These are terms you will hear somewhere along your journey as an entrepreneur: assessment year, calendar year, income year …
We want to list them specifically for sole proprietors, so that you as an entrepreneur know when it’s about what!
What is a calendar year? 📆
Fortunately, in the complex world of taxation, the word ‘calendar year’ always continues to mean a normal calendar year.
In other words, always from 1 January to 31 December, no need to worry about confusion!
What is an income year? 🗓️
If you are a sole proprietor, the word ‘income year’ is also quite easy to interpret. Because an income year then always, without exception, runs concurrently with a normal calendar year.
Accounts are always kept by income year (or financial year) and you will also hear accountants regularly refer to this term.
For example, if we talk about income year 2022 for a sole proprietor, this means: all your turnover, expenses, investments … for income year 2022 add up to calculate the profit or loss for that year. This way, we also know how much taxes have to be paid.
So, suppose you start your sole proprietorship on 1 April, then your income year in a sole proprietorship runs up to and including 31 December of that same year. With a sole proprietorship, there can be no deviation here, as these accounts always run concurrently with the calendar year.
Why the term ‘income year’?
So from a sole proprietors’ perspective, the term income year (or financial year) seems a bit redundant. An income year always runs concurrently with a calendar year anyway, starting on 1 January and ending on 31 December.
This is because a company does have the option to deviate from the calendar year.
For example, you can select an extended income year at the start of your company. If you start on 1 December with your company and choose an extended income year of 13 months, so your income year only ends next year on 31 December. So you have one income year, which runs over 2 calendar years and contains a total of 13 months.
Other combinations are also possible, for example, if your company starts on 1 April, you can let the income year run up to and including 31 March of the next year. After that, your company’s income year will always run from 1 April up to and including 31 March. So your company’s turnover, expenses, investments and so on will always be bundled from 1 April to 31 March. Based on that, the profit or loss will be determined and the tax impact will follow.
Given that Dexxter is the accounting programme for the entrepreneur with a sole proprietor who wants to take charge of his own accounting, we are not going to zoom in further on the discrepancies with a partnership.
Tip!
In any case, know that an income year for sole proprietors always points to the calendar year.
Changing years in Dexxter
Below you will find out how to easily change years in Dexxter.
What is an assessment year?🔎
Before this, we talked about income year, which for sole proprietors always corresponds to a calendar year. So that is the period from January 1 up to and including December 31.
The day following the income year determines the assessment year.
For a sole proprietor 👤
If you are an entrepreneur with sole proprietors, then it is quite simple: for example, the year runs from 1 January 2022 to 31 December 2022, we refer to it as income year 2022.
The following day is January 1, 2023, in other words assessment year 2023.
It’s not going to get any more difficult than this situation, because in the case of sole proprietors, we can never deviate from a calendar year. So the income year will always run to 31 December
For a partnership 👥
If you are an entrepreneur with a partnership, then things can potentially get a bit more complex. Even if your income year runs, say, from 1 January 2022 to 31 December, we will still refer to it as income year 2022.
The day that follows is January 1, 2023, in other words assessment year 2023.
Similarly, your income year in a company could, for example, run from July 1, 2022 up to and including June 30, 2023. The day following that is July 1, 2023, in other words assessment year 2023.
Why companies choose a broken income year, we won’t go into that further here.
Why is the assessment year important?
Taxation in Belgium is liable to be edited at times and these changes often start from a certain assessment year. As sole proprietors, this is always quite clear, as your income year always corresponds to a calendar year.
As a company, however, this can sometimes be edited, leading to doubts about which assessment year is the correct one.
This is of course important because it determines which tax law changes apply from which assessment year. Although there are also changes in legislation that take effect from a certain date, which makes it all a bit more straightforward.
The term year of assessment is also back in assessment notices. Think, for example, of a personal income tax statement, which always refers to a certain income year and assessment year.
So you know for sure when you receive a tax statement (your personal income tax assessment notice) for assessment year 2023, that it actually refers to the income of 2022.
Dexxter makes it easy for you! 💪
Are you an entrepreneur with sole proprietors? Dexxter stands ready for you! We are the accounting programme for Belgian sole proprietors who want to take charge of their own bookkeeping.
Tip!
Start your free 30-day trial today to discover all our functionalities.
Including your own custom-made tax timeline. This allows you to see all tax deadlines relevant to your vAT type.
Do you still have specific questions? That’s perfectly normal, many from your fellow entrepreneurs for that matter!
This is precisely why we have also built a community in Dexxter. That’s a place in the application where entrepreneurs can ask questions and get answers from other entrepreneurs, sparring together to find solutions.
In addition, we also have learning centre available Dexxter, packed with content, videos, courses …
You are not alone as a (starting) self-employed person, let that be clear!
