Belgian Tax reform – Individuals – Personal income tax
Latest update: 7 February 2022
Law of 21 January 2022 regarding various tax provisions (Official Gazette 28 January 2022)
- Replacement income of assisting spouses: the compensation of any kind for total or partial compensation in full or in part for a temporary loss of remuneration are, up to now, not included in the taxable remuneration of assisting spouses. The change provides to include this compensation in the taxable income and to tax the benefits arrears at the average rate for the last previous year during which the taxpayer had twelve months of taxable professional income. This measure is applicable to the income paid or attributed as from 1.1.2022.
- Distinct taxation of taxable income exempted by convention: when a Belgian resident receives foreign income, this income is in principle exempted in Belgium but is taken into consideration to determine the tax rate applicable (the so-called “exemption with reserve of progressivity”). There has been some discussion to know if the reserve of progressivity should also be applied if the foreign income would have been subject to distinct taxation if it was a Belgian source income. The new law provides the final answer and confirms that income which, if it were not exempted, would be subject to distinct taxation, is not submitted to the reserve of progressivity. In that case, a zero rate applies. This measure is applicable as of FY 2021.
- Professional withholding tax of non-residents employed as seasonal workers in agriculture and horticulture: since March 2021, seasonal workers in agriculture and horticulture are subject to a 18.725% wage withholding tax on all remuneration received. This percentage corresponds in principle to the effective tax rate. Thus, in order to avoid the burden of a tax return in Belgium for non-resident employed as seasonal workers in agriculture and horticulture (who have no other Belgian source income), the new law introduces under certain conditions a final withholding tax for those persons (meaning that they will not have to report the related income in a Belgium tax return). The measure is applicable as of FY 2022.
- Modification in order to remedy inconsistencies between the tax treatment of certain foreign pensions and the Belgian scheme: in order to clarify the tax treatment of certain foreign pensions in Belgium, and to avoid that some foreign collective pensions are being considered as individual life insurance, it is now explicitly stated in the income tax code that these collective pensions plan can not be considered as individual life insurance (and thus can not fall under the scope of the exemption of art. 39 §2 ITC). The measure is applicable as of FY 2022.
- Reporting obligation for copyrights: the law provides for a legal basis regarding the obligation to draw up forms and summary statements for copyrights and related rights income and the concession of these rights. Currently, this reporting was not mandatory. This extension will trigger certain consequences from a corporate tax aspect (see our page Entities). Entry into force: income paid or attributed from 1 January 2021 in a taxable period that relates at the earliest to FY 2022.
- Increased deduction for charging stations: the increased deduction of the depreciation costs related to charging stations is only applicable to the charging systems which are permanently fixed to the ground / wall. Entry into force : 1 September 2021.
- Favorable tax treatment of bonuses for exceptional sports performances : new favourable tax rate (16,5%) for the income related to exceptional sports performances. This measure targets the income received from national or international sports federations, National Olympics Committees, Belgian or foreign public authorities or non-profit public organizations recognized by the International Olympic Committee. For the income which falls under the scope of this measure, the income, up to 30.000 EUR (indexed amount for income year 2021 : 50.040 EUR) will be taxable at 16,5%. The part of the income that exceeds the indexed amount will follow the normal tax rules. Entry into force : income year 2021.
- Reduced rate VVPRbis: according to the VVPRbis regime, companies can distribute dividends to private individuals at a withholding tax rate of 15% (subject to conditions) instead of 30%. The law includes several clarifications.
- According to the modified regime, it is more explicitly mentioned that the shareholders must fully pay up the initially subscribed contribution. Although not strictly mentioned in the law, it seems to be sufficient that the contribution is subscribed at the time of the attribution or payment of the dividend.
