Expatriates taking up employment in Belgium will be subject to comprehensive rules and, in some cases, employment visa requirements.
The global mobility services team at Grant Thornton Belgium can help expatriates and their employers deal with Belgian visa and work permit requirements, Belgian labor law and social security issues, and Belgian income tax items.
In particular, we can assist expatriates and their employers in identifying Belgian tax planning opportunities, reviewing tax equalisation policies, and providing compliance services as to their Belgian tax filing requirements.
Most expatriates will qualify for special non-resident tax status. We can prepare the formal application for this tax status, which is due to the relevant tax office within six months of the expatriates’ arrival.
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Prior to 1 January 2019, employers of non-EEA (European Economic Area) nationals were generally required to apply for a work permit prior to the employee taking up employment in Belgium, and the employee would need to obtain a labor card. The expatriate would also have to obtain a residence permit in order to live in Belgium. In situations where the expatriate’s spouse and family relocate to Belgium, relevant residence permits and work permits (if the spouse was working) would be required. If the expatriate was an EEA national the above procedure was generally not required.
Since 1 January 2019, non-EEA nationals who wish to work and stay in Belgium for more than 90 days must apply through their employer for a 'single permit' with the competent regional authority. If this request is accepted, he receives a single document attesting that he is authorised to work and stay more than 90 days in Belgium.
The Belgian tax year runs from 1 January to 31 December.
Individuals who are Belgian residents for tax purposes must file their tax return at the latest on the due date indicated on the tax return (generally 30 June). The same rules apply to individuals who are not Belgian residents for tax purposes. When no return is received, the taxpayer should request one by 1 June at the latest.
Taxpayers providing their tax consultant a proxy to file the tax return on their behalf through 'Tax-on-Web' applications are granted an extended filing due date until later in the year, usually in October for Belgian tax residents.
Employees and directors generally deduct taxes at source. When no withholding tax needs to be deducted, taxes will become payable within a period of two months following the receipt of a tax bill. Married taxpayers (or legal cohabitants) file a joint income tax return. However, professional income is taxed separately on behalf of each taxpayer. Investment income and real estate income is taxed on behalf of the member of the household who is the legal beneficiary of this type of income.
Individuals are taxed at progressive rates according to total taxable income. Rates for the 2019/20 income tax year are:
Resident tax rates (including temporary residents)
|Total income||Tax rate|
|€0 – 12,990.00||25%|
|€12,990.00 – 22,229.00||40%|
|€22,229.00 – 39,660.00||45%|
All tax amounts are increased by the applicable municipality taxes, which are imposed at rates between 0% and 9%. The municipality tax is calculated based on the amount of income tax due.
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 are taxable on at least 75% of their worldwide income in Belgium. No municipality 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.
A tax free amount of €7,430.00 is normally available, possibly increased for dependent children and specific circumstances. A lump sum (up to €4,720.00 for employees) or itemised business expenses can be deducted.
Special flat rates apply to different types of income depending on their nature (severance payments, accrued capital under life and group insurance contracts, etc.). However, regular progressive tax brackets are in principle automatically applied whenever they appear to be more advantageous (eg when the globally taxed income is low enough).
Sample income tax calculation for a non-resident executive (with application of the special tax status):
|Cost of living allowance||10,000.00|
|Total employment Income:
(of which €11,250 are assumed as tax free allowances (TFA) under the special tax regime for foreign executives)
|Social security contributions (TFA increased with travel exclusion) (13.07%)||(5,973.84)|
|Travel exclusion (20%)||(8,555.23)|
|Standard business expenses||(4,720.00)|
|Income tax thereon:|
|On 7,271.93 @ 45%||3,272.37|
|Total (A) Personal allowance (single 7,430.00)||10,215.47|
|Income tax thereon:|
|On 7,430.00 @ 25% (B)||(1,857.50)|
|Income tax (A-B)||8,357.97|
|Communal tax (7%)||585.06|
|Income tax due||8,943.03|
The residents of Belgium are taxed on their worldwide income in Belgium. Non-residents are taxed in Belgium only on their Belgian source income.
Under Belgian tax law, one’s tax residence is governed by several criteria and is generally defined as the place where an individual has his/her permanent home (ie generally where the family is living) or where an individual has his/her centre of economic interest (ie place where an individual manages his/her private affairs).
The Belgian tax code also provides for a rebuttable presumption that an individual is a tax resident of Belgium when he/she is registered in the National Register of individual persons in Belgium. This registration takes place in the municipality where the individual resides. Moreover, the Belgian tax code provides for an irrefutable presumption of tax residency when a married or legally cohabitating family resides in Belgium.
However, expatriates (certain foreign executives, specialists and researchers) who qualify for the special non-resident tax status continue to be considered tax non-residents during the whole period of their assignment to Belgium (see below 'expatriate concessions').
Belgian tax law provides for the following four categories of taxable 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
- other 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.
As mentioned above, where one performs duties in Belgium, any remuneration received in respect of these duties is treated as Belgian sourced income and is therefore subject to Belgian income tax regardless of the expatriate’s tax residence status (subject to the relevant double taxation treaty).
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.
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, etc) from which the portion of the employment income related to the number of days worked outside of Belgium is excluded (so-called 'travel exclusion').
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 recurring and non-recurring 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 (ie housing allowances, cost of living allowances, tax equalisation, home leave, school fees at an international school, etc.).
Depending on 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 reimbursement of school fees or moving expenses.
As already indicated, these foreign executives are considered to be non-residents for tax purposes. As such, they cannot claim tax treaty benefits as a Belgian tax resident.
