International tax (general)

Belgian Income tax law is based on:
  • Territorial application for persons, where the Country of residence is the key criterion.
  • Territorial application for assets and income, where the Source of income Country is the relevant criterion.
When your Country of Residence is Belgium (see Q3), you will be subject to taxation in Belgium on your worldwide income, i.e. on your income earned in Belgium as well as abroad. When you are a non-resident in Belgium, you will only be taxed on your Belgian-source income. Hence, Bilateral Double Tax Treaties will prevail over Belgian tax law in the event of conflict with Belgian Tax Laws.
Belgium has a wide network of Double Tax Treaties (based on the OECD Model Tax Convention on Income and Capital) as it concluded Treaties with 93 countries, and has several Treaties in negotiation and under condition or approval. For further information on the OECD Treaty model, see: https://www.oecd.org/ctp/treaties/2014-model-tax-convention-articles.pdf Note that Belgian Constitutional law does not provide in a priority rule for the International Treaties over the domestic Belgian Law. Belgian Jurisprudence however gives precedence to International Law with direct effect over Belgian Law. Once Tax competence over income or capital has been granted to Belgium, following rules will apply. (see Q4-Q8) First you will need to check whether you are or have become a Belgian residents or a non-resident.
As an individual person, you will be considered a Belgian resident if you are domiciled in Belgium. Residency status is determined based on the facts and circumstances. The Belgian tax code considers a tax resident in Belgium, anyone who has either his domicile or the centre of his wealth in Belgium, where:
  • Domicile for tax purposes means a ‘domicile in fact’ that may be independent from the domicile as defined for civil purposes and from the nationality and is vested, asserted and consolidated by a number of facts and circumstances. It necessarily will require a certain permanent or continuous character.
  • Centre of wealth means the place from which one manages his fortune, wherever the assets are located. The centre of wealth is deducted from various items such as the place where real estate, bank deposits and other assets are located, those items being united through the place where those various assets are managed.
The Belgian Tax Code foresees in the refutable presumption that persons who are registered with the ‘National Registre of Physical Persons” in Belgium, will be Belgian tax residents. For married individuals (or individuals officially engaged in a “cohabitant” scenario), an irrefutable presumption exists that the tax domicile is where the spouse or partner and any dependent children live. Certain foreign executives, specialists and researchers residing temporarily in Belgium are eligible for a special tax regime under which they are treated as non-residents (see Q8.) Note that different rules apply to Belgian consular and diplomatic personnel.

Assuming you are or have become a Belgian resident, you will have to file an annual Income Tax return. If you are married or are registered as cohabitants, you will have to file a joint tax returns. Hence, the earned income of spouses and registered cohabitants are taxed separately.

Under a fundamental revision of the Belgian tax system, effective from 1 January 2014, the overall tax due is split into a federal base and a regional surcharge. (Brussels, Flemish and Walloon). The regions have not made any changes that significantly affect the overall liability.

You will be subject to Income Tax on the four following categories of income:
  • Earned income, including employment income, director fees, self-employment income, business income and retirement income;
  • Real estate income;
  • Investment income, including dividends, interest and royalties;
  • Miscellaneous income.
For each category of income the net taxable amount is determined as the gross income received minus a number of deductions specific to the income category. In addition, several deductions and allowances can be set off against the total net taxable income.
  •  Immovable Income (Real estate income)
A tax on immovable property is levied on all real estate property located in Belgium. The tax is levied on the deemed rental income of the property. If the property is let to a professional user, the tax will be levied on the real income after deduction of costs. The basic tax is increased by a local surcharge, depending on the municipality where the property is located.
  • Movable Income (Investment income)

As per January 1, 2017, dividends are generally subject to withholding tax at a rate of 30%. Lower rates are applicable to dividend payments from new Small and Medium sized Enterprises, dividend payments from liquidation reserves and certain contributions in capital.

As per January 1, 2017, Belgian-source interest payments are generally subject to a 30% withholding tax. Interest on regulated savings accounts in excess of the tax exempt amount is subject to a 15% withholding tax. 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 30%.

You should consider the Double Income Tax Treaties where you as a Belgian individual receive movable income from a foreign Source Country (art 10, 11 and 12 of the OECD model). These Treaties will divide the authority to tax movable income on dividend, interest and royalties between the Source Country and the Country of residence of the recipient. The system comes down to the Source Country having to limit its tax rate while the Country of residence will have to adjust its taxes with taxes paid in the Source Country.

