Expat taxes in Belgium

After speaking about expat taxes in numerous countries, including  Thailand, South Korea and Japan,  Germany, Singapore, France the Philippines and Switzerland, this article will speak about Belgium..

Alongside looking at income taxes for individuals, we will also focus on other forms of tax, including for firms and on capital gains taxes.

We also can’t focus on things from the perspective of every nationality, because some countries do apply taxes by citizenship. This is the case for Americans and a few other nationalities.

Whilst this article shouldn’t be considered as tax advice, it is correct as far as we are aware at the time of writing.

For any questions, or if you are looking to invest as an expat, you can contact me using  this form, or use the WhatsApp function below.

Introduction

Belgium performs consistently well on all major indicators of a good life and is a good place to live for expats.

Belgium has a high standard of living and is ranked in the top 10 on several indicators of the OECD Better Living Index, with the average household wealth above the OECD average. 

In addition, the international presence in Brussels is second only to New York: some 1,500 institutions employing some 3,000 diplomats, as well as a base of more than 2,000 European headquarters of multinational organizations.

For those visiting Belgium for a limited time, there is no shortage of furnished apartments or apart-hotels. 

For longer stays in Brussels, there is a wide range of rented and owner-occupied housing, both within the city’s 19 communes and in the suburbs, from studio apartments to villas. 

Beyond that, there is an equally wide selection of properties in more rural residential areas and growing expatriate communities in other major centers in Belgium. 

Belgium also has an excellent level of health care. High-quality medical care is widely available from large university hospitals. 

It is also considered cheaper than the United States, and the shorter wait times mean Belgium is becoming a hot spot for medical tourism from neighboring countries.

Living is also relatively affordable. Where many expats live, Brussels is cheaper than other Western European capitals such as London, Copenhagen, Vienna and Zurich, according to Mercer’s cost of living ranking. 

On top of that, Belgium boasts a good public transport system with seamlessly integrated bus, metro and tram networks, making it easy to travel around Belgium on weekends (with some weekend destinations even at 50% off) or even popularity to a neighboring country. 

Belgium is one of the best places to live for expats. As an expat moving to Belgium, it can be helpful to get your head around the various taxation measures in your new country, from income tax rates to how corporate tax and VAT work. 

Therefore, this article will be a great guide for you to discover more about Belgium, your future home, and be aware of all the tax related things.

Belgium Tax System

Belgium is known for higher taxes than many other countries, however it is also considered the administrative center of the European Union and boasts an excellent standard of living, which makes it a very attractive country to live in.

The effective Belgian tax rate is over 50% for the highest paid individuals (including social security), compared with an average of 45% in the rest of Europe.

If you are a foreigner working in Belgium, you are generally required to pay Belgian taxes and file a tax return. Property owners may also be responsible for paying property taxes, gift taxes, and inheritance taxes.

Belgium has more than 90 agreements with other countries to prevent residents from paying additional income tax in their country.

The Belgian government is stepping up its efforts to curb tax evasion. In December 2018, the government reimbursed € 248 million in unpaid taxes, bringing the total for the year to nearly € 400 million. This is against the backdrop of speculations for higher tax penalties in 2020.

Who is required to pay taxes in Belgium?

How much you have to pay in Belgium depends on whether you are a resident or non-resident.

If you live in Belgium for at least six months (183 days) a year and are registered with a local municipality, then you are classified as a resident and must pay Belgian income tax on your worldwide income.

Your taxable income is income after deductions such as social security contributions, personal benefits, and professional expenses.

What are the tax rules for residence?

For tax purposes, an individual is defined as a resident of Belgium as follows:

• A Belgian resident is defined as a person whose family home is located in Belgium. If a person does not have a family home in Belgium, he / she will be considered a resident or the place from where he / she manages his / her personal wealth / business / occupation is in Belgium.
• Persons registered in the Civil Register are considered residents, unless proven otherwise. Individuals are irrevocably considered residents of Belgium if their family resides in Belgium.
• Foreign nationals who are eligible for the special income tax regime for expatriates are considered non-residents for income tax purposes.

Residents

For residents, documents must be submitted within one month after receiving the tax form from the tax authorities and, as a rule, no later than June 30 of the year following the year of income. 

Resident taxpayers must obtain the required forms from the Treasury Department if they have not received them by June 1st. Resident taxpayers can file returns electronically. 

Failure to comply with filing requirements will result in fines and / or penalties and may also result in taxation on an assessed basis.

People who are married or legally living together must file their tax return together, except for the year of marriage, year of lawful cohabitation, or if they are living separately. 