The conditions to obtain the special tax status can be summarised as follows:
- the employing company must be part of an international group
- the employing company must be a commercial organisation
- the expatriate must be a foreign national
- the expatriate must exercise a managerial function
- the expatriate must demonstrate that he/she has kept the centre of his/her economic interests outside of Belgium.
There is generally a requirement for the expatriate’s employer to deduct Belgian withholding taxes from the assessable employment income. The amount of withholding taxes is determined according to specific tables provided by the tax administration. The employer can deviate from these tables and directly implement the tax benefits of the special tax status by reducing the amount withheld.
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 or relevant internal tax legislation.
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 itemising 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.
Most allowances are, however, only available to non-residents if they earn at least 75% of their worldwide income in Belgium.
Tax reductions are granted either by the federal or regional government for specific expenses such as life insurance premiums, loans used to finance real estate acquisitions or renovations, the purchase of service vouchers, child care expenses, charitable contributions, etc.
A law passed in December 2017 introduced, in the event of a change of tax residence during the calendar year, a limitation on certain tax benefits. This limitation is applied pro rata temporis.
In general, capital gains are tax free in Belgium. Only capital gains on Belgian real estate (short-term assets) may be taxable under certain conditions.
Inheritance tax rules and rates differ based on the Belgian region in which the deceased had his/her fiscal residence.
Substantial differences exist between the rates applied by each regional authority. 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 information regarding these rules, and may reach out to Grant Thornton’s PCS Department to do so.
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. Non-resident status for purposes of the special expatriate tax regime (see Section A) does not automatically apply for inheritance 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. However, preferential flat rates apply to gifts of movable property.
Gifts are subject to gift taxes (subject to many potential exceptions). Transfer taxes apply to various asset (primarily property) transfers and leases at rates ranging from 0.2% to 12.5%.
The expatriate’s Belgian tax residency status will determine whether investment income such as interest, dividends, etc., will be subject to Belgian income tax.
Interest income is generally subject to a withholding tax of 30% (15% under some conditions). Dividend income is taxed at a rate of 30%. Expatriates qualifying for the special non-resident tax status may be subject to tax only on Belgian source interest and dividend income.
Royalty income, to the extent not regarded as professional income, may be subject to a specific tax (with a 15% tax rate and advantageous lump sum deductible costs). Royalty income above a given yearly cap (€59,970 in 2018) is presumed to be professional income.
A tax is levied on the annual rental value of immovable property. The rate varies according to the region in which the property is located.
Where duties are performed in Belgium, a charge to Belgian Social Security may arise. When the expatriate is treated as an employee, he/she will be subject to personal social security contributions of 13.07%. This rate applies to the monthly gross compensation and has no maximum limit. The employer will also be required to contribute about 25% of the relevant income and benefits to the Belgian social security system.
Social security contributions must be collected at source along with withholding taxes.
Different rates apply to self-employed activities, including activities of directors. For income year 2018, social security contributions are levied at a rate of 20.5% on net income up to €58,513.59 and at a rate of 14.16% on income between €58,513.59 and €86,230.52. Income in excess of €86,230.52 is not subject to social security contributions. The annual maximum contribution for self-employed activities is therefore €15,920.01 (increased by 3% to 5% for administration fees for the social insurance fund).
Mandatory social security contributions are deductible for income tax purposes.
An individual who is liable to Belgian social security contributions is also required to make a special social security contribution.
The maximum amount of this contribution is €731.28. The special social security contribution is not deductible for income tax purposes. For self-employed workers and directors, the special social security contribution is included in the above-mentioned rates for self-employed activities.
Where the expatriate is on a secondment from an EU jurisdiction and holds the relevant documentation (A1) an exemption to Belgian Social Security will apply (limited in time – usually five years).
Where the expatriate is on a secondment from a jurisdiction outside the EU with which Belgium holds a Bi-Lateral Agreement and the expatriate holds the relevant documentation (certificate of coverage), an exemption to Belgian Social Security will apply (limited in time).
Where the expatriate is transferring from a jurisdiction that does not fall into one of the above categories, the Belgian rules will determine his liability to Belgian social security taxes.
Expatriates benefiting from the special tax status who are subject to Belgian social security are allowed to exclude the tax free allowances also from social security. Moreover, under certain circumstances these tax-free allowances can be increased with the travel exclusion, resulting in additional social security savings (for both the employee and the employer).
The taxable moment is at the time of 'grant' of the stock options under the condition that the employee accepts the offer in writing within the sixtieth day following the offer date. The taxable benefit is determined at that moment on a lump-sum basis.
The basic rule is that the taxable benefit amounts to 18% of the value of the underlying shares for an option valid for a maximum of five years. This percentage is increased by one percent per year starting after the five-year maturity period of the option. The percentage thus obtained can even be reduced by half if certain conditions are met. Normally, the taxable benefit is exempted from social security contributions. The capital gain realised upon exercise and sale of the shares is tax free.
When the offer of the options is not accepted within the sixty-day period referred to above, taxation will occur at exercise. The taxable benefit will be determined as the positive difference between the market value of the shares at exercise and the exercise price. Social Security contributions will normally also be due. Subsequent capital gains upon sale of the shares are tax free.
There is no wealth tax in Belgium.
For foreign nationals who do not qualify for the special non-resident tax status and who perform duties outside of Belgium, split payroll arrangements may be applicable, reducing the overall tax burden.
Company cars normally constitute a tax effective fringe benefit.
Deferred compensation schemes can be set up subject to certain conditions. Stock options offered by a foreign employer are preferably granted before the assignment to Belgium as taxation may occur at grant.