- Transitional measure: following the reform of the company law, a minimum nominal capital is no longer required in most types of companies. Various companies have decided to reduce the contribution by waiving the payment of the subscribed amounts. However, the reduced VVPRbis rate only applies to fully paid-up shares. In order to avoid uncertainty, the law provides that for companies that have decided in good faith to waive the requirement to pay up between 1 May 2019 and 15 December 2021, shareholders will be able to benefit from the reduced rate if they proceed to a (fiscal) capital increase which brings the contribution back to the level it had before the exemption from payment and if the shareholders pay up the shares in cash before 31.12.2022 (and if the other conditions are met). This capital increase may, “where appropriate”, “not be accompanied by the issue of new shares or units”.
- During the discussion in the Finance commission, the Minister of Finance confirmed that “it is indeed necessary but sufficient that the amounts have been fully paid up in cash. A subsequent reduction in the amounts actually paid up does not prevent the subsequent application of the so-called VVPRbis regime” (Report, no. 55-2351/004, p. 34).
- According to the new article 269, § 2, 10, ITC: if a company that has issued shares or units or increased its capital under the VVPRbis regime “subsequently reduces its capital, such reductions shall be deducted in priority from the capital paid up in execution of the incorporation or increase in question”.
- No extension of the waiting period (“délai d’attente”/”wachttermijn”)
- Regarding the “preferential shares” and due to ambiguity in the current system, the prohibition on the creation of ‘preferential’ shares or units is replaced by a prohibition on giving the shares or units concerned a ‘preferential right in respect of participation in the capital or profits or in respect of the distribution of the assets’.
- Entry into force: dividends allocated or paid from 1 January 2022
- Withholding tax exemption regarding training: the program law of 20 December 2020 introduced a new tax incentive for employers who grant their workers more hours of training than the number imposed by the regulations. If for an uninterrupted period of 30 calendar days, a worker attends at least 10 days of training, the employer does not have to pay to the Treasury an amount equal to 11.75% of the remuneration of all the workers concerned. The new law brings clarification of the conditions to benefit from this incentive.
- Up to now, the spread taxation related to capital subsidies received by the public authorities was only applicable to the “benefit” category of income. The new law makes it applicable also to the “profit” category (liberal professions, etc.)
- A legal obligation to draft and file a 281.50 form is no longer required when an invoice (in accordance with VAT regulations) or a document in lieu thereof (credit note or simplified invoice within the meaning of art. 13 Royal Decree No. 1) has been issued by a taxable person located in the EEA territory. Moreover, the King will have the power to set a cap below which no record shall be made. The threshold may not exceed EUR 1,000 per year per supplier. This measure is applicable to income attributed as from 1 January 2021.
Program law of 27 December 2021 (Official Gazette of 31 December 2021)
On December 1st, the Belgian government formally tabled the draft program law at the Chamber. This draft legislation includes i.a. changes to the Belgian expat tax regime (see our heads-up article published on 15 October). The law has been voted on 23 December 2021 and were published on 31 December 2021 in the Official Gazette.
- Regarding the new expat tax regime, the essential characteristics of the draft legislation can be summarised as follows :
- Separate, although in many regards identical, regime for executives and for qualifying researchers
- Limitation in time to 5 years, with possible extension for another 3 years
- Open to employees and company key men directly recruited abroad or seconded to Belgium within international groups of companies
- Open to both foreign and Belgian citizens, whether employee or company key men (except for researchers what regards the latter)
- Required minimum gross annual taxable income of EUR 75.000 (not applicable to researchers)
- Precondition of lack of submission to Belgian income tax in the 60 months preceding the start of professional activities in Belgium (whether as resident or as non-resident)
- Precondition of previous place of residence more than 150 kilometres away from the Belgian border
- Possibility for the employer / company to pay up to maximum 30 % of gross annual taxable income as tax free expense reimbursement (a payment which comes on top of the gross salary)
- Limitation of the 30 % lump sum tax free expense reimbursement to EUR 90.000 per annum
- Possibility for the employer / company to reimburse on top of the lump sum 30 % specific other expenses, such as moval expenses, (very) moderate installation costs and school fees
- New regime is individual centric, not company centric (i.e. it can be continued with another employer in Belgium, provided all conditions are still met)
- Formal request to be made by the employer / company and by the employee / company key man
- Entry into force : 1st of January 2022
- Expats who are less than 5 years under the current regime may (under certain conditions) still opt-in in the new regime (with an overall time limitation of 8 years) or choose to stay in the old regime
- Fading out of (transitionary measures of) the old regime on December 31st 2023
The draft legislation only deals with the income tax aspects. Regrettably, no explicit exemption from Belgian social security – in particular what regards the maximum 30 % lump sum expense reimbursement – is (yet ?) included.
