Legal structure

The first choice to be made here is whether or not to establish a separate legal entity for the artistic legacy. Theoretically, it is possible to develop activities around the legacy without incorporating it into a structure. In that case, the legacy remains individual property, and the income is personal. By law, the beneficiary is a natural person working on a self-employed basis. So you will need to be registered as a self-employed person and set up a business as such. You will conduct your professional activities linked to the legacy independently. You can do this either as a main job or a secondary job.

There are a few steps to take and obligations to meet in order to register as a self-employed person:

• Join an accredited business counter and set up a (unique) business number which will also be your VAT number
• Register with the Crossroads Bank for Enterprises (CBE)
• Join a social security fund
• Register with the VAT office (some exceptions are possible) and activate your VAT number. Even if you want to benefit from a VAT exemption (<€25,000 revenue), you need to arrange this through a VAT office
• Keep accounts (yourself or through an accountant)
• File taxes (principally income tax)
• Join a health insurance fund (not if you are self-employed as a secondary job)

Bear in mind that certain steps do not apply if you register for self-employment as a secondary job, because these things will be arranged through your main job as an employee.

As a natural person, it is possible to work with family members, friends or others. To avoid conflicts, it is advisable to set down all your agreements in a contract. If both parties sign the contract, that means they agree to the content. Of course it is possible to make new arrangements in the course of your work together or to change the contract, but preferably do this in writing. It is best to consult a legal expert, notary or lawyer for support.

Keeping the legacy as your individual property with no legal structure has both advantages and disadvantages. The advantage is that this way of working has no initial costs and offers great flexibility and freedom (e.g. not being accountable to anyone else). The disadvantage is that you will pay tax yourself on the income from the legacy. Likewise, if there are debts, your private assets will come into consideration. Furthermore, your legacy is not represented by an entity. The personal risk involved in a legacy in your own possession, with no legal structure, is higher than if a separate entity is set up. Additionally, certain subsidies and tax breaks are only open to legal entities such as non-profit organisations or foundations, so you will not be able to benefit from them.

Here are a few considerations to bear in mind when deciding whether or not to set up a legal structure:

• The intention and ambition of the artist and/or heirs: a separate legal entity requires a high commitment.
• Financial aspects: are there start-up costs? What happens to the income from the legacy? Is it profitable?
• The goals and activities of the estate: some structures are better suited to certain activities than others. Be sure to take this into consideration when making decisions.

If you opt for a separate legal entity, several options exist. For example, it is possible to set up a company, such as a partnership (maatschap), general partnership (vennootschap onder firma: VOF), commanditaire vennootschap (CommV), cooperative company (coöperatieve vennootschap: CV), private limited liability company (besloten vennootschap: BV) or public company (naamloze vennootschap: NV). Please note that these Belgian legal forms do not necessarily have exact equivalents in other countries, and so the translations are approximate. Besides these, the most familiar structures for an estate or legacy are the non-profit association (vereniging zonder winstoogmerk: vzw) or foundation (stichting). In the latter structure, a further distinction is made between a private foundation and a public utility foundation (stichting van openbaar nut – accreditation by the Federal Public Service Justice). These different forms of organisation have been brought together in an overview (in Dutch only) by Cultuurloket, which provides business support to the cultural sector. This overview explains the conditions, advantages and disadvantages of each structure.

When choosing the most suitable structure, it is advisable to consider the various conditions that apply to the different forms of organisation. Questions such as ‘what requirements must be met?’, ‘what is the goal of the legacy?’ and ‘is there a minimum capital available?’ are pertinent here.

Firstly, it is advisable to think about the specific goal(s) of the legal structure when setting one up. These goals are what distinguish companies, associations and foundations. The goal of a company is to make a profit through the contributions of partners and activities and to distribute this profit to its shareholders. The situation is different for associations and foundations, whose activities are organised around an altruistic goal. The income and assets of such structures are only used to perpetuate the activities.

• In practice: if you want to make a profit and distribute it, go for a partnership or company. If you have other aims in mind, the organisational forms of an association or foundation are likely to appeal.

Secondly, it is advisable to check whether there is a minimum of capital available to set up a legal entity. Only for non-profit associations is this not required. In a partnership (maatschap), for example, no minimum capital is required from the partners, but they must contribute funds, goods or labour. Conversely, for a foundation (stichting), sufficient assets must be contributed for the foundation to function. This therefore means that you need to contribute enough resources, financial or otherwise, to be able to run the foundation. These assets can be supplemented with donations from other people, government subsidies, or possibly income from activities that the foundation organises after it has been founded.

