Any Tax Experts?

[mbchuz]

I'm still not convinced that taxation in my Belgian Pro League save is correct. I've literally stopped selling players because I am charged every cent back in tax over the next 12-18 months; it makes better sense to just allow their contracts to run out than sell a star for $70m...

As a result, the financial side of the game is not 'ruined' as such, but we consistently break even (give or take a little) in the long term every year, whether we have a mediocre year, or win the Champions League and have 100m+ transfer profit.

I just want to leave a screenshot of the current tax rules in Belgium here for people more familiar with taxation to peruse for me, if anyone would be so kind. I'll openly admit that I don't understand tax very well...

Thanks in advance

[Cougar2010]

I'm no expert on Belgium tax laws but there isn't anything there that sticks out as being obviously wrong.

EDIT

You might want to post up a screenshot of your finances screen if you think there is an issue and we can see the other income & exps rather than just tax.

[Puni]

Seeing these numbers, what stands out for me is the corporation tax. In Belgium, that tax rate is fixed at 33,99%. The national ensurance is a little bit too high as well, should be 13,07%.

[Sikker]

You could try to look up other nations and compare.

[mbchuz]

You could try to look up other nations and compare.

Thanks for making me feel stupid! Why did I not think of this...

What I'm noticing after looking at other European nations (particularly Central) is that the maximum 'Corporation Tax' threshold is consistently in the 22-26% range in virtually all other nations, with one or two as high as 33%. Certainly none others anywhere near 50%. Interestingly, I also saw a 23% 'Transfer Tax' in Greece.

[Sikker]

Maybe Puni is right about the taxes he mention. Try to bring this up in the Belgian league bug thread....

[Puni]

I'm a Belgian Accounting and Tax student, so I should be.

[mbchuz]

I'm a Belgian Accounting and Tax student, so I should be.

You were put on this Earth to contribute to this thread

Can you shed any light on the two 'Employer Tax' (what is this? why two of the same thing?) and also why there are multiple 'Nat. Insurance Employer' (why is one capped and the other open-ended?)?

And is there any nation I could model the tax system on? I'm very keen to change these values to something more realistic, but like many FM players I could never forgive myself if I even accidentally changed hidden values to my benefit. Most countries have a list half the length of all the Belgian tax rules so I'm not sure what to change and what to remove.

[sagajagan]

Have I read that screenshot wrong, or is there actually a 50% tax band on income over 34,000 Euros in Belgium?!

[mbchuz]

Have I read that screenshot wrong, or is there actually a 50% tax band on income over 34,000 Euros in Belgium?!

It is quite high, but I got the impression that income taxes are generally high (for individuals) all through Europe; it's the other taxes here, especially corporate, that concern me more. FWIW here in Australia the highest tax bracket is 45% for over $180k (€142k).

[sagajagan]

It is quite high, but I got the impression that income taxes are generally high (for individuals) all through Europe; it's the other taxes here, especially corporate, that concern me more. FWIW here in Australia the highest tax bracket is 45% for over $180k (€142k).

It's 45% on £150k in the UK, and I always assumed it was on six figures in other countries. Never have I heard of such a top rate of tax on such a low figure. Didn't Gerard Depardieu relocate to Belgium to escape high taxes? Surely 50% on anything above 34k is worse than 75% on anything above 1 million?

[mbchuz]

It's 45% on £150k in the UK, and I always assumed it was on six figures in other countries. Never have I heard of such a top rate of tax on such a low figure. Didn't Gerard Depardieu relocate to Belgium to escape high taxes? Surely 50% on anything above 34k is worse than 75% on anything above 1 million?

Maybe you're right... It wouldn't surprise me since I'm confident the Corporation Tax is incorrect.

Actually, a quick Google search reveals that it's probably true: "Expatriates and Belgian citizens alike suffer from one of the highest taxation rates in the EU. It amounts to - including social security - 57.3 percent for a single earner"

http://www.expatica.com/be/finance_business/tax/taxation-in-belgium-8618_8286.html

http://europa.eu/youreurope/citizens/work/abroad/taxes/belgium/employed_en.htm

With respect to the Depardieu situation, I think these two paragraphs sum it up nicely (tldr: Foreigners are increasingly setting up 'foundations' in Belgium which have attractive taxation benefits):

"The key to Belgian foundation law is that it permits the patron to hand over all assets to children as a gift, taxed at only 3 per cent instead of France’s 45 per cent inheritance tax. It also avoids France’s annual wealth tax, a levy that does not exist in Belgium. To top it off, the foundation’s benefactor retains full control of the assets while alive and can set disbursement terms for after their death."

"Counterintuitively, part of Belgium’s appeal to potential tax avoiders is its reputation for high taxes. For some workers – particularly the unmarried and childless – income taxes are the highest among OECD states. Those high rates can obfuscate a tax code littered with loopholes for the rich, including no taxes on capital gains or rental income."

http://www.ft.com/cms/s/0/b21d8f1e-7461-11e2-b323-00144feabdc0.html

Which begs the question, why can't my club get some decent accountants and take advantage of these loopholes!

