Expatriate tax ebook - Belgium

Basis of taxation

Charge to tax
Residence
Income from employment
Source of employment
Benefits (in kind)
Expatriate concessions
Relief for foreign taxes
Deductions against income

Charge to tax
A charge to Belgian tax is dependent on whether the income arises in Belgium. The extent of the charge will be determined by an individual’s tax residency status.

Residence
Under Belgian law, the place of tax residence is governed by several criteria and is generally defined as the place where an individual has his/her permanent home (i.e. generally where the family is living) or where an individual has his/her center of economic interest (i.e. place where an individual manages his/her private affairs).

The Belgian tax code provides also for a refutable assumption that an individual resides in Belgium when he/she is registered in the National Register of individual persons in Belgium. This registration takes place in the commune where the individual resides. Individuals that are Belgian residents are taxed on their worldwide income and gains. Non-residents are only taxed on their Belgian income and gains.

However, expatriates who qualify for the special non resident tax status continue to be considered as tax non residents during the whole period of their assignment to Belgium. ( see below "expatriate concessions").

Income from employment
A Belgian tax charge arises on employment income derived from duties performed in Belgium. Assessable employment income includes all wages, salaries, overtime pay, bonuses, gratuities, perquisites, benefits etc.

Source of employment
As mentioned above, where duties are performed in Belgium, any remuneration received in respect of these duties is treated as Belgian sourced income and, therefore, subject to Belgian income tax regardless of the expatriate's tax residence status (subject to the relevant double taxation treaty).

Benefits (in kind)
In general, where the benefit is enjoyed in Belgium, a Belgian income tax charge will arise. Therefore, housing, meal allowances, provision of a car and relocation allowances will come within the charge to Belgian income tax in addition to the individual's salary.

Expatriate concessions
Foreign executives or specialists qualifying for the special non-resident tax status are taxed on all income derived from their employment activity (salaries, bonuses, fringe benefits,…) from which are excluded:

• the portion of the employment income related to the number of days worked outside of Belgium. Special rules apply for the determination of the foreign working days;
• certain expatriate allowances or expense reimbursements (see further).

The foreign nationals qualifying for the special non resident tax status will not be taxed on supplementary securing and non securing expenses which are incurred as a result of their recruitment or transfer to Belgium, whether paid as lump sum allowances or as specific reimbursements of expenses (i.e. housing allowances, cost of living allowances, tax equalization, school fees at an international school etc). Depending upon the function exercised by the foreign executive, the maximum annual excludable expenses or allowances amount to € 11.250,00 or 29.750,00. However, the above ceilings do not include school fees.

As already indicated, these foreign executives are considered to be NON RESIDENTS for tax purposes. As such, they can not claim tax treaty benefits as a Belgian tax resident.

There is principally a requirement for the expatriate's employer to deduct Belgian payroll taxes from the assessable employment income. When the employer has no permanent establishment in Belgium, withholding taxes are normally not required.

Relief for foreign taxes
Where income has been subject to tax twice (in Belgium and a foreign jurisdiction) expatriates who are Belgian tax residents may be granted relief by the Belgian tax authorities where provided for in the relevant double taxation treaty.

Deductions against income
In determining the taxable amount of the employment income, compulsory social security contributions paid either in Belgium or abroad are fully tax deductible. Professional expenses can be claimed either by itemizing the expenses actually made or on a lump sum basis using the standard business expenses deduction. A wide range of deductions may be taken against the net income subject to conditions and limitations: e.g. gifts, payments for child care, alimony payments, mortgage interests, mortgage capital reimbursements and related insurance premiums. Other expenses incurred may result in tax credits: life insurance premiums, personal contributions to pension funds, energy saving investments. A taxpayer is entitled to standard tax free amounts and child allowances.

Information about Belgium:

introduction

facts and figures

basis of taxation

what taxes?

tax planning opportunities