Belgium tax for expats

Belgium is renowned for having higher taxes than many other countries, however it is also considered the administrative heart of the European Union and also boasts an excellent standard of living making it a very attractive country to live.

We have prepared this overview of Belgium tax for expats primarily as a guide for British expats. Some of the information will also be relevant for expats of other nations as well, however this guide must not be used in isolation to make any financial decisions about your Belgium tax affairs and you should always seek advice from an Belgian tax specialist.

Belgium tax returns and compliance

The tax return due date: 30 June for residents and, in principle, 30 September for non-residents. Later dates may apply when filing electronically. The exact dates are determined by the tax authorities each year and can vary.

Tax year-end: 31 December.

Tax return compliance requirements in Belgium:

All individuals resident in Belgium and non-resident individuals taxed on Belgian-sourced income are required to file an annual tax return. The government, in principle, issues a tax return form to each taxpayer.

Who pays tax in Belgium?

Income tax is levied on the worldwide income of Belgian residents and on the Belgian-source income of non-residents.

Residents

For residents, your filings are due within one month after receipt of the tax form from the tax authorities and, in principle, at the latest on 30 June of the year following the income year. Resident taxpayers must obtain the necessary forms from the Ministry of Finance if they have not received them by 1 June. Resident taxpayers can opt to file returns electronically. Failure to comply with the filing requirement gives rise to a fine and/or penalty and could also result in taxation on an estimated basis.

In principle, Belgian law provides that the employers deduct a withholding tax from salaries payable to employees as determined by prescribed tax tables. The difference between the final tax liability and the withholding is payable or refundable within two months after receipt of the tax assessment. The tax assessment is, in principle, issued before 30 June two years following the income year.

Persons who are married or legally living together are required to file their tax return jointly - except for the year of marriage, year of declaration of legal cohabitation, or if they are living separately. Spouses and legally cohabiting partners are taxed separately on all income. If the spouse/legally cohabiting partner does not work, up to 30% of the working spouse’s/legally cohabiting partner’s net employment income is attributable to the non-working spouse/legally cohabiting partner. (This allocation is limited to "EUR 10,490" on an annual basis in 2017).

Income of minor children is reported on the tax return of the parents as long as they are living with their parents, unless it is business income or alimony.

Non-residents

For non-residents the filing deadline is, in principle, 30 September of the year following the income year. Non-resident taxpayers must also obtain the necessary forms from the Ministry of Finance, if they have not received them in time. Non-resident taxpayers can also opt to file their return electronically.

In principle, Belgian law provides that the employers deduct a withholding tax from salaries payable to employees as determined by prescribed tax tables. The difference between the final tax liability and the withholding is payable or refundable within two months after receipt of the tax assessment. The tax assessment is, in principle, issued before 30 June two years following the income year. In specific factual circumstances there is no obligation to deduct withholding tax on the salaries paid to non-residents.

Persons who are married or legally living together are required to file their tax return jointly except for the year of marriage, year of declaration of legal cohabitation, or if they are living separately. Spouses and legally cohabiting partners are taxed separately on all income. If the spouse/legally cohabiting partner does not work, up to 30 percent of the working spouse’s/legally cohabiting partner’s net employment income is attributable to the non-working spouse/legally cohabiting partner. (This allocation is limited to "EUR 10,490" on an annual basis in 2017). This allocation, as well as federal standard personal allowances and federal tax credits, only applies for taxpayers that have at least 75% of their worldwide income taxable in Belgium or taxpayers that are able to claim (partial) exemptions based on a tax treaty. Depending on the fact that the taxpayer is resident of another EER member state (not including Belgium), he/she will be able to claim (partial) regional tax credits too.

Income of minor children is reported on the tax return of the parents as long as they are living with their parents, unless it is business income or alimony.

Belgium income tax rates

Income tax is calculated by applying a progressive tax rate schedule to taxable income. The rates for 2019 are as follows:

Resident tax rates also apply to non-residents.

Furthermore, the Belgian taxes calculated on the total amount of personal allowances (see below) will be deducted from the total amount of taxes.

How is income taxed in Belgium?

Belgian residents are taxed on their worldwide earned and passive income. Non-residents are taxed only on their Belgian-sourced income.

The following categories of income are subject to income tax:

• earned income;
• income from self-employment;
• trade or business partnership;
• dividends;
• interest;
• income from real property;
• miscellaneous income.

Employment income is taxable when received or, when the employee is entitled to receive it, whichever occurs earlier. Employment income is subject to tax to the extent it was earned during a period of Belgium residence, or in the case of income earned while non-resident to the extent it was earned in respect of duties performed in Belgium.

Dividends and interest are subject to a withholding tax which is generally the final tax.

Expatriate tax advice on employment income - Employment income includes salaries, wages, bonuses, perquisites and benefits in kind, as well as retirement income. Benefits in kind are taxable based on their actual value for the beneficiary.

