Marriage in Belgium: Marriage tax benefits

Marriage tax benefits and tax breaks for married couples in Belgium

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Your marital status has legal and tax implications in Belgium, such as receiving marriage tax benefits or claiming gift and inheritance tax breaks for married couples in Belgium.

Marriage in Belgium involves more than just love. Once you move to Belgium, your marital status will come into play when assessing your Belgian taxes and marriage tax benefits, Belgium-based assets, and the taxes you could potentially pass to your relatives if the inheritance law in Belgium applies.

Internationals need to particularly consider how their marriage contract – either from Belgium or abroad – can affect their assets, income, divorce, marriage tax credit, inheritance and succession tax in Belgium, and if they should consider changing their relationship status to benefit from laws regarding marriage in Belgium.

Foreigners living in Belgium will generally be liable to pay the Belgium inheritance tax on their worldwide assets in Belgium, but these taxes can be reduced depending on your marriage contract in Belgium. Philipp Bollen, the director of estate planning at international Belgium-based bank BNP Paribas Fortis', explains the process of assessing your marriage contract to see which outcome offers the best financial solution for your asset and succession planning and the recent legal changes to inheritance tax in Belgium. 

Why is your martial status important?

While income taxes in Belgium are among the highest in Europe for high earners, the Belgian tax system does offer some tax breaks for married couple depending on your relationship status, particular in the indirect tax system (ie. one-time payments on assets), such as the gift tax and the inheritance tax in Belgium.

Belgian law allows for a unique situation where couples can claim certain marriage tax benefits by entering into a Belgian marriage contract, including foreigners.

Expats who have been married abroad or in Belgium can consider the potential marriage tax benefits of whether the law of a foreign country offers better conditions, or if you are better served by switching your martial status to the Belgian system.

Marital law can influence the outcome of asset and succession planning, such as inheritance, divorce, wills, and real estate. International couples need to consider how different relationship statuses in Belgium determine certain tax and legal conditions.

The Belgian government allows several ways for relationships to be officiated – co-habitation, registered partnership, or marriage in Belgium for both heterosexual and same-sex couples – although some benefits only apply to married couples and registered partners.

Marriage tax benefits – tax benefits of marriage

Do you qualify for marriage tax benefits in Belgium?

Foreigners in Belgium will first need to ascertain which marital law applies to their situation. Legal and tax implications come into play based on certain factors of relationship and marriage law in Belgium:

  1. If you were married abroad or one of you is a foreigner living in Belgium, a foreign marital law can apply to any marital processes you undertake in Belgium (ie. will, inheritance, divorce).
  2. Since 17 August 2015, foreigners have more options to determine which country’s laws will be applicable to them in Belgium, but need to hold a link with the country they choose.
  3. Different rules apply depending on whether you have a wedding contract or not. If you were married before 1 October 2004 without any wedding contract, then the law of joint nationality will apply; if not joint nationality, the marital residence will determine which law relates to you in Belgium.
  4. If you were married after 1 October 2004, the marital law will be based on the country of marital residence, the joint nationality or the country where the wedding was held, whereby step two is only applicable if step one is not possible, and step three is only applicable if step two is not possible.
  5. If you entered into a marriage in Belgium or choose to switch to Belgian marriage law, you need to consider whether communal estate or separate contracts will provide more tax benefits of marriage.

Tax benefits of marriage abroad

If you were married abroad or the marital law of another country applies to you in Belgium, the main implication is that any processes undertaken in Belgium can be more complex.

“If you are living in Belgium, and you opted for the Italian system or the US system and there is a divorce or one of the partner dies, then your foreign marriage contract would have to be analysed in Belgium, and that can be quite complex," Bollen says.

“Marriage contracts are not definitive. If you opt for a Belgian wedding contract and move abroad again, you can always change your marriage property contract.”

A couple can simplify their legal processes by transferring their marital certificate from abroad to a recognised relationship licence or contract for marriage in Belgium.

Registered partnership

In Belgium, partnerships can also be legalised without marriage, known as a registered partnership (wettelijk samenwonend/cohabitation légale). This partnership status is available to anyone sharing a residence. A cohabitation also has some legal and tax implications, although they differ in some ways to official marriage in Belgium.

As soon as you enter into a registered partnership, you will have certain obligations but also entitlements to certain rights. For example, in the event your partner passes away, you will have the right to 'usufruct' with respect to the family house, which is the right to continue to live in your shared home.