Movable income received by a Belgian resident from a foreign source will be taxed at their net received amount.
  • Professional Income (Earnings)
The professional income of a husband and wife is taxed separately. If only one spouse receives earned income, 30% of this income (limited to a maximum annual amount of 10,230 € for the 2015 income year) is attributed to the non-earning spouse and is taxable to such spouse at the (lower) progressive rates. If the earned income of the secondary wage-earning spouse is less than the maximum attributable amount, additional income from the primary wage earner is attributed to the second spouse to the extent of the difference. You should consider the Double Income Tax Treaties where you as a Belgian individual receive income from profits (art 5 and 7 of the OECD Model) originating from a foreign Country, from independent personal services (art 14 of the OECD Model) or form dependent (salaried) services (art 15 of the OECD Model).
  • Miscellaneous income.
You should note that profit or Income that is not earned from a professional activity is very likely to be taxed as a Miscellaneous Income (art 90 ITC). The Miscellaneous Incomes category comprises:

- profit or earnings, from any activity, transaction or speculation or services for others, occasionally or by coincidence outside the scope of a professional activity, with the exception of normal transactions in the management of a private possessions, consisting of immovable properties, portfolio values and movable properties (art 90, 1° ITC).

Note that the exception of Personal Income Tax for “normal transactions in the management of a private possessions” is a key feature in Belgian tax law, which has given rise to extensive Case Law, amongst other with respect to internal capital gains, i.e. sale or contribution of shares in a holding company belonging to the seller or contributor.

Until recently only the abnormal part of the capital gain was subject to tax. However, due to a recent change in art 90, 9°/al 1. ITC / art 102 ITC the full capital gain is now taxable, without deduction of involved costs. This income is taxed at a 33% rate.

- Prizes and Subsidies, above 2.500 €. Note that the King is authorized to exempt Prizes and Subsidies from tax if granted by recognized entities. (art 90, 2° ITC). This income is taxed at a 16,5% rate.

- 80 % of received maintenance payments (alimony) paid by a person not belonging to his/her household by virtue of a civil obligation (art 90, 3° ITC);

- Late payments of alimony as per art 90, 3° ITC (art 90, 4° ITC);

- Subletting or transfer of leases of immovable property without furniture, outside the scope of a professional activity, or the concession of immovable property not for advertising purposes within a sport facility, or the concession to use immovable property for purposes of IT or telecom operators (art 90, 5° ITC). This income is taxed at a 25% rate.

- Income form Hunting, fishing and bird catching licenses (art 90, 7° ITC). This income is taxed at a 25% rate.

- Capital gains on unbuilt land. Taxable are capital gains on unbuilt land situated in Belgium, realized on a transfer for consideration outside the scope of a professional activity within a time frame of (i) 8 years after its acquisition or (ii) within 3 years after being donated and being acquired within 8 years after acquisition by the donor. (art 90, 8° ITC)

This income is taxed at a 33% rate, if realized within 5 years of acquisition. The rate is 16,5 % if the gain is realized within more that 5 years and within 8 years after acquisition.

- Capital gains on shares that qualify as a substantial participation (art 90, 9° ITC). Further conditions are that only shares in Belgian companies qualify; the gains do not qualify under another taxable category; the shares are part of a participation that have in a 5 year period directly or indirectly belonged to the transferor; are realized by transfer for a consideration; the shares need to be transferred to a company that is not located (registered office, main establishment or main seat of management) in the EER. This income is taxed at a 16,5% rate.

- Capital on built grounds. Taxable are capital gains on built grounds situated in Belgium or real right on such grounds, realized on a transfer for consideration outside the scope of a professional activity within a time frame of 5 years. (art 90, 10° ITC) This income is taxed at a 16,5% rate.

- Income from the exploitation of inventions to academic inventors. (art 90, 12° ITC) This income is taxed at a 33% rate.

