The Flemish and Walloon regional governments have already reached their respective agreement. Some of the measures will introduce significant changes to the regional taxation landscape. However, these measures have not yet been voted and still need to follow the legislative process at the regional level.
Both Regions will reduce their inheritance and gift taxes (following after the takeover of the tax collection concerning the Walloon Region) as well as the registration duties on the acquisition of a primary and sole residence.
Regarding car taxation, both regions have decided to introduce a road usage fee for foreign users, compliant with European law. The three regions will cooperate to achieve a globally similar level of taxation in this respect.
Besides this new common measure, the regions adopt different approaches. Indeed, in Wallonia, the government has decided to encourage the acquisition of more environmentally friendly vehicles and to reduce the registration and road tax for these, while Flanders believes that it is no longer necessary to support the transition to electric vehicles, as the greening of the car fleet has progressed quite rapidly. It will remove the tax advantages/benefits associated with this policy.
While Flanders will focus on increasing investments in R&D up to 5% of the gross domestic product (GDP), tax penalties, the fight against tax fraud (notably undisclosed foreign immovable property), and the reform of gaming and betting, Wallonia will support an incentive-based environmental tax system based on the “Polluter-Pays Principle” and improvement of the relationships between the tax authorities and taxpayers.
An overview of the measures announced is presented below for each region.
Flemish Region
Real Estate Reform
- Reduction of registration duties from 3% to 2% for a primary and sole residence, effective from 1 January 2025.
- The registration duties for purchases by professional sellers will increase from 4% to 6%, resulting in a 50% cost increase.
- Termination of the current favourable regimes for property tax on energy-efficient new-build homes and renovations; this is the result of stricter energy performance regulations, with new buildings consistently meeting high standards.
- The tax advantages related to real estate heritage are being eliminated to simplify regulations
- A generalised 6% VAT rate is requested from the Federal government for demolition and reconstruction, as part of climate policy and to support affordable housing.
- Advocating for stringent enforcement, particularly in identifying foreign property ownership to prevent misuse of reduced registration fees for primary residences in Flanders.
- The renovation of the Flemish building inventory and a Flemish tax shift that gradually makes electricity cheaper at the expense of fossil fuels.
Inheritance and Gift Taxes
- The reform of inheritance taxes reduces rates for children, surviving spouses, siblings, and others, with a specific focus on small to medium-sized legacies.
- The new rates would be as follows:
- Children:
- 0 – €50,000: exemption
- €50,000 – €150,000: 3%
- €150,000 – €250,000: 9%
- Between brothers and sisters:
- 0 – €75,000: 25%
- €75,000 – €150,000: 30%
- Regarding the movable assets/property inherited by the surviving partner, the exempted portion would be increased from €50,000 € to €150,000 €. The same ceilings as for children apply for the rates of 3% and 9%.
- For individuals without heirs in the direct line and first degree, such as a partner or children:
- They would be able to leave something to one or more persons with whom they had an emotional bond, which will be taxed in a manner that is closer to the tax regime for those who inherit in the direct line (with an exempted amount capped at €50,000)
- This reform would enter into force in 2026 and be fully applicable in 2029.
- The suspicious period for gifts will (most likely) be extended from 3 to 5 years (not mentioned in the agreement itself but in other sources).
- The gift tax will remain lower than the inheritance tax.
- Focus on closing loopholes.
- Family companies: one of the measures would be to exclude real estate used for dwelling from the favourable regime (in the gift and inheritance taxes).
Miscellaneous
- Introduction of a road usage fee compliant with EU law.
- Newly registered electric cars will be subject to road taxes, with the removal of current exemptions from the annual road tax and one-time registration tax.
- The abolition of the exemption is a result of the rapid evolution of the greening of the vehicle fleet.
- The tax structure for gaming and betting will be harmonised, with increased controls on illegal gambling and higher taxes on these activities, subject to regional agreements, while ensuring a deterrent effect without shifting activity to the illegal sector.
- Potential reorientation of the Flemish job bonus pending federal expansion, with continuity assured if federal changes do not proceed.
- Request to the Federal government to simplify the recognition process for structurally organised entities regarding tax-deductible donations, ensuring smaller organisations can also benefit.
- Policy efforts to reduce high fiscal penalties, including a review of the 20% registration duties fine, will continue to ensure proportionality, while strict measures remain in place for intentional fraudsters.