The draft program law also includes changes to the following regimes or provisions:
- sports persons
- uniform age criterion for young sportspersons: 23 year (for income tax and wage withholding tax purposes) and transitional measures for sports persons of 23, 24 and 25 years old.
- changes to the partial exemption for transferring wage withholding taxes (for sports clubs) ⇒ mainly with respect to the “spending obligation” of the non-remitted wage withholding tax amounts.
- agent fees exceeding 3% of the gross annual salary of the sportsperson are no longer deductible as professional expenses.
- exception which allows the taking up of supplementary pension capital as from the age of 35 (taxed at 20%), provided that the sports activity is completely stopped, will disappear (with a transition period).
- entry into force depending on the provisions (applicable from 1 January 2022, to remunerations paid or attributed from 1 January 2022 except for remunerations subject to a distinct taxation of 16,5% and attributed to young sports persons aged 23 to under 26 years of age on 1 January 2022)
- the deductibility of the payments in the framework of fiscal and social amnesty is excluded (entry into force: 10 days after the publication of the law in the Official Gazette)
- tax reduction for child care
- maximum amount increased (from EUR 13) to EUR 14 per day / child
- already applicable for income year 2021 (tax year 2022)
- tax reduction of 45% (remains)
- entry into force: the day of the publication of the law in the Official Gazette and is applicable from FY 2022.
- tax shelter start-ups & scale ups: doubling of the amounts that these companies can raise (EUR 500,000 for start-ups and EUR 1 million for scale-ups) is provided. Entry into force: the day of publication of the law in the Official Gazette and applicable to sums allocated to the acquisition of shares from 1.1.2021
- Increase in tax-advantaged overtime in the construction sector: the maximum threshold of 130 hours is increased to 220 or 280 hours depending on the type of works and when they need to be performed (night, week-end or during public holidays). Other conditions need to be met (such as electronic registration). Entry into force would be fixed by the King on the first day of the second month following the prior approval of the European Commission, and will apply to overtime work performed from that date.
Budget agreement: new measures announced
On 12 October, the Belgian Government reached an agreement on the Belgian budget. The budget agreement combines a number of measures to transition the Belgian economy after Covid in an environmentally balanced manner. Some points will need further agreement with the social partners, and some measures are taken explicitly in view of the recent surge of energy prices.
Transitioning an economy after the Covid pandemic, and whilst there is significant pressure on the energy market which could in the end backfire for the economic recovery, is a challenge. Some of the most important tax related measures include (i) the increase of resources for the transfer pricing team of the Belgian tax authorities (ii) the gradual transition to E-invoicing for B2B transactions, (iii) a number of environmental taxes aiming to stimulate the use of greener sources of energy (e.g. the introduction of an airplane tax for short flights) and also a number of measures aiming to support the economic weakest in society and to reduce the taxes on labour.
Beyond taxation, the agreement puts forward a number of new measures covering a variety of areas such as energy, labour and tax and social contribution.
From a personal income tax point of view, the most important changes would be the following:
- Airline tax on short flights
- Reform of the wage withholding tax system (notably for shiftlabour and nightlabour)
- Adjustment to the special social security contribution
- Tax deduction for child care is increased to 14 EUR/day/child
- Amendments to the expat tax provisions
- The amount paid in relation to certain settlements will no longer be tax deductible
- Increased efforts in the fight against tax fraud
Law of 18 July 2021 containing temporary support measures (Official Gazette of 29 July 2021)
The law on temporary support measures in the light of the covid-19 pandemic has been published. Existing measures are extended until the end of September 2021.