Note that municipal taxes should be added to the above-mentioned flat rates, unless your overall income tax rate is lower in which case the latter applies.
  • Personal allowances
As an individual person you may deduct personal allowances. Additional personal allowances are available for dependents. The personal allowances are applied to the lowest tax brackets. For the 2015 income year (2016 tax year), the standard personal allowance equals 7,090 € per person. The following personal allowances for dependent children may be claimed for the 2015 income year (2016 tax year). Number of children* € 1 1,510 2 3,880 3 8,700 4 14,060 Each additional child 5,370 * A handicapped dependent child is considered to be two children. In general, nonresidents who do not earn at least 75% of their total professional income in Belgium may not deduct any personal allowances.
  •  Tax reductions.
Tax reductions are granted either by the federal or regional government for the following:
  • Life insurance premiums
  • Personal contributions to group insurance contracts or pension funds
  • Investments in shares issued by the individual’s employer
  • Loans used to finance real estate acquisitions or renovations • Security investments to protect private houses from fire and theft
  • Interest on loans for financing the purchase, construction or renovation of privately owned real estate (subject to certain limits)
  • The purchase of service vouchers, up to a maximum purchase of EUR1,400 per person (2015 income year)
  • Child care expenses for children up to the age of 12 (limited to EUR11.20 per child, per day)
  • Charitable contributions to qualifying charities.
Several other tax reductions are available, depending on the taxpayer’s family situation and the type of professional income (pensions, pre-pensions for early retirees, unemployment income and disability or sickness reimbursement).
  • Relief for losses
You may offset losses with respect to earned income against other earned income and this can be carried forward indefinitely. Hence, no carryback of losses is allowed. Nota that no professional losses may not be deducted from other types of income (Movable, Immovable and Miscellaneous income)
  •  Income Tax Rates
The following are the tax rates for the 2016 income year: Schermafbeelding 2016-12-30 om 11.04.11 This bracket applies to the amounts exceeding the taxpayer’s tax-free amount (see Personal allowances). The following types of income are subject to special tax rates
  • Severance payments are taxed at the average rate applicable in the last year of normal professional activity, taking into account the municipal tax (not for directors).
  • Anticipated Belgian holiday pay is taxed at the average rate applicable to all income in the year of payment, taking into account the municipal tax.
  • The capital accrued under life or group insurance contracts and lump-sum amounts paid instead of pensions are taxed at a rate of 10% or 16.5%, increased by the municipal tax. Tax increases may apply in the case of retirement before the age of 65 or in the case of a career of less than 45 years.
  • Miscellaneous income from occasional benefits (including certain capital gains, prizes and subsidies) is taxed at a rate of 16.5% or 33%, depending on the nature of the income (See also under Miscellaneous Income).
  • Copyright income, up to a ceiling of EUR57,270 (net amount for the 2015 income year after standard or itemized deductions), is taxed at a rate of 15% (the excess is subject to the regular progressive tax rates).
The above flat rates apply to the special items unless it is more favorable to include the income with other income taxable at the regular progressive rates. All tax amounts are increased by the applicable municipal (commune) taxes, which are imposed at rates of an average of 7 % and up to 9%. The municipal tax is calculated on the amount of income tax due. Some communes, like Knokke on the Belgian coast, have a 0% tax increase. For non-residents a flat increase of 7% is due.
Belgium is well known for its tax exemption on capital gains realized by individuals on the sale of shareholdings. You, as a Belgian individual person, realizing a capital gain on securities or shares that are part of your private estate, will benefit from a tax exemption, unless any of the four following cases apply:
  • when the securities are used for your professional activity, they will be taxed as professional income;
  • when the securities are subject of a speculative transaction, the capital gain will be taxed at a separate 33% rate as Miscellaneous Income (art 90, 1 ITC);
  • when the securities are subject of a transaction outside the scope of a normal administration of private possession, the capital gain will be taxed at a separate 33% rate as Miscellaneous Income (art 90, 9°/1al. ITC);
  • When the transaction does not fall under any of the above cases, it will still be taxed at a 16,5% rate if the shares are or have been part of a substantial participation (art 90, 9°/2al. ITC). Further conditions are that only shares in Belgian companies qualify; The shares are part of a participation that have in a 5 year period directly or indirectly belonged to you; The shares are realized by transfer for a consideration; The shares need to be transferred to a company that is not located (registered office, main establishment or main seat of management) in a Country member of the EER.
Capital gains realized by a Belgian individual outside the scope of a professional activity and without speculative purpose on following assets will be tax exempt:
  • Capital gains on unbuilt land. Taxable are capital gains on unbuilt land situated in Belgium, realized on a transfer for consideration outside the scope of a professional activity within a time frame of (i) 8 years after its acquisition or (ii) within 3 years after being donated if the donor bought the property within 5 years before the donation. (art 90, 8° ITC) This income is taxed at a 33% rate, if realized within 5 years of acquisition. The rate is 16,5 % if the gain is realized within more that 5 years and within 8 years after acquisition.
  •  Capital gains on developed real estate if the property is sold within any of the following time periods: — Five years after purchase — Three years after donation if the donor bought the property within five years before the donation — Five years after the start of using a new building if construction began within five years after purchasing the land on which the building stands (art 90, 10° ITC). This income is taxed at a 16,5% rate.
Capital gains derived from the sale of certain intangible right