Spouses and partners living by law are taxed separately on all income. If the spouse / legally resident cohabitant is not working, up to 30% of the net income from employment of the employed spouse / cohabitant by law falls on the non-working spouse / cohabitant by law. (In 2017, the appropriation capped at € 10,490 per year).

The income of minor children is reported on the parents’ tax return for as long as they live with the parents, excluding income from business or child support.

Non-residents

For non-residents, the filing deadline is usually September 30 of the year following the year of income. 

Non-resident taxpayers must also obtain the required forms from the Treasury Department if they do not receive them on time. Non-resident taxpayers can also submit their return electronically.

People who are married or legally living together must file their tax return together, except for the year of marriage, year of lawful cohabitation, or if they are living separately. 

Spouses and partners living by law are taxed separately on all income. If the spouse / resident partner is not employed, up to 30 percent of the net employment income of the employed spouse / resident partner is attributed to the unemployed spouse / cohabitant by law (In 2017, this amount capped at 10,490 euros per year). 

This allocation, as well as federal standard individual surcharges and federal tax credits, apply only to taxpayers who have at least 75% of their world income subject to tax in Belgium, or taxpayers who can claim (partial) exemptions based on a tax treaty. 

Depending on the fact that the taxpayer is a resident of another EER member state (not including Belgium), he / she will also be able to claim (partial) regional tax relief.

The income of minor children is reported on the parents’ tax return for as long as they live with the parents, excluding income from business or child support.

Income tax in Belgium

Residents of Belgium are subject to income tax and passive income worldwide. Non-residents are taxed only on income derived from Belgian sources.

The following categories of income are subject to income tax:

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

Employment income is taxed when it is received or when the employee is eligible for it, whichever comes first. 

Employment income is taxable to the extent that it was earned while living in Belgium or, in the case of income earned while living in Belgium, to the extent that it was received in relation to duties performed in Belgium.

Dividends and interest are subject to withholding tax, which is usually the final tax.

Consulting on taxation of foreign citizens on employment income – income from work includes salaries, wages, bonuses, benefits and benefits in kind, as well as retirement income. In-kind benefits are taxed based on their actual cost to the recipient.

Normal professional expenses can reduce work income. Rather than claiming a deduction for actual professional expenses, the taxpayer may demand a deduction for standard business expenses. 

Self-employment and business income are included in total earned income. Actual professional expenses can also be deducted from this income. 

In order to avoid additional taxes during the final assessment by the authorities, taxes must be prepaid.

Losses related to earned income can be offset against other earned income and can be carried forward indefinitely. No returns allowed. Professional losses cannot be deducted from other types of income.

Resident taxpayers are taxed on income from real estate located both in Belgium and abroad. Income from real estate abroad in most cases can be exempted from taxation (depending on the application of the double taxation treaty). 

Income tax is levied on the net rental income after deducting the standard surcharge. Non-resident taxpayers are taxed on income from immovable property located in Belgium on the same basis as residents. However, non-residents do not tax income from foreign real estate.

Resident taxpayers are taxed on dividends from Belgian or foreign sources. However, resident individual taxpayers are not required to report dividend income provided they are subject to Belgian withholding tax, which in most cases is 30 percent.

Non-resident taxpayers, including foreign nationals residing in Belgium, who enjoy a special income tax regime for expatriates, are subject to Belgian income tax on dividends from Belgium. 

In addition, when such persons have foreign dividends transferred directly into Belgian bank accounts, some tax treaties allow Belgium to withhold tax.

Interest accrued in a regulated savings account is tax-free up to EUR 1,880 per taxpayer. Over this amount, they are subject to 15 percent withholding and the final tax rate.

Most of the other interest charged in Belgium is taxed at a rate of 30 percent.

Royalties are subject to withholding tax at the rate of 15% if the main contract was entered into on or after 1 March 1990. Royalties paid on contracts entered into prior to that date are subject to withholding tax at the rate of 25%.

Other Belgian taxes

As in every disciplined country, there are plenty types of taxes that every resident have to pay. Let’s discuss each of them and try to explain their functionality or how they work.

Local taxes in Belgium

Municipal taxes on utilities, including television, garbage collection, and water, are levied by the respective regions / provinces and municipalities at a rate of up to 9%, which is paid as part of your income tax.

The exact amount you will need to pay is set locally. For example, each of the 19 municipalities in Brussels sets its own rate.

Non-residents pay no council tax, but instead pay federal tax at a flat rate of 7%.

Taxes on goods and services (VAT) in Belgium

In Belgium, VAT is called Taxe sur la Valeur Ajoutée (TVA) or Belasting over de Toegevoegde Waarde (BTW). This applies to most goods and services.

The standard rate is 21%, but there are lower rates for some categories of goods and services. A 12% rate applies to food served in restaurants and social housing, while a 6% rate applies to most basic commodities such as food, water supplies, books and medicines.

