If a business fails to pay its social security contributions on time, it will be summoned before the Labour Court.
One third of all companies which fail have been summoned by the Social Security(*)
So a Social Security summon is a very bad sign.
(*) Source: Companyweb: results based on our own study into causes of bankruptcies.
The CBE does not report any VAT activity linked to this company number.
A business is exempt from charging VAT if it:
- performs only exempted activities (for example socio-cultural, financial and medical activities), or
- is registered under the VAT exemption scheme for small businesses.
In both these cases, the business can not charge VAT to its customers.
The deletion of a VAT number can be requested by:
1) the taxpayer himself in case of:
a) complete discontinuation of the business
b) stopping all activities subject to VAT within the business
2) the government when there is no longer any economic activity within the business.
In other words, the deletion of a VAT number can be an important negative indicator concerning the continuity of the business and requires additional attention.
The FPS Finance states the following:
A business established in Belgium must register for VAT if it is subject to VAT.
A Belgian (or non-Belgian) business is liable for VAT if its activity is the supply of goods or services as set out in the Belgian VAT Code.
If the business’s only activities are exempt from VAT (e.g.
certain socio-cultural activities, financial transactions, transactions in the medical sector), and the business therefore does not have a right of deduction, then the business is not required to register.
It does not have to charge VAT to its customers (
Article 44 of the Belgian VAT Code).
However, if this type of business is required to account for Belgian VAT on intra-Community acquisitions of goods or on intra-Community supplies of services, it is required to register for VAT.
For more information regarding "Value Added Tax", please refer to
Fisconet plus.
One quarter of those which fail have a general indebtedness > 100% (*)
A general indebtedness of < 50% is absolutely healthy.
General indebtedness = debt/total assets
This shows what percentage of a company's total funds is being provided by third party funds, or debt.
Being > 100% indebted means a company's equity assets are negative, due to carrying over major losses:
so its liabilities exceed 100% of its total assets.
Such a situation is unsustainable in the long term (cf.
alarm bell procedure).
= A very bad sign!
Businesses do benefit from having a certain level of debt, however, as interest on debt capital is tax-deductible, for example.
Deducting notional interest also plays a major role in choosing between debt and equity in Belgium.
(*) Source: Companyweb: results based on our own study into causes of bankruptcies.
A business is liquid if it can meet its short-term payment obligations; if not, it is illiquid.
A liquidity of > 1 is considered very good
(= in theory, this business can pay its short-term liabilities if it realises its current assets).
The way this ratio has changed in recent years is highly significant.
If liquidity falls steadily, this means things are getting increasingly worse, and will end up being unsustainable.
How liquid and profitable a business is gives a good idea of how well it is doing.
| Liquidity | Profitability |
|---|
| + | - |
| + | Healthy | Chronically sick |
| - | Temporarily sick | Dying |
(**)
(**) Source: Handbook "Financial analysis process" by Hubert Ooghe and Charles Van Wymeersch (Intersentia)