In a marriage in Belgium, the spouse is always entitled to the usufruct of all assets owned by the deceased.

Are there married tax credits on income tax?

With respect to income taxes, Belgium’s tax system is relatively utilitarian for any couple status, so your marital status has little influence. Since 1 January 2005, Belgium assesses all income earners separately, with married couples and registered partners only having the main benefit of filing one tax return even though still being assessed individually. There are of course a few tax benefits of marriage or for official couples, such as being able to share tax deductions between both partners, for example, partners can both claim a deduction connected with buying a family house.

Marriage tax break – tax breaks for married couples

Marriage tax benefits in Belgium

Your marital status will have the most effect on asset and succession planning, for example, inheritance tax in Belgium and real estate management, or in the event of divorce or child custody.

Those married abroad will likely be subject to a foreign marital law. As the Belgian tax system allows for certain marriage tax benefits and married tax credit for married couples, foreign residents in Belgium may benefit by transferring their marriage licence to Belgium. Once transferred to Belgium, they would need to consider if the communal or separate estate system is best for them.

The communal estate system is the main marriage contract in Belgium, and if you were married in Belgium without any stipulations, it is the default law. Under this law, any communal property is automatically split 50/50. In the separate estate system, ownership is assigned depending on the asset. The main difference is that in the event of gift law, married couples under the separate estate benefit from a unique situation where they can gift each other their assets, which is not possible for communally owned property.

Marriage tax breaks in Belgium

Gift tax and estate planning for married couples

Under the communal system, in the event one partner dies, any jointly owned assets will be split 50/50, and a will can transfer the deceased partner’s asset to the surviving partner or children. However, they will need to pay the exorbitant inheritance tax in Belgium. For lower taxes, they might consider gifting an asset instead.

Gift tax in Belgium, which is tax imposed on the transfer of ownership of property during an owner's lifetime, varies according to region and degree of kinship. As of January 2017, the gift tax rate for movable properties or investment portfolio in Belgium are as follows: 3 to 7 percent in Flanders and Brussels, and 3.3 to 7.7 percent in Wallonia. The gift tax rates for real estate in the regions are much higher.

"Being able to gift a partner or your children can provide certain tax benefits," Bollen says. "Gifting is always better than transfer by death as it generally involves less tax."

Couples married under the communal system must take note that they can’t arrange a gift to each other because they jointly own all properties. They can, however, gift their children. With these options in mind, people must still assess their individual situations as there are some who plan to live off their investments in older age and might not want to lose control of their assets too soon.

“It is also very important that clients are aware that if they gift their children, they lose their assets but they can still have some control and keep some income,” says Bollen.

In separate estates, in the same situation, there is the additional option of gifting an asset to a partner. By giving all the assets to your wife or husband, the surviving partner can continue to take control of the assets and manage a small income while still alive. The other advantage is that a gift between spouses can always be cancelled.

Inheritance tax for married couples

Inheritance tax in Belgium, like the Belgian gift tax rates, vary according to the asset amount, degree of kinship between the benefactor and heir, and the region you live in.

According to Bollen, it is important to distinguish between inheritance law and the inheritance tax in Belgium. 

"The civil law of inheritance determines which party is entitled to certain assets of the deceased while the law of inheritance tax in Belgium governs who has to pay tax and on which value," he explains.

The Belgian inheritance tax  is paid to the regions – Brussels, Wallonia and Flanders – by heirs or legatees on the total net amount they inherit from the estate of a Belgian resident. A different rule applies to non-residents as standard inheritance tax rates are charged on the gross value of the benefactor's Belgian assets.

For example, in Flanders, if you gifted an investment portfolio worth EUR 1.0mn, there would only be a 3 percent flat tax rate, but if you passed it onto your partner via a will, they would have to pay inheritance tax according to a scaled tax system of 3 to 27 percent. Essentially, they would have to pay 3 percent tax for the first EUR 50,000, 9 percent tax on the next EUR 250,000, and 27 percent on all the rest.

