Belgian Tax reform – Individuals – Personal income tax
Latest update: 18 October 2021
Upcoming changes to the Belgian expat regime
In the framework of the agreement on the Belgian budget, the Federal Government announced its intention to amend the special regime for foreign executives, who are working temporarily in Belgium under specific conditions, by reducing certain benefits / applying certain limitations to the well-established regime.
At this point, it seems that nothing is carved in stone, but it is clear that something will change.
A measure which is currently being discussed, is the duration to what extent the special expat regime can be applied. In the past, the element of duration of the tax regime already resulted in uncertainty for companies and their expatriates in Belgium. Following current practice, the Belgian tax authorities will often perform a tax audit after a certain period of time (typically ongoing files were audited, for example after 10 years of application). In such a case, the expats typically need to demonstrate that they still maintain sufficient links with their home country and hold assets abroad. It is possible that the regime will, going forward, be ‘officially’ limited in time (5 years, extendible by three years) which can then result in a fixed (ultimate) end date…
Also on the table is the matter of so-called ‘statelessness’ due to the fact that an expat, who is a non-resident taxpayer in Belgium, is also no longer resident in another country. Here the Belgian Government is looking into the possibility of qualifying expatriates (under the regime) as tax residents of Belgium. This would mean that the foreign executives will need to mention their worldwide personal income (such as foreign movable income) in their Belgian tax return, leading to an increased Belgian tax burden.
Under the current special tax regime, the executive’s remuneration must be divided into the part corresponding to work performed in Belgium (which is taxable) and the part corresponding to remuneration for professional activities performed abroad (which is ultimately not taxable in Belgium). This foreign travel exclusion (and its specific counting method) and the non-taxable allowances may be abolished and replaced by a standard percentage/deduction, somewhat comparable to what is used in the Netherlands (the Dutch 30% rule). Moreover, the income which qualifies for a tax deduction could become capped up to a certain limit (EUR 90.000). Specific expenses may perhaps still be reimbursed on top as tax-free allowances.
Finally, in order to benefit from the special tax regime, a certain “minimum wage level” may be required, which will have an impact on the eligibility of the regime for a number of expats. This minimum wage level could be substantially higher than what is required for immigration/employment purposes.
However, what will exactly be changed (i.e. what combination of measures will be applied) and as of when these changes to the special tax regime will become applicable, is still uncertain at this point in time. It is also unclear whether there will be a transition or phase-out period available.
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)
Law of 17 February 2021 introducing a new annual tax on securities accounts (Official Gazette 25 FEbruary 2021)
On 11 February 2021, the Chamber adopted the draft bill introducing a new annual tax on securities accounts in the Code of Various Duties and Taxes (CVDT).
In a nutshell, the tax is an annual tax on the holding of a securities account, levied at the rate of 0.15% on the average value of the account in excess of EUR 1.000.000.
Scope of Application
The tax applies to securities accounts as such and therefore in principle concerns all securities accounts, whomever the account holder is – natural person, company, legal entity, “legal arrangement” in the meaning of the Cayman Tax or de facto association – whatever its tax residency status – resident or non-resident – and its legal rights on the account (full ownership, bare ownership, usufruct).
However, the tax is not due on securities accounts held by specific types of financial institutions in the course of their own business activities, i.e. (sic) “exclusively for their own account”.
Residents (including Belgian permanent establishments of foreign companies provided the double tax treaty concluded with its country of residence allows such wealth taxation) are taxable on securities accounts held in Belgium or abroad. Non-residents are taxable on securities accounts held in Belgium only (and provided the double tax treaty concluded with its country of residence allows such wealth taxation).
The tax is levied on securities accounts with an average value of taxable financial instruments in excess of EUR 1 million.
The nature of the financial instruments held on the securities account is irrelevant, only the total value of the securities account is.
To compute the “average value” of the securities account, the reference period is a period of twelve successive months beginning on 1st October and ending on 30th September of the following year. The tax is due on the first day following the end of the reference period. Specific rules apply for securities account closure, tax residency changes, if the securities account is no longer part of the assets of a permanent establishment of a foreign company or if it no longer meets the definition of securities account within the meaning of the Law.
Transitional measures provide that the first reference period begins on the day of the entry into force of the Law (i.e. the day following its publication in the Official Gazette) and will end on 30 September 2021.
Tax Rate and Ceiling
The tax rate would be set at 0.15 p.c.
Where applicable, the amount of the tax is limited to 10 p.c. of the difference between the tax base and the threshold of EUR 1,000,000. In this way, the government wishes to prevent the collection of the tax from causing the assets to fall below the threshold of EUR 1,000,000.
