Introduction
Taxation in Belgium is levied at both a federal and municipal level and is controlled through the Ministry of Finance.
Tax Year
1st January to 31st December.
Assessment Basis
Belgian residents are taxed on their total worldwide income from all sources. Residents are required to complete a tax return in June each year, non-residents generally in the course of the third quarter. Couples, married or legally co-habiting, are taxed separately, but assessments are issued in joint names. If only one partner is earning, a proportion of earnings may be transferred to the nonearning partner, so that each is accorded a basic minimum deduction.
Income Tax
A progressive scale is applied to successive portions of net taxable income. Tax rates vary between 25% and 50% (federal income taxes) and between 0% and 10% (municipal taxes to be calculated on the federal taxes due). For resident and non-resident taxpayers, taxable employment income includes salary, bonuses, commissions, cost of living allowances, housing allowances, private use of company car and tax equalisation reimbursements. For expatriates, cost of living allowances, housing allowances and tax equalisation allowances may be exempt, within certain limits.
Individuals and couples benefit from tax free allowances, which are increased in respect of dependent children.
Taxation of Investment Income
Investment income includes interest, dividends and income from real estate or other forms of investment. Interest and dividends received are subject to a flat tax rate of 15% for interest and 25% (unless certain conditions are met) for dividends, usually withheld at source. Foreign interest and dividends collected abroad must be declared in the annual tax return and the flat tax rate is paid on assessment, increased at this point by municipal taxes (0% - 10%).
For each taxpayer the first €1,730 (income year 2010) of authorised savings bank account interest is exempt from the 15% withholding tax.
Tax on Property Rental Income
Property rental is subject to tax. The tax is calculated according to use and based upon either actual rent or ‘cadastral income’ (deemed rental value) basis.
Wealth Taxes
There are no wealth taxes in Belgium.
Capital Gains Tax
Capital gains tax is only payable in specific scenarios relating to property sales and the sale of foreign holdings in Belgian companies. Within the EU an exemption can be claimed in relation to the latter. Capital gains on shares realised in the framework of the management of a private portfolio are in principle exempt from Belgian income taxes.
Premium Tax
For premium payments made after 1 January 2006, a premium tax of 1.1% is applied.
Inheritance and Gift Tax
Inheritance tax is due in respect of worldwide assets, from each heir or legatee, on the net amount inherited from the estate of any deceased person who is considered to have their fiscal residency in Belgium. The amount payable depends on the heir’s relationship to the deceased and the deceased’s region of fiscal residence.
Regional and Municipal Taxes
Rates vary between 0% and 9.5% of the total federal income tax payable. Non-residents have to pay a similar tax at a fixed rate of 7% of the total federal income tax payable.
Property Taxes
Local property taxes are assessed on a cadastral income basis and taxes vary by region between 20% and 50% of cadastral income. Tax credits and abatements are available if the taxpayer occupies the property.
Stamp Duty/Transfer Tax
Transfer tax (‘Registration duty’) is charged at a rate of 10% or 12.5% depending on the region, on the sale/transfer of real estate, except on newly constructed properties where value added tax applies. A tax is also applied to some stock/share transactions and levied on both the sale and the purchase.
Rates vary according to the circumstances and the type of securities but are usually no higher than 0.5%, with a maximum of €750 per transaction.
Sales Tax
Sales tax of 21% is generally added to the sales price of goods/services. Some sales are exempt from sales tax or are taxed at a reduced rate.
Social Security Contributions
An employee is liable to pay social security contributions as a percentage of gross remuneration. The rate is 13.07% of gross salary. In addition, special monthly and annual social security contributions are deducted from salary. Compulsory social security contributions are tax deductible.
Taxation of Expatriates Living in Belgium
An expatriate living in Belgium will become liable to Belgian income tax, as residence rather than domicile is the relevant
determining factor. A resident of Belgium is defined as someone who has a family home or a place from where they manage their personal wealth/business/occupation in Belgium. People are automatically presumed to be resident of Belgium if their family lives in Belgium and/or if they are registered in the Belgian population register.
Where an expatriate is resident in Belgium for only part of a tax year, income for that period is treated as if it were for a full year and full annual allowances can be claimed, as can the full bands for progressive rates of tax. Expatriates that become permanently resident in Belgium are liable to inheritance tax on their worldwide assets. Any gifts not already subject to gift tax made three years prior to death will be added to the value of the estate. Inheritance tax rules differ according to the region where the deceased had their fiscal residence and the heir’s relationship with the deceased.
Foreign inheritance taxes paid on property situated abroad owned by a deceased Belgian resident can be deducted from Belgian tax payable on that property under certain conditions. Expatriates may be considered to be tax resident in more than one country, but double taxation treaties between Belgium and many expatriates’ home countries should ensure that double taxation is avoided. Belgium has negotiated over 90 double taxation agreements.
Taxation of ‘Non-Residents’ Living in Belgium
The taxation of non residents living in Belgium is different from that of residents. Non-residents are taxed on Belgian-source
income only, namely income from employment in Belgium, Belgian-source property income, interest and dividend income paid
by Belgian companies, as well as Belgian-source capital gains. They are not taxed on foreign capital gains or foreign
investment income received outside the country. If, on death, a non resident leaves property in Belgium, an inheritance tax
liability arises, with the tax chargeable being based on the gross value of the property.
Special Tax Regime for non-resident expatriates
Expatriates in Belgium are generally regarded as Belgian tax residents and are therefore subject to Belgian income tax on their worldwide income. However, the Belgian authorities have encouraged multinational companies to transfer foreign executives to Belgium by introducing special tax concessions to non-Belgians who are ‘temporarily’ working in the country. The tax concessions allow such expatriates to be treated as non-residents for tax purposes. The concessions do not apply to
inheritance tax.
To qualify for these special concessions, four conditions must be met:
• The expatriate must be a foreign national.
• The expatriate must be either an executive or a director of a company, or a researcher or specialist.
• The expatriate must be non-resident for tax purposes.
• The expatriate must be temporarily employed in Belgium by an international group of companies.
Under the special concessions:
• Only Belgian source income is taxable, including property income and dividend income.
• Municipal taxes are payable at 7% of total federal income tax payable.
• Capital gains tax applies only to Belgian-source gains.
• Under certain circumstances, temporary expatriate workers who qualify for the special regime may be exempt from
paying social security contributions (typically up to 5 years).
Expatriates who benefit from the non-residents’ special tax regime may not invoke double taxation agreements because they
only apply for the benefit of Belgian residents. For certain expatriates qualifying under the special regime who originate from
other EU Member States, the EU Savings Directive may have an impact on their Belgian-source interest payments, with a
withholding tax of 20% being levied on such payments (increasing to 35% as from July 2011).
Gerard Associates Ltd. Financial Advisory Services does not provide individual tax advice, and nothing contained in this briefing should be construed as such. We make every effort to ensure the accuracy of the information but cannot be held responsible for any liability arising.
It is essential that all clients seek tax advice specific to their own personal circumstances with the relevant tax professional of the jurisdiction(s) in which you are liable to tax.
This has been prepared based on our understanding of current legislation and tax practice as at the date above. However, these are subject to change, and may result in income tax consequences different from those detailed below.
We cannot accept responsibility for its interpretation or any future changes to law.
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