turnover.

Taxable income is then determined by the tax authority that applies a standard allowance for professional expenses 34 % (with a minimum reduction of €305).

  Warning : the self-contractor is subject to another tax and social system.

Regardless of the turnover, declaration No 2035 must be made online by the persons under the controlled declaration:

In case of doubt, the contractor may request administrative control over specific points.

If he made a mistake in his statement, the tax authority will not be able to punish him financially if the following 2 conditions are met:

  • The error is made for the 1st time, subject to the contractor's good faith
  • This is a hardware error (input error, wrong address for example)

The professional may correct himself or be asked by the administration to regularise his situation.

NLCs are included in the taxable income of the tax household, which takes into account the total amount of NLCs. The automatic flat-rate deduction of 10% of professional expenses, valid for salaries, is not applicable to professional profits.

The taxable profit is the net profit realised in the calendar year taking into account the income and actual expenses paid in the same year.

Therefore, receivables acquired and not yet cashed are excluded and expenses incurred but not yet paid. However, it is possible to opt for commitment accounting. This may include, for example, a note or invoice issued but not cashed.

Revenues are comprised of:

  • Receipts received in return for the service rendered to the client (fees, commissions in particular)
  • Accessories: reimbursements of fees including lump sum payments, financial products resulting from the investment of funds received in customer deposits in the course of the profession, miscellaneous commercial revenues for example.

However, financial products derived from professional income may be taxed in the category of income from movable capital.

The net profit must account for gains or losses from:

  • Completion of assets allocated to the exercise of the profession constituting the professional heritage
  • Assignment of offices or offices
  • Receipt of compensation in return for termination of the profession or transfer of a client

Income and expenses relating to the taxpayer's private property are not taken into account. Capital gains in respect of the taxpayer's private property are subject to the personal capital gains tax regime.

Profit is included in the other income categories to constitute the total income of the beneficiary or the tax household.

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Profit-deductible deficit

Deficits arising from the practice of a professional practice or from offices and offices are deductible from profits of the same kind made in the taxation year by other members of the tax household.

Total Income Allowable Deficit

Deficits arising from the practice of a professional practice or from offices and offices are deductible from the total income of the taxation year and the 6 following years.

Certain charges are deductible from the tax return of a business.

There are several specific regimes.

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Income from a literary, artistic, scientific or sports production

These revenues can be taxed on the average of profits for the current year and the previous 2 or 4 years. This is possible even when no income has been collected. The option must be exercised at the time of the tax return.

General insurance agents

They may opt for the general scheme for employees, provided that the commissions are fully declared by the third-party payers. They shall not receive any other income from their profession, except remuneration directly related to their activity. Such ancillary remuneration shall be less than 10 % of the gross amount of the commissions received.

Sports referees

Amounts and allowances paid to them shall be exempt if they do not exceed €5,964.72 (corresponding to 14,5 % of the annual social security ceiling).

Artists and creators

They shall be entitled to a 50 % reduction (capped at €50 000) on their taxable profit for the first 5 years of operation.

Turnover above € 72,600 (return audited)

The non-commercial profits tax (NCA) applies to the following revenues:

  • Benefits professional
  • Revenue from offices and offices (e.g. notaries, bailiffs, clerks, auctioneers)
  • Copyright and income of certain professions in the communication and information sectors (e.g. advertising creator)
  • Industrial property income received by an individual
  • Income of priests
  • Revenue of intermediaries or transparent agents acting on behalf of their clients
  • Miscellaneous income received by non-commercial professions in the course of their business

Liberal professionals can use different statutes: individual entrepreneur, classical society, but also specific structures, such as the professional civil society (SCP) or the liberal accrual society (SEL).

The Liberal accrual corporation is subject to the capital corporation regime and is subject to corporate tax except option (option for a family URL or SARL).

Commercial or agricultural income, received in the course of a professional activity, may also be taxed in the NLC category. They must then arise from non-commercial activity, the revenue of which must remain paramount.

The situation is different for an employee.