- Waiver of rent: taking into account that a number of individuals self-employed are still forced to close their business, the tax benefit (tax reduction) is granted for the month June, July, August or September 2021 provided that the tenant has been obliged to close down all or part of his business in the rented building for at least one day in the month or months for which rent and rental benefits are waived. The mandatory closure must then take place in the month for which the rent is waived. The other terms and conditions remain the same as for the tax benefit granted by the Law of 2 April 2021 (see below).
- Exemption for overtime: the tax exemption for remuneration of overtime in the critical sectors (including the care sector) is extended until 30 September 2021. Therefore, 120 additional voluntary overtime hours can be worked during the period from 1 January to 30 September 2021.
- Extension of relaxations regarding the tax shelter for audio-visual and performing arts works
- Extension until 30.9.2021 of measures already extended last year until 31.3.2021 and until 30.6.2021 by the Law of 2 April 2021, notably:
- the non-inclusion of remuneration for student work for the calculation of the resources (“bestaansmiddelen”/”ressources”) without being limited to specific sectors;
- the exemption for notarial powers of attorney.
Law of 27 June 2021 containing miscellaneous tax provisions and amending the Law of 18 September 2017 on the prevention of money laundering and terrorist financing (so-called “pot-pourri law”) (Official Gazette of 30 June 2021)
From an indivual income tax perspective, the major changes are the following:
- Cayman tax: On 28 January 2021, the Constitutional court ruled in favour of an annulment of a modification of article 18, al. 1, 3° BITC by article 89, 1° of the Program Law of 25 December 2017 which, in the context of the Cayman Tax, had aligned the tax regime of distributions made by the legal constructions without legal personality (“type A constructions”) with the tax regime applicable to distributions made by legal constructions with legal personality (“type B constructions”). The Court has indeed considered that the modification at hand was discriminatory (see our newsflash of 12 February 2021). Following this judgment, the legislator had to amend the law or keep it unchanged but justify the difference of treatment by means of an explicit reasonable justification included in the explanatory statement of the law. The legislator chose the second option and justified the difference of treatment in the explanatory statement. Furthermore, the legislator has adapted (i) articles 5/1, §3, a) BITC to provide for an exemption from the tax regime applicable to legal constructions in case a legal construction has a legal personality according to the Law that governs it (vs previously, only type B legal constructions could benefit from the exemption) and provided it is subject to an income tax rate, computed according to Belgian tax rules, of at least 15% and (ii) article 18, (1), 3°, BITC which will provide that a distribution made by a legal construction having a legal personality according to the Law that governs it and being subject to an income tax rate, computed according to Belgian tax rules, of at least 15% (i.e. legal construction benefiting of the exemption from the tax regime applicable to legal constructions according to article 5/1, §3, a) BITC) do not qualify as dividends in the meaning of article 18, (1), 3°, BITC. These adaptations will enter into force retroactively i.e. on 17 September 2017 and apply to income attributed or paid by a legal construction from that date forward and on income attributed and paid from 1st January 2018 for Belgian withholding tax purposes.
- No increase of the tax-free portion of income in cases where there has been a marriage dissolution, legal separation or cessation of legal cohabitation that occurred in the same year as the marriage or declaration of legal cohabitation.
- Association work: besides some technical corrections, article 90, al. 1, 1°ter BITC has been adjusted so that termination fees are also indisputably part of the taxable income from association work.
- Growing companies – non-residents: the tax reduction for the acquisition of shares in growth companies can also be granted to non-residents who acquire at least 75% of their total professional income in Belgium. At present, there is no legal basis for applying a federal tax increase if the non-resident no longer satisfies the 75% rule. The benefit is then taken back in the form of a federal tax increase (already existing for business start-ups). The law has been amended so that the increase applicable to the tax reduction scheme for the acquisition of new shares in growth companies is also taken into account in the taxation of non-residents.
