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Sharing economy, enemy or ally of traditional business?

Start-ups, scale-ups, incubation centers, pitches, webinars, workshops, etc. all “hot” and “trendy” names for a booming group of entrepreneurs striving worldwide to disrupt existing businesses by challenging them mostly through the use of new technologies.

In our daily lives we are constantly confronted with new online sharing platforms, promising us to facilitate our lives by simply clicking on an “app” on our smartphones, which have become our new bank cards, ID cards and so much more. These new online sharing platforms (e.g. such as Uber, AirBNB, FLAVR, Listminut, MenuNextDoor, etc) enable us to have our preferred restaurant delivering our favorite dish at home, to drive us home from where we want at any time, to sleep in a cozy and trendy loft instead of an ordinary hotel room, etc.

The demand for online sharing platforms is both a social and economic phenomenon. People are nowadays searching for sustainable products and services as well as for individual and authentic experiences. Furthermore, the economic crisis of the recent years has reduced people’s purchasing power.

Although a “sharing economy” is defined in multiple ways, the following three (3) elements are crucial: (i) online sharing platforms create a consumer-to-consumer ecosystem, and can thus not be catalogued under the product-service economy which relates typically to a business-to-consumer relationship; (ii) sharing platforms provide temporary access to goods and are thus not about transferring any ownership of goods; and (iii) sharing platforms are about a more efficient use of physical assets on demand.

Both critics and advocates of the sharing economy are using multiple arguments to defend and tackle the desired and undesired effects of these new online sharing platforms.

It cannot be denied that online “sharing economy” platforms have an increasing impact on people’s lives, disrupt traditional business models, contributes to a more sustainable economy and promote the development of new business models. The future will tell us whether this new phenomenon is only a temporary hype or will change the economy permanently.

Notwithstanding the revolutionary effects of some online sharing platforms, authorities worldwide are struggling to deal with these new technologies, as a result of which most of the online sharing platforms are currently operating in a grey zone as it comes to legislation.

Needless to say that we have currently reached a point of no return. In order to promote the development of a sharing economy and stimulate entrepreneurship in general, existing laws and regulations need to be adapted in a way to promote the development of these new types of business models. Regulators and policy makers need to react and adapt regulations if they do not want to miss the obvious opportunities.

Based on the foregoing we can only welcome the Belgian government’s proposal to regulate online sharing platforms allowing them to operate within a legislative framework.

During its budget control of April 2016, the Belgian government implemented a favorable tax regime for sharing economies. In essence, the government proposed the implementation of a flat upfront taxation of 10% for service providers to online sharing platforms.

In order to benefit from this 10% upfront taxation, the following cumulative conditions should be met:

  • Earnings through the use of an online sharing platform may not exceed EUR 5000 per year;
  • Services can only be offered to private persons (are thus excluded: enterprises and/or professional natural persons);
  • Only services can be offered (such as delivery of food or housing). The offering of assets is excluded;  
  • The online sharing platform needs to be recognized by a public administration; and
  • The end-consumers need to pay either to an agent or directly to the online sharing platform.

As mentioned above, the principal decision and the framework of this frontier new tax regime have been adopted by the Belgian government. We are however waiting for the draft laws and the final approval thereof by parliament.

Although we would have expected a somewhat more ambitious approach from a government, striving for a social and economic boom of the Belgian economy in the wake of the recent financial crisis, this initiative is definitely a step in the right direction supporting and stimulating a new generation of entrepreneurs aiming at innovative ways to do business.

We will closely monitor this subject matter and inform you once laws will be adopted and/or other initiatives will be taken.

For specific questions, you can reach out to the authors of this article or to your regular contact person at Cresco.

Olivier Van Raemdonck | Senior Associate

Filip De Schouwer | Managing Partner

 

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