Taxation of employer-provided stock options. Effective from 1 January 1999, specific rules are included in Belgian Tax Law relating to the taxation of stock options granted to employees, directors and other independent persons. Options offered on or after 11 November 2002 are deemed to be granted on the 60th day following the offer if the beneficiary has given written notice of his or her acceptance of the option before the expiration of the 60-day period. If the option is accepted within the 60-day period, the taxable benefit is determined as a benefit in kind arising from such stock options and is taxable to the beneficiary on the date of grant on a lump-sum basis, regardless of whether the exercise of the option is unconditional. Under the lump-sum basis, the taxable income is determined as a percentage of the value of the underlying shares at the moment of the offer of the options (18%, effective from the 2012 income year). If the exercise price of the option is lower than the value of the underlying shares at the time of the offer, the lump-sum basis is increased by the difference. In general, only the grant of an option results in a taxable benefit. If that is the case, the employee is exempt from tax on potential benefits arising from subsequent possession of the option, including benefits from the exercise or sale of the option or from the sale of the underlying shares. No social security contributions are required with respect to such options, unless the options are “in the money” (that is, granted at a discount) or if the options are “covered” (that is, the risk that the value of the underlying shares will decline is covered at the time of offer or until the end of the exercise period of the option, therefore granting a guaranteed benefit to the beneficiary of the option).
Non-residents individual persons are to a large extent taxed on the same basis as Belgian residents, and within the same categories. Hence, there are however important differences. Per definition non-residents will be taxed on income from a Belgian source. For non-residents, the final tax due is computed in the same manner as for Belgian residents, with personal allowances being allowed if non-residents earn at least 75% of their total professional income in Belgium. No municipal tax is due, but an additional federal tax at a flat rate of 7% on the amount of the individual’s income tax is payable.
As per 2015 there are three categories of non-residents: - Non-residents, residing in an EER Member State, earning at least 75% of their total professional income in Belgium (or residents that can invoke a non-discrimination clause like French, Dutch and Luxemburg residents). The non-residents under this category benefit from federal personal and household related allowances and deductions (Deductible expenses, Deduction for certain alimony payments, Tax deduction for certain interest payments). Tax deductions under regional tax laws are available, and are obviously different per region. - Non-residents, not residing in an EER Member State, earning at least 75% of their total professional income in Belgium. The non-residents under this category benefit from federal personal and household related allowances ad deductions (Deductible expenses, Deduction for certain alimony payments, Tax deduction for certain interest payments). However, tax deductions under regional tax laws are not available. - Other non-residents. The non-residents under this category cannot benefit from federal personal and household related allowances and deductions, nor from tax deductions available under regional tax laws.
As a Non-resident, you will be subject to tax only on your income from a Belgian source. These incomes are essentially the following: Immovable Income (Real Estate Income)
  • Immovable Income from Real Estate Property located in Belgium, comprising Real Property owned, possessed, ore used under a right in rem (zakelijke recht / droit réel) by the non-resident. Excluded are income from real estate that is qualified as Professional Income or Miscellaneous Income. Movable Income (Investment income)
  •  Movable Income (Investment income) is taxable if (i) at charge of a Belgian individual resident, Belgian company, entity with a seat in Belgium, a Belgian governmental entity, a Belgian establishment of a non-resident. when the debtor thereof is taxable in Belgium, or if (ii) at charge of non-resident without establishment in Belgium, but are materially paid out in Belgium. Professional Income (Earnings) Professional income comprises profits, Income from liberal professions, Salaries and wages and Pensions.
  • Profits made through a Permanent Establishment in Belgium will be taxed in Belgium. The notion Permanent Establishment basically coincides with the definition given in the OECD Double Tax Treaties (art 5 of the OECD Tax Treaty Model)
Various profits made by non-residents will also be taxed in Belgium even if not realized through a Permanent Establishments, such as profits from the sale or letting of immovable property.
  • Income from liberal professions, are taxable if the income stems from an activity exercised in Belgium. The connecting factor here is not the notion of “Permanent Establishment”.
  • Salaries and wages comprises salaries paid by a Belgian individual resident or company, or Belgian establishment of a non-resident. Salaries paid by a non-resident for the exercise of an activity by a person who is present in Belgium during a period exceeding 183 day in any given period of 12 months are subject to Non-Resident Income Tax.
  • Pensions This category comprises pensions paid by a Belgian individual resident or company, or Belgian establishment of a non-resident, The Belgian Sate or governmental entity, other debtors when the contributions to that pension have granted a tax advantage for the debtor or the professional activity that gives right to that pension was partially or entirely exercised in Belgium.
  • Miscellaneous income. Non-residents are taxed on several specific incomes, called Miscellaneous Incomes, if realized in Belgium, in the same way as Belgian residents (see Q 4). Most categories of Miscellaneous Income are subject to a liberating withholding tax and need not be added to the Tax Return. Exceptions are (i) taxable capital gains on shares in Belgian companies realized outside the scope of a professional activity, (ii) taxable capital gains realized on substantial participations, and (iii) Income from the exploitation of inventions to academic inventors.
  •  Since 2013 a catch-all provision is applicable in order to tax all income that (i) is taxable in Belgium, (ii) is at charge of a Belgian resident or Belgian establishment of a non-resident, and (iii) tax authority is attributed to Belgium in a Double Tax Treaty or the non-resident cannot prove effective taxation on that income in his country of residence. Such income is subject to a professional withholding tax of 33% (except lower rate available in the Double Tax Treaty) due by the debtor after deduction of a fixed 50% cost deduction.

