Belgian Tax reform – Individuals – Personal income tax
Latest update: 24 April 2025
Draft Program Law
On Friday, 11 April, the Council of Ministers approved a draft program bill named the “Easter agreement.” This bill includes among others the first wave of tax measures that will be effective in the assessment year 2026 or from 1 July 2025.
Gradually, the decisions become clear and the key tax changes from a personal tax perspective are the following:
From an employer perspective:
Carried Interest:
- The draft law would introduce a new regime for individuals or related persons receiving carried interest from Belgian/foreign AIFs (alternative investment funds)
- The income would be treated as investment income, taxed at a flat 25% rate (via withholding & income tax)
- This measure would apply to carried interests paid or attributed as from the date of enactment of the law
Hybrid company cars
- Hybrid car tax deductibility would be improved, temporarily up to 75% (based on CO2 emissions) or higher for cars with maximum 50 gr CO2 emission
- Fuel deductibility adapted (50% until 2027), electricity fully deductible
Expat regime
- Would be more attractive as of income year 2025: Exempted amount limited to 35% (instead of 30%) of the gross remuneration (uncapped). The minimum remuneration required to qualify for the regime is decreased from 75.000 EUR to 70.000 EUR, .
From a general personal income tax perspective:
- Flexi-jobs: exemption would be increased (from €12.000 to €18,000 as of income year 2025), indexed annually.
- Student work: the system would be improved by including a doubling of the exempt amount, and an increased net subsistence income (€12,000).
- Loan interest deduction (secondary residence): would be abolished as from fiscal year 2026 (hence as of January 1st, 2025) .
- Alimony payments: Deductibility gradually reduced (70% in 2025, 60% in 2026 and 50% by 2027). Payments outside EEA would be non-deductible.
- Several amounts related to tax reductions or deductions would be frozen from 2025 until tax year 2030.
- Tax simplification: several tax deductions and tax reductions would be abolished such as the tax reduction for the salaries of a domestic employee, the tax reduction for adoption expenses, tax reduction for premiums for legal protection insurance, etc. The tax reduction for gifts would be reduced from 45% to 30%.
Update: 31 January 2025
Since the long-awaited tax reform was ultimately not implemented in 2024, there were no major changes in personal income tax. Nevertheless, below we will go into some details on certain elements.
1.Transition period of old expat regime ends
As of January 2024, the ‘old’ special tax regime applicable to certain expats in Belgium under the administrative tolerance (i.e. Circular n°Ci.RH.624/325.294 dated 8 August 1983) has been terminated, leading to significant changes for expats who benefited from this regime. This development has had profound implications from a personal income tax point of view and has also resulted in additional reporting obligations, necessitating a reassessment of tax positions for expats.
National residency and reporting obligations
The benefits of the ‘old’ regime have ended, and unless the individual can demonstrate that their tax residence is outside of Belgium, the individual is now no longer a non-resident, but a resident under Belgian tax law. As Belgian residents, these individuals now have to declare their worldwide income (with the possibility to claim exemptions based on tax treaties), unlike the previous regime where they were only taxed on Belgian source income.
Specific reporting obligations for foreign assets
Compared to non-residents, Belgian residents have stricter reporting obligations, particularly with regard to foreign assets, including:
- foreign bank accounts must be reported to the National Bank of Belgium and included in the annual personal income tax return;
- policyholders of an individual life insurance contract concluded with a foreign insurance company are required to declare this in their annual personal income tax return;
- the purchase and sale of real estate abroad must be spontaneously reported to the authorities within 4 months of the transaction. If a non-resident taxpayer becomes a resident taxpayer, the period is shortened to 30 days after the first day of the tax period. In addition, the (deemed or effective) real estate income must be declared in the annual personal income tax return, with the possibility of claiming an exemption based on the relevant tax treaty;
- under the so-called Cayman tax (see also below), Belgian residents are obliged to report interests in legal structures via the annual personal income tax return and the new appendix 276CJC, with possible tax consequences.
When switching from non-resident to resident, there are many reporting requirements to consider, including various filings with their own forms and specific deadlines. It is crucial to ensure compliance to avoid fines and penalties.
New special tax regime
A ‘new’ special tax regime has been introduced for incoming taxpayers and researchers. This regime replaces the ‘old’ special tax regime that has been in force since 1983. In a competitive labour market, the special tax regime plays a crucial role in attracting talent from abroad.
2. Cayman tax: appendix 276 CJC
Since its introduction in 2015, the so-called Cayman tax has been tightened several times. In a nutshell, the Cayman tax is essentially a look-through tax aimed at taxing the income collected by a legal construct at the level of the founders as if they had received this income directly themselves. Distributions by the legal construct are in principle considered as dividends and taxed at 30%. The law also provides for some fictitious distribution moments. The primary objective of the measure is to combat the abuse of legal arrangements designed to isolate the private assets of Belgian taxpayers in order to avoid tax control and taxation.
As for reporting obligations, in the past it was sufficient to report the existence of the legal arrangement in the individuals’ tax return. As of the 2024 tax year, there is an obligation to file a specific annex (known as the annex ‘276 CJC’) in the tax return. This new annex requires detailed information on the legal structures involved and the income distributed, including, for example, identification data, the share of assets contributed by the founder, and the equity of the legal structure.
The Cayman tax remains difficult to apply in practice. The analysis can become very complex, especially in the case of layered structures. The taxpayer may not have access to all the data that must be reported or are necessary to analyse the consequences in terms of income tax. In addition, certain provisions may conflict with the free movement of capital and services in the EU. For example, income that arises due to the transfer of the legal structure to a state or jurisdiction outside Belgium is deemed to constitute a fictitious dividend. The exit tax upon emigration of the founder of the natural person abroad may also conflict with the free movement of capital and services within the EU.