[Puni]

You were put on this Earth to contribute to this thread

Can you shed any light on the two 'Employer Tax' (what is this? why two of the same thing?) and also why there are multiple 'Nat. Insurance Employer' (why is one capped and the other open-ended?)?

And is there any nation I could model the tax system on? I'm very keen to change these values to something more realistic, but like many FM players I could never forgive myself if I even accidentally changed hidden values to my benefit. Most countries have a list half the length of all the Belgian tax rules so I'm not sure what to change and what to remove.

1) I'm assuming (because I'm not that familiar with the English terms) that employer tax is the following: In Belgium, employers withold a monthly sum of money from an employee's salary. They transfer this money to the state, as a form of advance on the employee's income tax. This way, the employee doesn't get a hefty bill once a year, but the amount that is due is spread monthly.

2) There are two forms of national insurance in Belgium. An employee pays 13,07% of his monthly income (a fixed percentage) to social security. This is the national insurance employee you see on top of the list. It is, just like the above, witheld and transfered to the state by the employer. On top of that, the employer has to pay an additional amount on top of the employee's monthly income. This is the national insurance employer. It's quite a hefty sum, generally somewhere between 30 and 40% of a wage/salary. I'm not entirely sure what is meant by the capped amount though.

3) I highly doubt you can model our system on another country. It's probably one of the most complex (if not the most complex) in the world.

Have I read that screenshot wrong, or is there actually a 50% tax band on income over 34,000 Euros in Belgium?!

There's no flat tax on income in Belgium. The basics work like this:

0-8350 EUR: 25%

8350-11890 EUR: 30%

11890-19810 EUR: 40%

19810-36300 EUR: 45%

36300+: 50%

There is a reduction available through means of a 'tax' free sum, which varies depending on your personal situation. There's a base sum that can go up if, for example, you have kids, are a single with kids, have elderly to take care of,...

And then there's another list of tax reductions of course, but that one is so complicated I'm not even going to bother explaining all of it.

[mbchuz]

You might want to post up a screenshot of your finances screen if you think there is an issue and we can see the other income & exps rather than just tax.

Ok I have a few screenshots here which demonstrate my problem quite well...

Here is my transfer income ('Players Sold') over the last couple seasons. You'll see there's been very little activity except for the two major transfers of $70m (August 55) and $50m (July 57).

For the record, my transfer expenditure has been below $4m in total for the last 4 years.

And here is my tax expenditure over the same period:

So what do we see here? Come tax time, about 12 months after each sale, my tax payments SOAR.

Let's focus first on the 12 month period June 56-57. Beforehand, the payments are about $4m a month, so $48m for the year. In June 56, they rise to and average around $8m per month for the full year, so about $96m in total. With all other values virtually equal, that means I'm handing over roughly $50m of the $70m transfer.

And same again with the second one: Taxes rose from $48m to $72m per annum (you can see I'll be paying about $6m a month right at the end of the graph). So $35m of my $50m transfer is going to the government.

When you factor in the annual dividends as well, which seem to consistently rise by about 20% of the transfer (ie. an additional $15m for the $70m transfer), I'm left with almost nothing.

And my balance over the last couple of seasons shows that well:

Look at it from June 55 onward... Big rise in August 55 with the $70m transfer -> Stays roughly the same for 12 months -> Taxes rise and it falls back to where it started by mid 2057 -> Big rise in July 57 with the $50m transfer -> Stays roughly the same for 12 months -> Now falling back to where it started due to tax rise.

I cannot emphasise enough how frustrating this is. I may as well give players away for free, it makes managing the finances a lot easier!

[mbchuz]

Just giving this one bump before it dies so any 'experts' can contribute before I have some fun with FMRTE...

[Sikker]

I think the problem is dividends in FM isn't tax-deductible.

When a season ends (e.g. June 2015) you have your revenue (total income) of which you must pay taxes the following season (2015-2016). At the beginning of the following season (July 2015) you (maybe) then pay dividends of your profit. But these dividends don't get deducted from last season revenue (June 2015). Only from the revenue of the following season obviously (June 2016). As such you may end up paying huge taxes and dividends (2015-2016) due to player sales the season before.

I'm not 100% sure this is correct, though. I've put in dates to (hopefully) make it more clear what I mean

[Puni]

Dividends shouldn't be tax deductible. In any major company, this is the big schematic:

Profits before tax

- tax

= profit after tax

+ profit from last year that has been transferred

= total amount that can be turned into dividend, put into reserves or once again transferred to the next accounting year

When turning out dividend in Belgium, it is important to know that is is susceptible to another tax, for the person receiving it. The company will withold that part of the dividend and pass it on to the state. If I'm not mistaken, this is 21% of the total dividend.

[Sikker]

Aha, reckon I never learn to understand FMeconomics