Declaration and Payment
The tax is collected indirectly, i.e. through a financial intermediary (i.e. any intermediary which offers securities accounts: credit institutions, brokerage firms, investment firms).
- Belgian intermediaries must levy the tax, i.e. intermediaries constituted in accordance with Belgian law, intermediaries established in Belgium, and intermediaries not established in Belgium which have appointed a responsible representative. Belgian intermediaries shall file a declaration with the competent office, and shall pay the tax, no later than the 20th day of the 3rd month following the end of the reference period.
- If the intermediary does not declare and collect the tax, this obligation falls back on the account holder. In the cases where the holder is liable, the latter shall file an electronic declaration via the electronic platform MyMinfin, no later than the last day provided for the submission of the personal income tax return. The tax shall be paid no later than 31stAugust of the year following the end of the reference period. A paper filing can be accepted in specific cases.
If a securities account is held by several holders, each holder is jointly and severally liable for the declaration and payment of the tax.
Lack of declaration, late, inaccurate or incomplete declaration as well as non-payment or late payment are punishable by a fine which is established according to the nature and seriousness of the offence, according to a scale ranging from 10 p.c. to 200 p.c. of the tax due.
Specific anti-abuse rules
As regards the new tax on securities accounts, two situations are covered by specific anti-abuse rules, based on irrebuttable presumptions of abuse:
- 1° the split of a securities account into several securities accounts held with the same intermediary.
However, in the event of separation or death resulting in the termination of the forced indivision of a securities account, the irrebuttable presumption will not apply. The same goes if, for example, an account of EUR 50.000 is divided into two accounts of EUR 25.000.
- 2° the conversion of taxable financial instruments, held in a securities account, into registered financial instruments.
General anti-abuse rule
A new general anti-abuse rule (GAAR) is introduced in the CVDT, the wording of which is similar to the GAAR existing in other tax codes. The GAAR is not limited to the application of the new tax on securities accounts, but applies to all other duties and taxes of the CVDT.
With regard to the tax on the securities accounts, the anti-abuse rule applies retroactively as from 30th October 2020 (see publication in this respect in the Belgian Official Gazette of 4 November 2020).
The explanatory statement of the Act lists eight situations (a priori non-exhaustive list) which may a priori constitute tax abuse (the first five situations were already mentioned in the Notice on the introduction of an annual tax on securities accounts, Belgian official journal, 4 November 2020, sec. ed., pp. 79255-79256):
- the split of securities accounts by which securities are moved between securities accounts with the same financial intermediary or to securities accounts with another financial intermediary in order to prevent the total value of the securities on an account from exceeding the threshold of EUR 1.000.000;
- the opening of securities accounts by which securities are distributed between accounts with the same financial intermediary or with another financial intermediary in order to prevent the total value of the securities in an account from exceeding the threshold of EUR 1.000.000;
- the conversion of shares, bonds or other financial instruments into registered securities so that they are no longer held on a securities account.
This is, for example, the case when the conversion takes place in situations where it is customary for the securities to be held in a dematerialised manner and where the conversion does not concern (often large) equity holdings in (mainly) family companies held as a long-term investment and/or for control purposes, which are moreover outside the normal framework of an investment portfolio;
- the placement of a securities account subject to tax in a foreign legal person which transfers the securities to a foreign securities account;
- the placement of a securities account subject to tax in a fund in which the units are registered;
- the transfer of an existing securities account or a unit-linked life insurance contract to a unit-linked life insurance contract concluded with an insurance undertaking established outside Belgium;
- the transfer of a securities account when the securities are transferred abroad to the same financial intermediary or to accounts with another financial intermediary;
- the holding of a securities account in which all securities have been sold or transferred in order to create zero values at reference points in order to reduce the average value of taxable financial instruments during the reference period.
A refund procedure is foreseen in case of overpayment.
Entry into force: the day following its publication in the Official Gazette (except the provisions related to the anti-abuse rule – see above).
Law of 20 December 2020 laying down urgent provisions in tax matters and the fight against fraud (Official Gazette of 30 December 2020)
On 17 December 2020, this draft law has been adopted by the Chamber. From a personal income tax perspective, it includes the following measures :
- restore the provisions regarding the sharing economy and make some changes to it;
- provide a legal basis in respect of the exemption from payment of withholding tax for researchers holding a bachelor’s degree.
Program Law of 20 December 2020 (Official Gazette of 30 December 2020)
The most important tax measures introduced from a personal tax perspective are the following.