The taxable profit is variable depending on the annual turnover (actual turnover).

Conditions of the controlled declaration:

  • CAHT greater than €72,600
  • or optional before 2nd working day 1to May of the following year (valid for 2 years)

Determination of taxable profit : net income tax

Tax Returns:

Regardless of the turnover, declaration No 2035 must be made online by the persons under the controlled declaration:

In case of doubt, the contractor may request administrative control over specific points.

If he made a mistake in his statement, the tax authority will not be able to punish him financially if the following 2 conditions are met:

  • The error is made for the 1st time, subject to the contractor's good faith
  • This is a hardware error (input error, wrong address for example)

The professional may correct himself or be asked by the administration to regularise his situation.

  Warning : NLCs are included in the taxable income of the tax household, which takes into account the total amount of NLCs. The automatic flat-rate deduction of 10% of professional expenses, valid for salaries, is not applicable to professional profits.

The taxable profit is the net profit realised in the calendar year taking into account the income and actual expenses paid in the same year.

Therefore , claims accrued and not yet collected are excluded and expenses incurred but not yet paid. However, it is possible to opt for commitment accounting. This may include, for example, a note or invoice issued but not cashed.

The net profit is equal to the difference between the total income and the expenditure necessary for the exercise of the profession (only for the controlled reporting regime).

Revenues are comprised of:

  • Receipts received in return for the service rendered to the client (fees, commissions in particular)
  • Accessories: reimbursements of fees including lump sum payments, financial products resulting from the investment of funds received in customer deposits in the course of the profession, miscellaneous commercial revenues for example.

However, financial products derived from professional income may be taxed in the category of income from movable capital.

The net profit must account for gains or losses from:

  • Completion of assets allocated to the exercise of the profession constituting the professional heritage
  • Assignment of offices or offices
  • Receipt of compensation in return for termination of the profession or transfer of a client

Income and expenses relating to the taxpayer's private property are not taken into account. Capital gains in respect of the taxpayer's private property are subject to the personal capital gains tax regime.

Profit is included in the other income categories to constitute the total income of the beneficiary or the tax household.

Répondez aux questions successives et les réponses s’afficheront automatiquement

Profit-deductible deficit

Deficits arising from the practice of a professional practice or from offices and offices are deductible from profits of the same kind made in the taxation year by other members of the tax household.

Total Income Allowable Deficit

Deficits arising from the practice of a professional practice or from offices and offices are deductible from the total income of the taxation year and the 6 following years.

Certain charges are deductible from the tax return of a business.

In some cases, a multiplier of 1.20 must be applied to the amount of non-commercial profits. This applies to the trader who is subject to a real taxation regime which is in one of these 2 cases:

  • He is not a member of approved association (AA)directly or through a corporation or group subject to the partnership tax regime
  • It does not call on the services of an accountant or a member company of the College of Accountants, which has signed an agreement with the administration.

Only the income of the holding subject to the progressive scale of the tax is increased.

On the other hand, long-term professional capital gains and losses and deficits are not subject to the 25% increase.

There are several specific regimes.

Répondez aux questions successives et les réponses s’afficheront automatiquement

Income from a literary, artistic, scientific or sports production

These revenues can be taxed on the average of profits for the current year and the previous 2 or 4 years. This is possible even when no income has been collected. The option must be exercised at the time of the tax return.

General insurance agents

They may opt for the general scheme for employees, provided that the commissions are fully declared by the third-party payers. They shall not receive any other income from their profession, except remuneration directly related to their activity. Such ancillary remuneration shall be less than 10 % of the gross amount of the commissions received.

Sports referees

Amounts and allowances paid to them shall be exempt if they do not exceed €5,964.72 (corresponding to 14,5 % of the annual social security ceiling).

Artists and creators

They shall be entitled to a 50 % reduction (capped at €50 000) on their taxable profit for the first 5 years of operation.

Industry 1 Conventional Physician

Some of their costs may be deducted on an option basis as a 2 per cent gross revenue deduction. These doctors also benefit from an additional deduction of 3 % under group III.