Possible adjustment to the tax-free amount for tax equalisation for foreign executives

Nicolas de Limbourg 24 September 2015


The Belgian tax authorities have recently introduced some changes to the so-called “technical note” detailing the calculation of the recurring tax-free allowances in the framework of the special tax regime for foreign executives (which are limited to EUR 11.250 or EUR 29.750 per year, depending on the employer’s circumstances).

In many cases, the most important part of these recurring tax-free allowances relates to the tax equalisation, which covers the neutralisation of the increased tax liability in Belgium in comparison to the home country.

Up to income year 2015, the tax equalisation has been calculated by comparing the Belgian taxes due with the hypothetical foreign federal taxes that would have been due. This is because the technical note defines the tax equalisation as follows: the positive difference between the Belgian income taxes and the foreign income taxes (excluding the income taxes imposed by the regions).

Recently, the Belgian tax authorities have adapted the tax equalisation calculation to consider the regionalisation of Belgian income tax law introduced by the 6th State reform by specifically stating that Belgian income taxes include federal and regional taxes. At the same time, a change was introduced to the second component of the tax equalisation calculation: the foreign taxes to be considered no longer only consist of federal taxes but now also include the taxes “imposed by or in favour of the regions”. This may have a significant impact on the amount of home country taxes to be taken into account for the calculation of the tax equalisation allowance, and therefore may lead to a decrease of the tax equalisation allowance.

In this respect, it is important to remark that local or municipal taxes do not apply in all countries. We hereby provide you with a list of the most common countries which do have local or municipal taxes and are therefore expected to be impacted by this change:

  • The United States of America
  • Canada
  • Switzerland
  • Italy
  • Japan
  • Norway
  • Denmark
  • Finland

The impact will, however, depend on the specific situation of the expatriate concerned, the salary and the tax rates applicable. The changes apply as from 1 January 2016.