Income from employment may be reduced by normal professional expenses. Instead of claiming a deduction for actual professional expenses, the taxpayer may choose to claim a standard business expense deduction. The maximum standard deduction is EUR4,320 for the 2017 income year.

Employment income and directors' fees are subject to a payroll tax at source by the employer. This withholding tax is creditable against the final income tax liability and any excess income tax withheld is refundable to the employee or director.

Self-employment and business income - Self-employment and business income is included in the total earned income. A deduction for actual professional expenses is also available against this income. To avoid a tax surcharge at the time of final assessment by the authorities, tax prepayments must be made.

Losses with respect to earned income may be offset against other earned income and may be carried forward indefinitely. No carry backs are allowed. Professional losses may not be deducted from other types of income.

Real estate income - Resident taxpayers are taxed on income from real property located both in Belgium and abroad. The income of real property abroad can in most cases be exempt with progression (depending on the application of a double tax treaty). Income tax is levied on the basis of the net rental income after deduction of a standard allowance. Non-resident taxpayers are taxed on income from real property located in Belgium on the same basis as residents. However, foreign real property income is exempt to non-residents.

The principal residence located in the EEA is, in many cases, free of personal income tax.

Mortgage loans concluded with a bank situated in the EEA for the acquisition of an immovable property located in the EEA may give right to tax savings in Belgium.

Investment income - Under the Belgian domestic tax law, investment income consists of dividends, interest and royalties.

Resident taxpayers are taxable on dividend income from a Belgian or foreign-source. However, it is not compulsory for individual resident taxpayers to report dividend income provided it has been subject to Belgian withholding tax, which in most cases is 30 percent.

Non-resident taxpayers, including foreign nationals living in Belgium who benefit from the expatriate special income tax regime, are subject to Belgian income tax on Belgian-sourced dividends. Also, when such individuals have foreign dividends remitted directly to Belgian bank accounts, some tax treaties permit Belgium to withhold tax.

Interests accrued on a regulated savings account are tax-free up to EUR 1,880 per taxpayer. Above this amount they are subject to a 15 percent withholding and final tax rate.

Most other interests accrued in Belgium are subject to a 30 percent tax rate.

Royalties are subject to withholding tax at a rate of 15% if the underlying contract was concluded on or after 1 March 1990. Royalties paid on contracts concluded before that date are subject to withholding tax at a rate of 25%.

Special expatriate tax concessions -

The employee may qualify for a favorable tax status. Qualification for the expatriate special income tax regime is not automatic, but requires the filing of a special application request by both the employer and expatriate employee within six months from the first day of the month following the start of employment or secondment to Belgium. It should be clearly shown that the four qualifying conditions have been 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 a specialist.
• The expatriate must be a non-resident for Belgian income tax purposes. The Expatriate Tax Circular of 8 August 1983 lists a set of factual circumstances that are indicative of such a non-resident status.
• The expatriate must be temporarily employed in Belgium by an employer that is part of an international group of companies.

The expatriate who meets these conditions will benefit from tax concessions that reduce the annual taxable remuneration by the deduction of tax-free allowances up to a limit of EUR 11,250/EUR 29,750. Furthermore, the expatriate will only be assessed according to graduated tax rates on remuneration for work actually performed in Belgium and on other Belgian-sourced income (excluding movable income but including income from Belgian real property).

Under the Belgian expatriate special income tax regime, some so-called expatriate allowances (such as tax equalization, cost-of-living differential, housing differential, and home leave allowance) are treated as a reimbursement of extra expenses that are properly borne by the employer, rather than by the employee and are, therefore, not taxable to the individual employee. A distinction is made between non-repetitive expenses and repetitive expenses. The excludable portion of repetitive expenses is limited to EUR 11,250 per year, for expatriate personnel employed by operating companies, and to EUR 29,750 per year, for expatriate personnel employed by controlling and coordinating offices or research centers. However, education expenses, even though considered repetitive costs, as well as non-repetitive expenses, may be excluded without limit.

The following expenses are considered to be non-repetitive expenses.

• Moving costs on arriving in Belgium and on leaving Belgium.
• The cost of setting up a home in Belgium or other initial costs of first arrival in Belgium and decoration costs of a dwelling in Belgium.

Repetitive expenses that qualify for exclusion include allowances granted to cover the differences in cost-of-living and housing between Belgium and the expatriate’s country of origin, home leave, and tax equalization. However, the actual allowance paid only qualifies for exclusion to the extent permitted by prescribed guidelines.

The determination of the expatriate’s country of origin has a direct impact on the total amount of the tax-free allowances as the excludable expenses may only cover the cost differential between Belgium and the expatriate’s country of origin.

Taxes for expats in Belgium: Are there tax treaties and double tax relief?

