Why advance tax payments and optimised social security contributions matter so much

Throughout the year your accountant advises you to make advance tax payments and to optimise your social security contributions. Never pleasant, but it pays off.

Why make advance payments?

When preparing interim results at six and nine months, for sole traders (main and secondary occupation) as well as companies, we sometimes recommend making an advance payment. But why pay tax now when you could wait another year?

The answers are simple. First, you risk a tax increase (surcharge) if no advance payment is made, or it is made late. Second, you can spread your taxes over the financial year instead of paying everything at once. Finally, you receive a tax benefit when an advance payment is made before a given date:

• 11/04/2022 - 3.00%
• 11/07/2022 - 2.50%
• 10/10/2022 - 2.00%
• 20/12/2022 - 1.50%

As you can see above: the earlier, the better.

How do you do this? Very simply via MyMinfin. Make sure you log in in the name of the company.

Optimising social security contributions?

That social security contributions fund your social security and build up your social rights as a self-employed person is nothing new. But why should they be reviewed after a while, and what are the benefits?

Social security contributions are a bit like an electricity bill. If too little was paid in advance during the year, the settlement comes the following year with the shortfall. Doubly painful.

Together with the advance payments, we therefore check whether the social security contributions due need adjusting. They are paid every three months and depend on last year's profit or income. If you made a loss, the contributions paid are refunded to your account the following year. If you made more profit than expected, you can expect a settlement.

Do you receive a salary from your company? Then social security contributions are due on that too. The company can pay them, in which case they are treated as a benefit in kind. As a result they count towards the director's remuneration and thus towards the mandatory minimum director's remuneration of €45,000. Subject to other conditions, this may qualify the company for the reduced corporate income tax rate.

There are of course some exceptions to this last obligation. Your accountant takes them into account.

We can easily optimise this for you. You can also always pass this on to your social insurance fund yourself.

Conclusion

We can never oblige you, as a client, to make advance payments or to have your social security contributions optimised. But know that there are advantages when you do.

Still unsure when you receive your interim result and the advice on advance tax payments and social security contributions?