- In consultation with the federal government, ensure the maintenance of the partial exemption from wage withholding tax for R&D.
- Improving wages and employment conditions for people who work through service vouchers.
- The price of the service vouchers would be increased and they would no longer be deductible.
- Family allowances would again be yearly indexed in accordance with the health index.
Walloon Region
The Walloon government supports the following measures:
- Broadening of the tax shelter regime (by the Federal government).
- Support at the federal level for the maintenance and development of research incentives (e.g., exemption from payment of wage withholding tax for scientific personnel and the deduction for innovation income).
- Continuation of the “Prêt Coup de Pouce” (relatives can invest in your business and benefit from a tax advantage).
- Support for the “Airbag system” (financing for a self-employed activity in the start-up phase).
- Optimisation of family allowances: the semi-automatic right would be replaced by a conditional right from 18 years.
- Encouragement of the local authorities to develop a second pension pillar for contract agents.
- The Walloon government aims to ensure that its policies align with those implemented at the federal level, especially regarding the management of the social security and pension systems.
Ownership and Real Estate
With regard to the registration duties, the following measures are announced:
- Reduction of registration duties to 3% (currently 12.5%) for the acquisition of a primary and unique residence.
- Abolishment of the existing tax benefits such as reductions, abatements and housing vouchers.
- Possibility to directly benefit from the advantage in case of resale and repurchase within a reasonable timeframe of the primary and unique residence.
With regard to real estate, the Walloon government also aims to implement the following measures:
- Maximum automation of all reductions in the immovable property tax.
- Study to grant greater reductions in the immovable property tax in case of natural disasters (such as the floods of July 2021).
- Implementation of tax incentives in the event of certain building works being carried out.
- At the federal level, advocate the introduction of a VAT regime that is favourable to the acquisition and resale of private and unique homes
Inheritance Taxes and Gift Tax
In the first step, the Walloon Region must take over the collection of inheritance taxes from the Federal government. This should normally start in 2025 but the procedure will probably take 2 to 3 years.
In the second step, the Walloon government considers simplifying and implementing a phased reduction of the rates in inheritance taxes and donation duties:
- Phased decrease of inheritance tax rates (the intention is to halve all inheritance taxes):
- from min. 5% to max. 15% in the direct line;
- from min. 7% to max. 35% in the collateral line (between brothers and sisters, between uncles or aunts and nephews or nieces);
- from min. 15% to max. 40% between all other persons.
- Assimilation of children of legal cohabitants to the biological children of the deceased will be extended to all degrees to allow grandchildren of cohabitants to benefit from the preferential rates of the direct line.
- The minimum inheritance amount exempt from declaration and duty will be reviewed
- Introduction of flat-rate fees for death-related expenses.
- Removal of the 5-year occupation condition concerning the principal residence.
Miscellaneous Expenses
- Entrepreneurship support: mitigation of distortions of competition between non-profit organisations and private operations resulting from differences in terms of VAT liability.
- Tourism: VAT exemption regime for accommodation managers.
- Car taxation: reform of the registration tax and implementation of a usage fee (vignette).
- An incentive-based environmental tax system based on the “Polluter-Pays Principle”: attention to the establishment and collection of Walloon environmental taxes, including water and waste taxes, introduction or strengthening of fiscal incentives to promote energy savings in housing, complementing other policies (zero-interest loans, subsidies, etc.), possible mobilisation of citizen savings (e.g., a tax credit for investment or a Walloon state bond) to finance climate and energy transition projects.
- Effective, transparent and accessible tax rules which:
- include aligning the legislation with the judicial decisions and ensuring proper follow-up of the transpositions of European directives in fiscal matters, without “over-regulation”;
- improvement of the relations between citizens and the administration: transparent and proactive communication, direct contacts with control services and their officials, regular updating of circulars and administrative comments, etc.
- Better collection of taxes.
- Creation of an advance ruling commission.
- Drafting of a Walloon Tax Code, notably applicable to local authorities.
What is Next
These measures are still subject to a draft decree and will have to follow the legislative process in the Regional Parliament. For more insights on the impact of these possible changes, please do not hesitate to reach out to your regular PwC contact, or contact Pieter Deré or Bart Van den Bussche.
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