The current inheritance tax rates in Belgium are very high and could range up to 30 percent of inherited assets for spouses and direct descendants, and surges to 65 percent in Flanders and 80 percent in Brussels and Wallonia for distant relations and unrelated beneficiaries. Here are the Belgium inheritance tax rates for spouses and partners of the deceased as of January 2017:

Inheritance tax in Brussels for spouses and registered partners

Taxable amount Belgium inheritance tax rate Belgium inheritance tax due on previous amounts
EUR 0.01–EUR 50,000 3 percent EUR 0
EUR 50,000.01–EUR 100,000 8 percent EUR 1,500
EUR 100,000.01–EUR 175,000 9 percent EUR 5,500
EUR 175,000.01–EUR 250,000 18 percent EUR 12,250
EUR 250,000.01–EUR 500,000 24 percent EUR 25,750
Above EUR 500,000.01 30 percent EUR 85,750


Inheritance tax in Flanders for spouses, registered partners and cohabitants

Taxable amount Belgium inheritance tax rate Belgium inheritance tax due on previous amounts
EUR 0.01–EUR 50,000 3 percent EUR 0
EUR 50,000.01–EUR 250,000 9 percent EUR 1,500
Above EUR 250,000.01 27 percent EUR 19,500

 

Inheritance tax in Wallonia for spouses and registered partners

Taxable amount Belgium inheritance tax rate Belgium inheritance tax due on previous amounts
EUR 0.01–EUR 12,500 3 percent EUR 0
EUR 12,500.01–EUR 25,00 4 percent EUR 375
EUR 25,000.01–EUR 50,000 4 percent EUR 875
EUR 50,000.01–EUR 100,000 7 percent EUR 2,125
EUR 100,000.01–EUR 150,000 10 percent EUR 5,625
EUR 150,000.01–EUR 200,000 14 percent EUR 10,625
EUR 200,000.01–EUR 250,000 18 percent EUR 17,625
EUR 250,000.01–EUR 500,000 24 percent EUR 26,625
Above EUR 500,000.01 30 percent EUR 86,625


“If your main intention is to stay in Belgium, then my advice would be to opt for the separate system,” suggests Bollen.

“You can even avoid the 3 percent by opting for a gift that is not organised via a notary. So you can arrange a gift without a notary public, and if you live longer than three years after that gift, there are no gift or Belgium inheritance tax at all.” 

Important changes to inheritance and succession in Belgium

In 2015, the European Union has initiated a new law on succession and inheritance that can affect expats living in Belgium who are married or are in a partnership. According to the European Commission, around 450,00 cross-border successions take place in the EU yearly and the new law aims to simplify the complicated and costly process. Belgium has adapted the recent EU succession regulation, which came into force as of 17 August 2015.

Under the recent law, if an expat living in Belgium passes away without making a will, the Belgian inheritance law and inheritance tax law will automatically apply to his/her assets. Before the death, however, expats in the EU have an option to choose to have the civil inheritance law from their country of nationality applied to their estate. The country of nationality can be within or outside of the EU.

On a tax perspective, however, the law of inheritance tax in Belgium will always apply to all expats residing in Belgium despite having opted for the civil inheritance law of their country of nationality prior to their death.

The new rules apply in all EU countries except Ireland, Denmark and the United Kingdom. 

For more information on the European Union's updated succession regulation, visit the European Commission's website here.

Marriage tax credit: Inheritance tax married couples

How to change your marriage status

It’s simply done with a trip to a notary in Belgium, where they will construct a new contract of marriage in Belgium and will end the previous marriage contract as soon as both partners sign. Your new marriage contract will be registered in Belgium.

It’s important to meet a financial expert first and talk about the pros and cons of your marriage contract regarding your personal tax and legal situation.

Expert advice for your asset planning

Experts can help you choose the most profitable financial plan for your life, and depending on whether you want to protect your partner or your children, experts look at which marital status will provide the most marriage tax benefits.

“Financial experts will advise on whether to choose marriage, divorce, registered partnership or cohabitation, and depending on that, the financial consequences that you might get from each option,” says Bollen.

If you wanted to protect an investment or asset or transfer a percentage of your asset to the next generation, an expert would explain how the transfer can be done with the three-year rule, as a gift or via a will with inheritance taxes.

“Every step I will calculate the taxes and then its up to the client to make their choice,” says Bollen

 

Click to the top of our guide to marriage tax benefits in Belgium.

 

Philipp Bollen, Director Estate Planning / BNP Paribas Fortis / Expatica


Updated 2017 / Photo credits (CC-Licence): torange.biz (thumbnail).

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