Do you have to pay taxes and social security contributions on a prize or subsidy you receive?

If you receive a prize or a subsidy, you do not always have to pay tax on this prize or subsidy. What is important is whether it is an exempt prize or subsidy, a partially exempt prize or subsidy or a fully taxable prize or subsidy. On fully or partially exempt prizes or subsidies, you also do not pay social security contributions.

Full tax exemption

In some cases you do not need to pay tax on your prize or subsidy. The conditions are:

  • Be awarded by national or international institutions recognised by the King or the Council of Ministers: primarily the Flemish Community, provinces and municipalities, the VAF and the VLF. Download the complete list of recognised institutions (in Dutch).
  • Reward exceptional achievements or make possible exceptional efforts in the field of scientific research, the arts.
  • Be awarded in circumstances that offer the recipients plenty of possibilities for personal initiative in the field of continuing or implementing studies, research, works or artistic expressions.
  • Be granted altruistically, so that the recipient remains completely independent from the giver.
  • Not be financed, either directly or indirectly, by Belgian or foreign industrial, commercial or agricultural undertakings that can obtain any benefit from the rewarded or subsidised services.
  • No consideration be required.

In the case of full exemption, you do not receive any tax forms and do not have to enter this on your tax return. You also do not pay any social security contributions.

Examples:

  • An author receives a subsidy from the VFL.
  • A scriptwriter receives a script subsidy from the VAF.
  • A visual artist receives a development grant from the Flemish Community.

Partial tax exemption of EUR 3,760

Does the institution that is awarding you the prize or subsidy not appear on the list of recognised institutions? Then a partial exemption applies if the institution is an institution with public authority or a public non-profit institution and if the institution does not require any consideration. The exemption is EUR 3,7600 (2013 income year). If subsidies are spread over several years, the exemption is granted for the first 2 periods of 12 months (regardless of whether this period runs parallel to a calendar year). The non-exempt part is taxed as sundry earnings at 16.5% (+ local taxes), except where it would be more beneficial to tax it globally as professional earnings by combining it with other professional earnings.

  • Taxes
    • Notification: you will receive tax form 281.30 from the institution that is awarding you the subsidy or prize. You do not need to attach this to your tax return. You must enter the prize or subsidy in the preparation for your tax return in:
      Part 2, Box XV. Sundry earnings
      B. Other sundry earnings, 2. Prizes, subsidies, annuities and pensions granted to academics, writers and artists, a) Taxable amount
      Code 1203-58/2203-28: reduce the amount received by the tax exemption of EUR 3,760 and increase the result by 18.17% wage tax (even if no wage tax was deducted).
      You must enter wage tax under code 1204-57/2204-27
      You only need to enter the codes and the corresponding amount in the return.
    • Expenses: you may not deduct expenses from prizes or subsidies.
    • Example:a single visual artist receives a subsidy of EUR 10,000 from the Academy for Visual Arts. The Academy for Visual Arts is a non-profit organisation, but is not on the list of recognised institutions that can award a fully exempt subsidy. The Academy does not expect a consideration for awarding the subsidy.The subsidy is taxable as sundry earnings. The Academy does not withhold any tax.

 

Amount

Explanation

Subsidy

EUR 10,000

 

Exemption

EUR 3,760

Fixed exemption per artist

Tax return code 1203-58

EUR 7.373,80

(EUR 10.000 – EUR 3.760) + 18.17% wage tax on EUR 6.240

Tax return code 1204-57

0

No wage tax is deducted

Taxes

EUR 1.216,67

16.5% (tax rate for sundry earnings) on EUR 7.373,80

 

  • Social security contributions: you do not pay any social security contributions on these earnings.

Fully taxable prizes and subsidies

Subsidies and prizes paid or awarded as remuneration for services rendered are taxable in the same way and subject to social security contributions as the reimbursements for a service or work.

    Examples of fully taxable prizes and subsidies:
  • An artist wins a prize from a municipality, but has to use the prize money to design and produce a picture for the town square.
  • A composer receives a reimbursement from the client – via a subsidy from the Flemish Community – to produce a composition. Because the composer does not receive the subsidy directly from the Flemish Community, but from his client, who expects a composition in exchange, the reimbursement is remuneration for services rendered. The reimbursement therefore counts as professional earnings and is fully taxable.

Related info: