Belgian Tax reform – Individuals – Personal income tax
Latest update: 3 February 2025
On 31 January 2025, a new Belgian Federal government agreement was announced, bringing with it expected significant changes in tax policy during the next government period.
From an employer perspective, the most important announced measures would be the following:
- Reduction of wage costs for low and medium salaries
- Specific regime for carried interest: 30% (no impact on existing plans)
- Flexible remuneration would receive a legal framework: gross salary sacrifice limited to a maximum of 20% of the annual gross salary. Additional bonuses can still be granted on top of the salary.
- Harmonisation of collective bonus regimes (CCT 90, beneficial premium, …) without additional cost for employers or tax burden for employees.
- Meal vouchers: amount increased (twice €2 during the legislature) and scope extended, but all other vouchers (i.e., eco vouchers, culture vouchers, etc.) would gradually be abolished.
- Temporary relaxation deductibility hybrid cars
- The expat regime would be improved to be more attractive
- The copyrights regime would be reviewed: digital professions could benefit again from it
- The mobility budget would be reviewed as well.
- Other measures will be taken in terms of legal certainty and stability regarding some exemptions from professionnal withholding tax
From a general personal income tax perspective, the most relevant measures would be the following:
- Reduction of the personal income tax via increase of the tax-free (lump sum) amount (from 2027), the reduction of the special social security contribution (from 2029) and the strengthening of the employment bonus
- A solidarity contribution would be introduced on capital gains on financial assets (including investments in cryptocurrencies) at a rate of 10%:
- Basic exemption up to €10,000 (annually indexed)
- No retroactivity and with an exemption for historical capital gains from the entry into force of the tax
- Deductibility of capital losses from income of the same category in the same year, but without the possibility of carryforward
- For taxpayers with a substantial participation (more than 20%):
- Capital gain <€1M: 0%
- Capital gain €1 M – €2,5 M: 1,25%
- Capital gain €2,5 M – €5 M: 2,5%
- Capital gain €5 M – 10 M: 5%
- Capital gain >€10M: 10%
- Retirees who want to supplement their income: 33% flat-rate
- The tax deduction for childcare would be increased for active individuals
- Alimony payments would gradually decrease from 80% to 50%. Payments to countries outside the EEA would no longer be deductible.
- Elimination of the Federal deduction of loan interest for housing other than the main residence
- Phasing out of the marital quotient for non-retirees (50% by 2029), for retirees: specific phase-out scenario
- Elimination of a range of tax reductions
- For self-employed, among others:
- A new deduction allowing them to deduct a portion of their benefits or professional profits from their taxes (after deduction of business expenses and social contributions). Thai deduction would be available for full-time and part-time self-employed. This amount would be increased in 2029.
- Changes to the second pillar of the supplementary pension (notably an increased contribution from 8,17% to 8,5%)
- Favourable measures for the tax prepayments
- The minimum remuneration for company directors would be composed of a maximum of 20% of the annual gross salary in benefits in kind and would increase from €45,000 to 50,000 EUR and be indexed annually
- Share deals: the government would help Regions (if requested) to fight against share deals for what concerns the real estate companies
- The liquidation reserve would be harmonised as much as possible with the VVPRbis regime: therefore, the waiting period would be reduced from 5 to 3 years but the withholding tax rate would increase from 5% to 6,5% in case of distribution after 3 years and up to 30% in case of distribution within 3 years
- A new system to encourage (sustainable) investments would be introduced
These measures are of course subject to change. They are not yet included in a draft law and, afterwards, still have to be enshrined in a law after having followed the legislative process.
For more details, don’t hesitate to contact your PwC contact.
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.