• That makes it important to think about the financial opportunities and/or whether start-up capital is available to establish a (future) estate.

Besides the distribution of profits and the minimum capital, there are other aspects you may wish to consider, such as managers and representatives, and liability. Some legal entities require several governing bodies, roles or members to act. In a non-profit association, for example, it is obligatory to appoint a general meeting and a governing body of at least three members (unless the association consists of two members). They will manage and represent the organisation. There is also a difference in liability. The questions to ask here are: ‘are you solely liable or jointly with other people?’ and ‘Are your private assets implicated, or only your professional ones?’ This has to do with the risk – including the personal risk – you run within a given entity.

• So it is recommended when setting up a legal entity to consider the minimum number of founders, the governing bodies and managers, and the liability risks in terms of private and professional assets.

All these factors contribute to making a well-considered decision. This decision will help to determine the identity and strength of the legacy. Please note that the laws and regulations surrounding the various structures is susceptible to change. So do obtain professional advice. Contact Cultuurloket or see their website for more information (in Dutch).

Inheritance taxes

With a legacy, you need to take inheritance tax into account, also known as succession duty. As an heir, you need to file your return for a legacy with the Flemish tax authority, using a form or ERFonline. The inheritance tax will be calculated on the basis of that return. Inheritance tax depends on the value of all the movable and immovable property (in Belgium and abroad) that belonged to the deceased on the date of their death. This must be sorted out within a given period after the death. Consult the Flemish Government’s website (in Dutch) for more information.

• This means that, for a visual artist, a market value is calculated for all their remaining works of art, sketches, drawings, etc., and this calculation will be used for the inheritance tax. Note that this may lead to high tax costs.
• In theory, inheritance taxes in Flanders expire after five years. Until they expire, a return is required.

There are various ways to reduce and avoid inheritance taxes, such as by accommodating the legacy in a structure that is no longer anyone’s private property, or by means of a gift. This can only be done by the artist themself, during their lifetime. For example, you can state in your will that the legacy will be put into a foundation. A company can also optimise taxes.

• If the legacy is accommodated in a separate legal entity, it is possible to reduce the value of the assets and hence also the amount of inheritance tax. Obtain professional advice on this from your notary.

Another way of reducing or avoiding inheritance tax is by making a gift of the legacy. Movable property can simply be given directly from one person to another. However, it is recommended to set this down in a written contract, because otherwise the gift may be included in the calculation for succession duty after all. A gift of immovable property must also be made with the help of a notary. The gift is made by means of a notarial deed that is registered with the notary and subject to gift tax.

• For example: imagine you want to give works of art to a future heir. You make an appointment with the notary to register the gift by means of a notarial deed.
• It is important to note that the giver must live for at least five more years after a gift has been given directly in this way. Otherwise, it will be included in the calculation of inheritance tax after all.
• Please note: The inheritance tax laws also vary by region.

Besides reducing and avoiding inheritance tax, it is also possible to pay the succession duty with cultural goods (in Dutch) that form part of the legacy. This is how masterpieces and key works of art come into consideration for museum collections as a form of payment. The government’s intention here is to expand the Flemish Community’s art and heritage collection.

There are two tax conditions linked to this scheme:

1. The cultural goods are accepted in payment at 120% of their market value, so effectively 20% extra.
2. If the inheritance tax to be paid is less than the market value of the cultural goods, you have the opportunity to get a refund of the remaining amount.

Cultural goods include a wide range of items, such as paintings and sculptures, but also archaeological finds, scientific objects, manuscripts, etc. To find out whether the goods are in any of the categories and what their estimated value is, you can file a request with the Topstukkenraad (in Dutch). If you contact the Flemish Government about this scheme during your lifetime, you can be involved in the decisions about what will happen to the art afterwards, such as which museum it may end up in.

• For more information about paying inheritance tax with cultural goods, it is best to contact Cultuurloket or consult their website.

When it comes to inheritance tax on your legacy, we advise you to gain professional advice from a notary. Along with the notary, you can consider various options for setting up a legacy or estate, find out which legal and administrative structure is recommended and ask for more information about legacies and succession duties.

Interested to read more? Go to the next page: Financial resources.