- Growing companies: transfer of shares: article 145/27, §4, al. 2, BITC has been amended in order to confirm that the transfer of shares of the growth company in which an investment was made via a financing vehicle, and this within 48 months of the acquisition of the shares by the financing vehicle, also leads to the partial reversal of the tax reduction for the acquisition of new shares of growth companies. This amendment will also trigger a partial reversal of the tax reduction in the event of the closure of the liquidation unless the liquidation is the consequence of a declaration of bankruptcy of the growing company in which it was invested. This becomes effective as of assessment year 2019, just like the entry into force of the tax reduction itself.
- Occupation of a newly constructed or rebuilt property: via a “rebuttable presumption”, the proposed measure aims to simplify the examination by the administration of the declarations of occupation of a property and to avoid the burden of a proof that is difficult to prove (and subject to objection).
The law also introduces changes in tax procedure:
- Tax increase in case of late tax return: art. 444 BITC now specifies that the tax increase also applies to the part of the income declared late. Up to now, the current text explicitly provides for the calculation of the tax increase only on the part of the income that was not declared.
- Currently, the only document available electronically is the assessment notice. In the future, and in the framework of the modernisation of the FPS Finance, the aim is to make all the “communications” related to audit of the tax return (such as a notice of adjustment, notice of ex officio assessment, …) available electronically. The King will determine the date of entry into force in order to allow the tax authorities to adapt their working method. The BITC is being mended in order to provide that the taxpayer may opt to receive all the communications electronically.
- Communication of books and documents via a secured platform: books and documents will have to be communicated via the secure electronic platform of the FPS Finance. This only applies to documents available in an electronic format and to individuals and legal entities using a computer system or other electronic device to keep, prepare, send or retain all or part of their books and documents.
- Making tax data available to local governments: the tax authorities are allowed to communicate to the administrations of the Communities, Regions, provinces, agglomerations, federations of municipalities and municipalities, the information which is necessary to those services in order to ensure the execution of the legal or regulatory provisions for which they are responsible.
Law of 2 April 2021 on temporary support measures in the light of the Covid-19 pandemic (Official Gazette 13 April 2021)
On 1 April 2021, the Chamber adopted the draft law on temporary support measures in the light of the Covid-19 pandemic. Existing measures are extended until the end of June 2021. Additional tax and economic support measures have been also approved notably in favor of companies and workers.
The tax measures are a.o. the following:
- The government decided to generalize the non-taxation of the allowance for employers in the context of home working since various companies and organisations indicated that they wish to continue to allow people working from home, in combination or not with office work. The tax-free allowance for those who structurally continue to work from home will be maintained (i.e. EUR 129.48 per month). The payment of this amount requires structural home work (i.e. 5 days of home working per month). For the second quarter of 2021 (April, May and June 2021), the maximum home working allowance (EUR 129.48 per month) may temporarily be increased to EUR 144.31 per month to better reflect actual costs related to the home office. Moreover, the Minister seems to suggest that, in addition to the above allowance, the reimbursement of office furniture/computer equipment is also possible.
Law of 2 April 2021:
- Waiver of rent :
- Tax reduction of 30% for lessors who waive the rent and rental benefits of tenants who were forced to close their business due to the corona measures. The system is available if the tenant is an individual self-employed, a small company according to art. 1:24, §§1 to 6 of the Company & Association Code or a small association. The tax reduction is subject to a number of conditions.
- The measure is valid for the rent of the months March, April and May 2021.
- The tax reduction is equal to 30% of the amount of the rent and rental benefits that have been waived. A maximum of EUR 5 000 per month per lease can qualify for the tax reduction, and a maximum of EUR 45 000 per month per lessor.
- Extension of the exemption of regional and local Covid-19 aids until 31 December 2021
- Reactivation of the tax shelter SME: in order to strengthen the equity capital of companies and to encourage taxpayers to subscribe to capital increases of companies facing a significant negative impact on their turnover, this measure is reactivated until 31 August 2021. This offers subscribers a temporary tax reduction of 20%. Companies facing a loss of turnover of more than 30% in the period from 2/11/2020 to 31/12/2020 are eligible.
- Definite abolition of the December advance payment for wage withholding tax (new)