A 0% rate is available for daily and weekly publications and recyclables.

Can you get a VAT refund?

If you sell goods to another VAT registered business elsewhere in the EU, the buyer will pay VAT at their country’s rate.

This also works the other way around, so if you buy goods from another country within the EU, you will be charged VAT at Belgian rates.

When making a cross-border transaction, you will need the customer’s VAT number. You can check this through the European Commission.

Social security in Belgium

Social Security payments exceed your earned income. If you work, the employer pays a part (currently about 35%), and you pay another, smaller part (about 13.07%) of your salary.

Self-employed workers must make their own social security payments. Self-employment social security contributions usually amount to around 22% of your annual income, rising to 14.16% if your income exceeds € 54,398.

You can read more in our guide to Belgian social security and Belgian taxes for self-employed workers.

Property and wealth tax

Property owners must pay an annual tax based on ownership from January 1st of each year. The amount is calculated based on the estimated annual rent (cadastral income / cadastral income), which is attributed to the property by local authorities.

The tax payable depends on the municipality and region.

If you live in the Flemish region, this is typically 2.5% of your annual rental income; in the Brussels-Capital Region – 2.25%; and in Wallonia it is about 1.25%.

Inheritance tax in Belgium

Inheritance tax applies to the total value of the property of a person residing in Belgium, or any property belonging to Belgium if they do not reside there.

The tax depends on the region. It is paid to the region in which the deceased has been a tax resident for most of the last five years of his life.

Gift tax

Belgium has a three-year donation rule for movable and immovable property. This means that if you give something to the heir and then die within three years, he will have to pay inheritance tax on the value of the gift.

The gift tax rate varies by region. In Wallonia, it ranges from 3.3% to 5.5%, and in Brussels – from 3% to 40%, depending on the value of the gift and whether the recipient is an heir.

Are there tax treaties and double taxation exemptions?

Income earned by Belgian residents from business activities in non-contracting countries is taxed at half the normal rate to the extent that income is subject to standard taxation abroad. 

Double taxation treaties between Belgium and other countries provide for the abolition of double taxation on such income of Belgian residents through a progressive exemption 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 foreign source income were included in taxable income.

Belgium has agreements on the avoidance of double taxation with 90 countries.

Belgium has signed agreements on the avoidance of double taxation with 8 other countries, but these agreements have not yet entered into force.

How to file a tax return in Belgium?

The Belgian tax year runs from January 1st to December 31st. All Belgian residents and non-residents who are taxed on income derived from Belgian sources must file an annual return.

Typically, you will receive a tax return between May and June relating to the previous year’s income. It usually needs to be returned by the end of June, although you can find the exact date on your tax return.

You usually have extra time if you use the Tax-on-Web online tax filing system. Non-residents submit their return in late September – early October.

If you do not file your return by the due date, you could face a fine and the tax authorities can estimate how much taxes you need to pay. You can track the filing process through the Ministry of Finance’s public finance app.

Do expats have to pay Capital Gains Tax?

Resident and non-resident taxpayers are subject to capital gains tax on assets used for commercial purposes. Capital gains realized on land and buildings intended for private use are taxable for resident and non-resident 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 that they are the result of ordinary management of private capital, and for portfolio investments, provided that such capital gains are not the result sale of substantial participation.

Capital gains resulting from the sale of significant holdings between two residents, or between a resident and a non-resident located in the European Economic Area (EEA), are not taxable. On the other hand, capital gains resulting from such a transaction between a resident and a non-resident outside the European Economic Area are taxed.

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

Other income taxable for residents and non-residents (to the extent that it is income derived from Belgian sources) includes a variety of income and a wide range of other sources, including prizes and subsidies.

Do expats receive a government pension?

The social security rate for Belgian employees is 13.07 percent of total income and is fully deductible for income tax purposes. 

The reduction in the maximum social security rate will be phased in between April 1, 2016 and 2020. From April 1, 2016, the maximum rate will be reduced to 32.5%. In 2020, the maximum rate should be reduced to 25%.

Social security contributions are usually mandatory for expats working in Belgium.

To be eligible for a Belgian state pension, you must work in Belgium for an employer who paid contributions to the Belgian National Social Security Administration (RSZ). Self-employed workers can also apply for a Belgian pension on similar conditions. 

You can find out more about social security rates in our guide to social security in Belgium.

Salaried workers and self-employed workers receive a pension from the National Pension Board, and civil servants receive a pension from the State Pension Service.

Currently, the state retirement pension payment begins when you turn 65 and have worked for at least 40 years during your career. However, the government recently agreed to raise the retirement age to 66 in 2025 and 67 in 2030 (for both men and women).

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

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