Difference in Belgian tax treatment of income from immovable property – contrary to EU law (free movement of capital)

Written by Nicolas de Limbourg 16 April 2018


On 12 April 2018, the Court of Justice of the European Union (CJEU), ruled that the difference in tax treatment of immovable income, depending on whether the property is located in Belgium or in another State, is not in line with EU law, as it constitutes a restriction on the free movement of capital.

Based on Belgian tax law and administrative commentaries, two different calculation methods are being applied in Belgium for the taxation of immovable income. It all depends on where the property is located.

  • For immovable properties located in Belgium and which are not rented out or properties rented either to natural persons who do not use them for professional purposes or to legal persons which make such properties available to natural persons for private purposes, income tax is determined based on the (lump-sum) “cadastral value” of the property. This cadastral value, which is often significantly lower than the actual rental value of the immovable property, is subject to indexation every year and increased with 40%.
  • For immovable properties located in another State (i.e. outside Belgium), income tax is based on the actual rental value of the property (if not rented out) or actual rent (if rented out).

The European Commission stated that, via the differentiated assessment of income from immovable property depending on the State in whose territory that property is situated, income from immovable property situated in another Member State of the EU or the EEA is overvalued in relation to income from immovable property situated in Belgium. Consequently, for tax residents of Belgium, income from immovable property abroad is treated disadvantageously in comparison with income relating to immovable property located in Belgium. As this may discourage tax residents of Belgium from making investments in immovable property in another Member State of the EU or the EEA, it is restricting the free movement of capital.

The CJEU agrees that this constitutes an infringement of EU Law for which there is no justification.

The Belgian legislator will now have to examine in which sense to amend the legislation, going forward.  We will keep you posted on further developments in this respect.