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    Updated On 20-09-2017
 
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Belgium

Individuals residing in Belgium are subject to personal income tax, as well as withholding tax, social security, inheritance and gift tax, and communal taxes.

The tax year for individuals is the calendar year, and the annual tax return must generally be filed by June 30th of the year following the tax year. Salaried individuals may prepay estimated income tax. The self-employed must prepay estimated tax according to rules similar to those applied to businesses.

Residency
Residents are taxed on worldwide income and capital gains. An individual is resident in Belgium if his/her domicile or principal economic interests are located in Belgium. The tax residence of married taxpayers is the place where the actual family residence is located. An individual who is listed on the National Register-i.e. an individual with a work permit or, for a national of the  EEA, a residence permit-is deemed to be resident unless the individual can prove otherwise. Nevertheless, certain foreign nationals living in Belgium and temporarily working in Belgium may receive special permission to retain non-resident status. 

Taxable income and rates
The personal tax system is progressive, with a high maximum marginal rate of 50% applicable to income exceeding EUR 34,330. Although tax rates are high and homeowners must pay tax on imputed rental income as well as local taxes, deductions are generous. Communal taxes of 0%-9% (averaging around 8%) raise the effective tax rate. Tax thresholds are generally indexed, although the government freezes them occasionally to obtain additional revenue.

The following rates apply to taxable income after deduction of the EUR 6,690 personal allowance: EUR 0-7,900 (25%); EUR 7,900.01-11,240 (30%); EUR 11,240.01-18,730 (40%); EUR 18,730.01-34,330 (45%); EUR 34,330.01 and above (50%).

Determination of taxable income
Residents are taxed on their worldwide income, including income derived from real estate, securities and other capital investments, and from salaries, wages and professional income. There is also a presumed rental income for property held in Belgium, which is reduced for owner-occupied dwellings.

A number of deductions may be taken from gross income, including the following:

  • Business expenses;
  • Social contributions;
  • Mortgage interest;
  • Childcare (up to the age of 12) and 80% of alimony payments;
  • Charitable donations; and
  • Premiums for life insurance policies of the endowment type and contributions to pension plan savings, within certain limits.

Business expenses incurred to earn business income may be deducted on an itemised basis. Deductions for the use of public transport or environmentally friendly forms of travel to work are being made progressively more generous. A flat rate deduction also is available.

A personal allowance is granted to the taxpayer and the taxpayer's dependents. If the taxpayer's spouse does not work, 30% of the main earner's income may be allocated to the spouse and taxed in the hands of the spouse up to a maximum of EUR 9,280 at the rate applying to that level of income or that income combined with the other person's earned income. Municipal taxes must be paid in addition to federal taxes. A typical municipal tax rate is 8%.

Certain items are taxed by way of withholding to ensure that Belgian income tax is collected. Capital gains derived by individuals are subject to a 33% tax on the sale of unimproved real property sold within five years of the date of purchase. Gains on all other property sales are exempt. Capital gains derived by an individual on the sale of securities are tax-exempt unless the individual has been trading to such an extent that the gains effectively constitute professional income; the gains are then taxed at normal income tax rates. One-off gains may be taxable at 33% if they are outside of the normal management of a personal portfolio. Gains derived from a substantial participation (that is, more than 25%) held for more than five years and transferred to a nonresident are subject to a 16.5% withholding tax.

Special expatriate tax regime
Executives posted in Belgium may apply to the Ministry of Finance to benefit from a special expatriate regime. Application must be made within six months from the beginning of the assignment. To qualify for the regime, the principal economic interests of the individual must be located outside Belgium and the employee must be hired abroad or be transferred to a Belgian entity.

The following incentives are available:

•           The taxpayer only has to report worldwide business and Belgian real estate income. Passive income (interest and dividends) is not reportable.

•           The taxpayer may exclude a tax-free allowance of EUR 11,250 (increased to EUR 29,750 for employees of coordination and R&D centres). The taxpayer can exclude actual allowances paid under the employer's company policy if they cover cost-of¬living allowances, housing allowances, tax equalisation and home leave. If the company does not have a company policy, the taxpayer may still exclude allowances calculated according to regulations issued by the tax authorities. In addition, school fees for dependent children and moving expenses that are reimbursed upon receipt may be excluded without limitation.

•           The taxpayer may exclude salary relating to days worked outside Belgium. This travel exclusion is based on a pro-rata method and is not subject to any limitation. Documentation is required for every working day spent abroad.

Capital taxes
Belgium does not levy taxes on personal wealth, although a 15% withholding tax is imposed on earnings from mutual funds investing more than 40% of their assets in interest-bearing securities.

An annual tax applies to the presumed annual rental income of owned land, buildings and industrial equipment. The tax is 1.25% of the assessed value for buildings in the Walloon and Brussels regions and 2.5% in the Flemish region, and is not deductible from personal income tax.

Inheritance tax ranges from 3% to 30% for spouses and direct descendants in Wallonia and the Brussels region and 3% to 27% in Flanders. Lower rates apply in some cases to residences. In the Flemish region, no inheritance tax is due when the family home is inherited by the spouse or the legal cohabitant of the deceased. Higher rates apply to gifts and higher rates (up to 80% in Wallonia and Brussels, and 65% in Flanders) apply to more distant relations and unrelated beneficiaries.


Source: Deloitte
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