Income derived by Belgian residents from a business activity performed in non-treaty countries is taxable at half the normal rate, to the extent that the income is subject to standard taxation abroad. Double tax treaties entered into by Belgium with other countries provide for the abolition of double taxation on such income of Belgium residents through the exemption-with-progression method.

Foreign-source income is exempt from tax in Belgium, but other taxable income is taxed at the rate that would apply to all taxable income if the foreign-source income were included in taxable income.

Belgium has entered into double tax treaties with 90 countries.

Belgium has signed double tax treaties with a further 8 countries, but these treaties are not yet in force.

What are the tax rules on residency?

For the purposes of taxation, here's how an individual is defined as a resident of Belgium:

A resident of Belgium is defined as a person who has his/her family home in Belgium. If a person does not have his/her family home in Belgium, he/she will be considered as a resident or the place from where he/she manages his/her personal wealth/business/occupation is located in Belgium...

Persons registered in the Civil Register are presumed to be resident, unless the contrary is proven. Persons are irrevocably presumed to be resident of Belgium when their family lives in Belgium.

Foreign nationals qualifying for the expatriate special income tax regime are deemed to be non-residents for income tax purposes.

Do I have to pay inheritance and gift tax?

The inheritance tax system in Belgium varies depending on the region of residence of the deceased. Substantial differences exist between the rates applied by each region. Special rules apply with respect to the transfer of a family-owned business and to the transfer of a family home to a surviving spouse, legal cohabitant or other cohabitant (except in direct line). Readers should obtain up-to-date expat tax advice regarding these rules.

Under existing law, the estate of a deceased resident consists of the resident's worldwide assets. Belgian jurisdiction over estates of deceased non-residents is limited to the non-residents' real estate located in Belgium. The definition of resident for inheritance tax purposes may differ from the definition used for income tax purposes.

Inheritance taxes and gift taxes on donations of immovable property are levied according to sliding scales, depending on the beneficiary's relationship to the deceased or donor. Expatriate and local tax law provides that preferential flat rates apply to gifts of movable property.

Belgium has entered into estate tax treaties to prevent double estate taxation with France and Sweden.

Finally on this point, do not assume that just because you've expatriated to live in Belgium that your estate will not be liable to inheritance tax (IHT) in your old home nation, or any nation where you hold assets.  For example, those domiciled in Britain remain liable for IHT on their worldwide estate.

If you are concerned about mitigating your IHT liability, we'd like to offer you a free initial consultation to determine whether we can help you.

Do I have to pay capital gains tax?

Resident and non-residents taxpayers are taxable on capital gains realised on assets used for business purposes. Capital gains realised on land and buildings held for private purposes are taxable to resident and non-residents taxpayers under certain conditions.

Capital gains realized on portfolio investments or other personal property held for private purposes are not taxable for residents and non-residents, provided they result from the normal management of private wealth and, for portfolio investments, provided such capital gains do not result from the sale of substantial participations. The capital gains resulting from the sale of substantial participations between two residents or between a resident and a non-resident, located within the European Economic Area (EEA), are free of taxation. On the other hand, capital gains resulting from such a transaction between a resident and a non-resident outside of the European Economic Area are taxable.

Individuals benefiting from the expatriate special income tax regime are subject to these rules as non-residents, which means that the rules only apply to Belgian-source capital gains.

Other income taxable to residents and non-residents (to the extent it is Belgian-sourced income) includes miscellaneous profits and a widely defined range of other sources including prizes and subsidies.

Do expats get a State pension?

Belgium's employee social security rate is 13.07 percent of total income and is fully deductible for income tax purposes. Reductions in the top social security rate will be gradually introduced between 1 April 2016 and 2020. As of 1 April 2016 the top rate will be reduced to 32.5%. In 2020, the top rate should be reduced to 25%.

Social security contributions are generally compulsory for expats working in Belgium.

To qualify for a Belgian state pension, you must have been employed in Belgium with an employer who paid contributions to the Belgian National Office for Social Security (RSZ). Self-employed workers can also claim a Belgian pension under similar conditions. You can read more about social security rates in our guide to Belgian social security.

Employees and the self-employed workers receive their pensions from the National Pensions Office, and civil servants receive their pensions from the Service des Pensions du Secteur Public.

Currently, payment of a state retirement pension (rustpensioen) begins when you are 65 years of age and have worked a minimum of 40 years throughout your career. However, the government recently agreed to raise the retirement age to 66 in 2025 and to 67 in 2030 (both for men and women).

Your pension will be based on how many years you have worked and how much you have earned.

The National Pensions Office (RVP) will calculate the amount you will receive based on your average wage over your career, converting past salaries to what they would be worth today. A single person will usually receive 60 percent of the average wage, and a married person 75 percent.

The Belgian Federal Government's website contains up to date taxation information in English.