Partner comes to work in the cafeteria; how to do it for tax purposes?

If you are a small entrepreneur, like many in the frying industry, there is a good chance that your partner is involved in the business. Or there comes a time when your partner quits a job and starts working in the company. With a business partner, other tax rules apply, and there may be an advantage to pick up. What options are there and what should you be aware of?

As an entrepreneur with a business partner, you need to think carefully about how to organize this for tax purposes. You and your partner may benefit from tax benefits. Which scheme you fall under depends on the situation. In any case, you must be an entrepreneur for tax purposes, which means that you put at least 1225 hours a year into your business. You and your partner must also meet the conditions of the tax partnership. You can check this with the tax authorities.

Once your tax partner starts cooperating in the case, there are three options to start with.

1. Wages

Your partner is not employed, but is paid for those working hours. If this reward is higher than 5000 euros per year, you can deduct this amount from the profit as a cost item. Your partner pays income tax and social security contributions on the severance pay. In addition, your partner is entitled to an employee deduction. The salary must be stipulated in a written agreement.

Register hours

The remuneration must also be realistic and in a reasonable proportion to the number of working hours. The advice is therefore to record the hours where you also indicate how you pay your partner. This can be done, for example, by transfer to an account or in the form of a debt acknowledgment. With the latter, you note on paper that you will give your partner an amount over a certain period of time. This is an option if you can not afford to miss out on money at the time.

2. Partner supplement and employee deduction

Your partner will not be hired, but will receive a partner supplement. If your partner works 525 hours or more a year, and the compensation is less than 5000 euros a year, then you as an entrepreneur are entitled to an employee deduction. You can deduct this from the profits. The deduction percentage depends on the number of working hours. Up to 875 hours, you can deduct 1.25 percent of the profits. This rises to a maximum of 4 percent (from 1750 hours).

A compensation of less than 5000 euros is not considered income. Your partner does not have to pay tax on this. If your partner is a partner or lender in your company, the right to the employee deduction lapses.

You can choose the employment salary or the employee deduction each year. So you are not bound to it.

3. Employment contract

Your partner is employed and you enter into an employment contract. It contains agreements on working hours and wages. The working conditions for your partner must be the same as for other employees. There must also be an authority relationship where you lead and supervise. This should be comparable to the relationship you have with other employees.

An employment contract also entails costs and obligations. For example, you pay payroll tax on the salary of your partner. Of course, your partner pays income tax and social security contributions. When your partner is your first employee, you must register with the tax authorities as an employer.

If your partner is employed by you, there may be no insurance obligation. In that case, your partner is probably socially insured. Ask the tax authorities about this.

To act together

Another option is to start a general partnership with your business partner. In that case, you must both meet the hourly criterion of 1225 hours per year. In a partnership, you are both liable for your private property, even if you are married under a marriage contract. If you create a BV together with a notary, in most cases you are not personally liable for any debt, except in the case of mismanagement or if the BV is not yet registered in the trade register.

think carefully

Advice from the Association of Professional Fryers: Get good advice and do not always choose the solution that is financially most favorable. Be aware of the consequences. What happens, for example, if your partner becomes ill or becomes incapacitated for work? Is your partner still entitled to benefits and allowances? And what happens in the event of a divorce? Get informed by an expert and think it through thoroughly.

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