Unfavourable treatment of Belgian residents that invest in property abroad: the story continues

Philip Maertens 28 July 2019


On 25 July 2019 the European Commission decided to refer Belgium to the Court of Justice of the EU for its failure to properly implement new rules related to the taxation of rental income of foreign immovable property owned by Belgian tax payers. Last year, on the 12th of April 2018, the European Court of Justice ruled that the Belgian rules on taxation of non-Belgian immovable income located in the EU are in breach of the European legislation as the taxable basis is calculated differently compared to real estate located in Belgium. 

Rental income of Belgian tax residents from immovable property located abroad is calculated on the basis of the actual rent received, whereas the taxable basis of property located in Belgium is based on a lump sum valuation (based on the cadastral revenue) if the property is rented our to individuals who use it for private purposes. As these rules discourage Belgian residents from buying property abroad and results in a different tax treatment, the Court of Justice judged that these rules are contrary to the free movement of capital.

Now the European commission asks the Court of Justice to impose financial sanctions to Belgium as long as Belgium fails to change its legislation to be compliant with EU-law.