Foreign executives, specialists and researchers residing temporarily in Belgium may qualify for a special tax regime when they are assigned, transferred or recruited from outside Belgium to work for a Belgian operation of an international group of companies. The special expatriate status is obtained through a written application to the Belgian tax authorities that sets forth the reasons why the relevant employee should qualify.

The application is filed jointly by the employee and the employer. It must be filed within six months after the beginning of the month following the month of arrival of the employee in Belgium. Foreign executives, specialists and researchers qualifying under the special expatriate tax regime are treated as nonresidents for purposes of the Belgian tax law. As a result, they are taxed on Belgian-source income only. Accordingly, unearned income and real estate income arising outside of Belgium are ignored in the determination of Belgian taxable income.

Qualifying individuals are taxed only on employment income or directors’ fees relating to professional activities performed in Belgium. Unless other reliable criteria are available, the amount of remuneration excluded from taxation in Belgium can be calculated as the fraction of the total worldwide remuneration that corresponds to the number of workdays performed outside Belgium compared to the total workdays performed (the travel exclusion). Special rules apply to the calculation of the exclusion. No maximum or minimum travel percentage is required to qualify for the special regime. Certain allowances paid to the employee as a result of his or her temporary stay in Belgium are treated as deductible expenses for the employer and are non-taxable to the employee, within certain limits. An overall annual limit of EUR 11,250 applies for qualifying expatriates working for regular operating companies. For qualifying expatriates employed by recognized headquarters, coordination offices, and research centers, an increased limit of EUR29,750 applies.

The following are the most common recurring allowances:

  • Cost-of-living allowance
  • Housing differential
  • Home leave
  • The tax-free allowances can be determined based on either the actual allowances granted by the employer (if these are based on recognized tables) or on a calculation method provided by the Belgian tax authorities (if no specific allowances are paid by the employer). Expatriates are also allowed to exclude from taxable compensation the reimbursement of moving expenses by their employer and the reimbursement of education expenses for international primary and secondary schooling in Belgium and, exceptionally, outside Belgium. These exclusions are not subject to an overall limitation other than that the amounts reimbursed must be reasonable. In this context, lump-sum relocation allowances are considered taxable, in most instances, unless they are justified by specific relocation expenses. Although the concessions are not granted for a fixed time period, the competent tax office has recently issued new guidelines, which set a review of the application after 10 years and 15 years. If the conditions for the regime continue to be met, the regime can be maintained after these reviews for up to a total of 20 years.
By virtue of the Belgian Model Treaty, the Belgian tax on dividends (art 10 OECD model) should not be in excess of 15%. Obviously you should check the relevant Double Income Tax Treaty with your Country of residence / your Source Country for specific rates. Interest payments (art 11 OECD Model) are usually taxable in the Country of residence of the recipient. The Source Country usually has a limited tax authority at 10 or 15%. The Belgian Tax Treaty Model in limited cases will exclude taxation by the Source Country. By virtue of the Belgian Tax Treaty Model, royalties (art 12 OECD Model) will exclusively be taxed in the Country of residence of the recipient. Movable income received by a non-Belgian resident from a Belgian source will be exclusively taxed at the withholding tax rate if the recipient has no fixed establishment in Belgium.