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Using Cake

Why Rewards are tax-free

The average Cake user already earned €9.26 this year thanks to the Cake Rewards. That’s a nice extra. Cause, hey, every little bit helps. But why don’t you have to pay taxes on that? We’d like to explain.

Cake is the profitable banking app. And those aren’t meaningless words. We are serious!

We want to improve the financial well-being of every Cake user. We analyze financial data to help people better understand, control and improve their finances. And we do this by the Cake Rewards, among others.

If you are a Cake user then you probably know what Rewards are and chances are that you have already earned something with Cake thanks to the Rewards. The average Cake user this year already received €9.26 on his bank account through the Cake Rewards.   

Cake Rewards

We love to explain it to you.

You can get a Reward when you buy something from one of our commercial partners. They target anonymous Cake users with cashback Rewards. You might have seen in the past few weeks offers from AVA, Foodmaker, Lukoil, Eneco, Proximus or other partners.💰

But Cake also sells fully anonymised statistics and insights to commercial partners. These insights are based on the transactional data of the Cake users. Don’t worry, all these insights are fully anonymised!🕵 

When your data is used in generating these insights, we share a portion of the generated revenue with you. Those Rewards are paid out monthly without you doing anything special, just being a Cake user. 🍰

Besides that, it is possible that we do special actions where you as a user can earn extra pocket money.

Extra pocket money  

Consider Rewards as some extra pocket money. We believe that all additional income is helpful. But wait a minute, income? 🤔 Don’t you have to pay taxes on that? Are these payments tax-free? 

That’s a fair question. But here’s some good news.

Yes, these are completely tax-free. So you get them completely free of charge, without snakes in the grass, monkeys up the sleeve or turtles in the canal. 

The only condition is that you are a private user (i.e. do not receive Rewards with a business account) and live in Belgium.  

Was this your main concern? Then you can stop reading here. And continue to sleep on both ears. 

For those who like to dig a little deeper, we’ll go a little further below. 

What do you mean, tax-free?

First of all, please note that this blog post only applies to Belgian residents. As soon as we become active in other countries, we will provide a nice overview of the exact situation in each country. If you are a tax resident of another country and you already want a conclusive answer now, it is best to consult a tax expert. 

So let’s zoom in on Belgium. In order to speak of a taxable income in Belgium, the income must be included in the “Income Tax Code”, also known as the “1992 Income Tax Code”.  

That stipulates that you pay taxes on the following income: 

  • income from real estate 🏠
  • income from movable goods and capital 💸
  • professional income 👮 🏢 🚑 👷
  • miscellaneous income 🏆

It is immediately clear that Rewards are not income from real estate or movable property. After all, it is not about buildings or investments. So we can already delete those two categories. ✅ ✅

The law defines “professional income” as income derived directly or indirectly from “activities”, such as profit or remuneration. 

In order to speak of a professional income, you must therefore obtain this income through the exercise of a profession.

According to established case law it is a “profession” in the case of (hold on): 

  • a set of repeated, sufficiently numerous and interconnected operations,
  • which require a particular skill or organisation 
  • and who also have a professional character. 

In concrete terms, it looks at the importance of the act in terms of profit, the organisation that the activity implies, the amount of borrowed money to be able to carry out the activity, the cooperation between two or more persons or a close link between the secondary activity and the main activity. 🤯

A whole bunch of factors that show that Rewards are not part of that and therefore do not qualify as professional income. Private users acting in the context of their own private life are therefore definitely safe. ✅

Is it miscellaneous income? Because it is money coming in.

The best-known category of “miscellaneous income” is the accidental or occasional profits or gains (however named) obtained outside the context of a profession. These are in principle taxable at 33%.

However, the law states that such income can only exist if it arises from “any performance, performance or speculation or from services rendered to third parties”. This does not include the normal operations of managing private assets. 

Maybe, this requires some additional explanation. 

👉 The law states that an active initiative must be taken by the taxpayer in order to obtain the income. So you have to actively do something for someone else. So, whoever digs a pit for another, and gets something in return, is taxed on it. 

However, with Cake, you get Rewards automatically without having to do anything. You don’t even have to cut coupons, scan codes, nothing, nada. It can’t be more passive (except maybe for a lazy Sunday on the couch). ✅   

Suppose we set up a contest or action where you can win a Reward but have to do something active for it. Take a selfie in front of a bank building to win €100 in Rewards. Could be. 

They are also excluded from taxation. The administration excludes a number of active supplies, such as the ‘prizes won by the taxpayer in publicity competitions’ (Com. IB 1992 No 90/8). ✅

👉 The normal management of private assets means that it is not a speculative act (with a chance of profit or loss, and in principle both a ‘purchase’ and a ‘sale’) but that it takes place within the framework of the management as a good family man. 

The courts define a good family man as “a well-informed and well-educated private individual who actively makes his private assets fit for purpose”. 

Let that be the intention of Cake: to inform our users well. Whoever installs Cake can consider himself a good family man. ✅

Summary

We have several reasons to state that Rewards are not taxable income. 

  • Rewards are not income from movable goods or real estate.
  • Because you only use our app privately (and not for business purposes), Rewards aren’t professional income either. 
  • You get our Rewards without doing anything (no active initiative) and if we did ask you to do something, it’s one of our “competitions” (and the exemption on prize money).
  • Rewards are part of the normal management of private wealth because you don’t act speculative (there is no risk) and you act like a good family man. 

So you can without any worries make your bank account profitable again by installing Cake. Katsjing! 🍰

Please note: this is a blog post and not a legally binding text. If there is a difference in interpretation of tax law (and this is almost always possible in Belgium), you can never hold Cake responsible for this. 

The Cake app is freely available to download since the beginning of this year. Although it is still a beta version it already offers more than enough features to improve your financial insights and to make your bank account profitable again. Download the app in the App Store and on Google Play .