Non-indexation of fiscal amounts
For the income years 2020 to 2023 the annual indexation of certain tax reductions and tax exemptions would be frozen. Consequently, the maximum amounts for a number of tax reductions would not be indexed during these four years and would remain at the same level of income year 2019. As from income year 2024, the annual indexation would take place again. Regarding the maximum amount for pension savings, please note that a majority amendment was tabled before the Finance Committee with a view to maintaining the upper limits applicable for the tax years 2022 to 2024 at their level for the tax year 2021, i.e. EUR 990 and EUR 1,270.
- Tax reduction for childcare: As from income year 2020 the maximum amount per childcare day and per child would be increased from EUR 11,20 to EUR 13. The age limit would be raised from 12 years to 14 years (and from 18 years to 21 years for heavily disabled children). Expenses for professional home care of sick children would become eligible. As from income year 2021 the maximum amount per childcare day and per child would be further increased to EUR 13,70 and it would be indexed every year. In order to benefit from this tax reduction, a certificate would be required.
- Tax free amount for informal care: Any taxpayer who takes in a family member to take care of, would be able to benefit from an increased tax-free amount, if it concerns a (grand)parent, brother or sister older than 65 years who is in need of help. To determine whether or not someone is in need of help, their degree of self-reliance would be taken into account. A reduced self-reliance of at least 9 points would be required.
The Central Contact Point (CAP), managed by the National Bank, contains the bank account numbers and certain financial contracts that are held by private individuals and legal persons, whether or not established in Belgium, which are held with Belgian financial institutions. Going forward, the CAP would also include data on the balance of those same accounts and contracts. This should enable the tax authorities to better expose and combat tax fraud.
Belgian tax reform : new measures announced
On 30 September 2020, 7 political parties reached an agreement on the formation of a new Belgian government (the so-called Vivaldi government). The agreement mentions the intention for a relance and investment plan of 4.7 bln EUR including measures with important social accents. To provide the necessary budgetary room for this plan, some important tax measures have been announced :
- besides the measures related to the taxation of digitalised companies and the introduction of a minimum tax for businesses, during the term of the government, a significant tax reform (with a particular focus on the personal income tax side) would be prepared which should be realised in 2024. Guiding principles are, among others, the simplification by gradual abolishment of deductions, tax reductions and exception regimes and the gradual shift from alternative remuneration to remuneration in cash.
- In combination, the fiscal amnesty procedure would be terminated by the end of 2023.
- The tax reform does not seem to include a capital gain tax or securities tax but would include a fair share of contribution from the wealthiest – with respect for entrepreneurship.
- Increase of the tax reduction for child care and of the tax-exempt income share supplement for the care of relatives (parents, grandparents, dependent brothers and sisters over the age of 65);
- reform of the current fiscal and parafiscal advantages of professional sportsmen and sports clubs;
- organisational measures would be taken to combat social and tax fraud, such as the creation of multidisciplinary investigation teams, and an action plan against tax fraud would be put in place;
- transparency and preventive measures would be taken, and therefore the saldo of Belgian bank accounts would be shared to the PCC, combined with rules when the PCC can be consulted;
- introduction of a tax charter and code of conduct in the framework of tax audits;
- the “cheese route” (“kaasroute”/”route de fromage”) would be closed by requiring the registration of foreign notarial deeds by Belgian residents in Belgium, taking into account the opinion of the Council of State;
- all new company cars should be carbon-neutral by 2026 ; tax rules dealing with company cars would be impacted;
- the government would put in place a framework allowing workers who do not have company cars to receive a mobility budget from their employer. This would stimulate sustainable mobility alternatives (public transport, cycling, carbon-neutral cars, etc.) and the willingness to live or move close to the workplace;
- in the framework of the recovery and transition plan, the introduction of the reconstitution reserve would be provided;
- in order to stimulate productive investment, the increased investment deduction would be extended by two years. The current investment criteria would be evaluated and, if necessary, adjusted.
- The government would also draw up tax benefits for companies which grant their employees more hours of training than is provided for in the regulations, while avoiding deadweight effects as far as possible. The aim is to support those companies which currently do not offer sufficient training.
Further details will come in the next weeks and months.The announced measures are, of course, subject to change.
Don’t hesitate to subscribe to our news flashes on the tax reform to stay informed and to visit our website which will be regularly updated.
Impact of COVID-19 : Belgian federal measures to support the economy
For the latest news regarding the tax measures taken by the Belgian government in the framework of the Covid-19 crisis, please visit our websites :
- the PwC report including tax measures from 108 countries : Navigate Tax, Legal and Economic measures in response to COVID-19 and select Belgium
- PwC Belgium Covid-19 website : Helping firms mitigate the potential impact of COVID-19