Unfortunately, ‘alimony’ or ‘maintenance’ remains at the heart of almost all family conflicts and often serves as the last bastion of, often bitter, discussions that aim to maintain a semblance of family solidarity when marital and parental ties are under strain.
This raises the thorny question of the quantum of the maintenance obligation which, in the absence of agreement, lawyers, mediators or magistrates will seek to determine by reference to the legal principles underpinning the obligation. The maintenance payer’s obligation aims, depending on the circumstances, to provide, in proportion to his or her means, for the accommodation, maintenance, health, supervision, education, training and development of a couple’s child, to maintain the ex-partner’s standard of living during separation, or indeed to cover the ex-spouse’s financial needs.
The maintenance obligation will essentially fall on the more financially well-off person, whose ability to contribute, net of any tax, must be determined.
This ability to contribute is established by taking into consideration the actual income of all kinds – professional, investment, real estate – but also all the benefits in kind and other means which ensure the standard of living of the maintenance payer, in addition to his or her ability to earn income and … not to forego it.
Thus, for a person who exercises a profession under the aegis of a company of which they are a shareholder and director, the profits of the company that are retained and not allocated in the form of remuneration or dividends should be taken into account in assessing his or her income, as well as the status of the company’s current account.
The current account reflects the day-to-day management of a company, and reveals the debts or claims between the shareholders, directors and the company.
The current account may therefore be in credit to the shareholder, if the latter has lent private funds to the company (which will be shown on the liabilities side of the balance sheet), in the form of a deferred payment if he or she has sold an asset to the company, or in the form of a provisional non-payment of dividends or a non-payment of remuneration. Conversely, the current account may be in debit if the company has lent money to the shareholder/director (which will then be shown as an asset on the balance sheet).
If the current account is in credit, the advantage may be significant for the person whose tax capacity is being determined, since he or she is likely to receive interest from the company, which is taxable through a 30% withholding tax but is also deductible for the company (subject to certain conditions).
Conversely, if the current account is in debit, he or she will claim to be in debt to the company, in the knowledge that the tax authorities will see this as a benefit in kind, i.e. a loan at a zero rate, which they will then tax as such (currently at a rate of just over 10%).
So, the company’s current account is also an element that determines the contributory capacity of the person that controls it, so as to ensure that he or she does not seek to evade a part of their maintenance obligation. For all intents and purposes, it is worth remembering that any Belgian tax resident may deduct, on a private basis, the alimony/maintenance that he or she pays, up to a maximum of 80%. The real tax impact will depend on his or her tax rate, so that the French expression “faire contre mauvaise fortune, bon cœur” (to put a brave face on misfortune) will often win the day in the search for a balance of economic interests between family and participation in a company.