This guide explains how your marital status in Belgium can affect your eligibility to claim marriage tax benefits and tax breaks.
Getting married in Belgium involves more than just love. Once you move there, your marital status will come into play when assessing your Belgian taxes and marriage tax benefits. This also applies to assets and taxes you might pass to your relatives if the inheritance law in Belgium applies.
Internationals living in Belgium, in particular, need to consider how their marriage contract can affect them financially. This includes factors such as their assets, income, divorce, marriage tax credit, and inheritance and succession tax. They may want to consider changing their relationship status in order to benefit from laws regarding marriage in Belgium.
Foreigners living in Belgium are generally liable to pay Belgian inheritance tax on their worldwide assets in the country. They may be able to pay less tax, however, depending on their marriage contract in Belgium. Philipp Bollen, Director of Estate Planning at 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 marital status in Belgium important?
While income taxes in Belgium are among the highest in Europe for high earners, the local tax system does offer some tax breaks for married couples. However, this depends on their relationship status. This particularly applies to the indirect tax system, i.e. one-time payments on assets such as gift tax and inheritance tax.
Belgian law allows for a unique situation where couples – including foreigners – can claim certain marriage tax benefits by entering into a Belgian marriage contract. Expats who have been married abroad or in Belgium can check whether the law of a foreign country offers better conditions, or if switching their marital status to Belgium is better.
Marital law can influence the outcome of asset and succession planning such as inheritance, divorce, wills, and real estate. Therefore, international couples need to consider how different relationship statuses in Belgium might determine certain tax and legal conditions.
There are several ways to officiate relationships under government law. This includes co-habitation, registered partnership, or marriage in Belgium for both heterosexual and same-sex couples. Some benefits, however, only apply to married couples and registered partners.
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, as follows:
- 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 (i.e., will, inheritance, divorce);
- Since 17 August 2015, foreigners have more options to determine which country’s inheritance laws will be applicable to them in Belgium; they need to hold a link, however, with the country they choose;
- Different rules apply depending on whether you have a wedding contract or not. If you married before 1 October 2004 and don’t have a wedding contract, the law of joint nationality applies; however if not joint nationality, the marital residence will determine which law relates to you in Belgium;
- If you got 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. Step two is only applicable if step one is not possible, and step three is only applicable if step two is not possible;
- 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 marriage tax benefits.
Tax benefits of marriage abroad
If you were married abroad or the marital law of another country applies to you in Belgium, processes in general are more complex.
“If you are living in Belgium, and you opted for the Italian or 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 explains. “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.
In Belgium, unmarried couples can legalize their partnership by having a registered partnership (wettelijk samenwonend/cohabitation légale). This partnership status is available to anyone sharing a residence. A registered partnership also has some legal and tax implications; these differ, however, 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 of your partner passing away, you will have the right to ‘usufruct’ with respect to the family house. This means you have the right to continue living in your shared home. In a marriage in Belgium, the spouse is always entitled to the usufruct of all assets owned by the deceased.
Married tax credits on income tax in Belgium
With respect to income taxes, Belgium’s tax system is relatively utilitarian for any couple status. Your marital status, therefore, has little influence. Since 1 January 2005, Belgium assesses all income earners separately. Only married couples and registered partners can file one tax return even though they are still assessed individually. There are, of course, a few tax benefits of marriage or for official couples. These include being able to share tax deductions between both partners; for example, both people can claim a deduction connected with buying a home in Belgium.
Marriage tax benefits in Belgium
A couple’s marital status will have the most effect on their asset and succession planning. This applies to inheritance tax in Belgium and real estate management, as well as dealing with divorce or child custody.
Couples 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, foreign residents in Belgium may benefit by transferring their marriage licence to Belgium. Once they do this, they would then 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 of one partner dying, any jointly owned assets will be split 50/50. A will can also transfer the deceased partner’s asset to the surviving partner or children. They will, however, need to pay the exorbitant inheritance tax in Belgium. For lower taxes, they might consider gifting an asset instead.
In Belgium, gift tax applies to the transfer of ownership of property during an owner’s lifetime. Gift tax varies according to region and degree of kinship. As of January 2019, the actual gift tax rates for movable properties or investment portfolio in Belgium are 3 to 7% in Flanders and Brussels, and 3.3 to 5.5% 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 explains. “Gifting is always better than transfer by death as it generally involves less tax.”
Couples married under the communal system can’t arrange a gift to each other for jointly-owned properties. They can, however, gift their children. With this in mind, people must still assess their individual situations as there are some who plan to live off their investments and might not want to lose control of their assets.
“It’s also 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 the spouses can always cancel the gift.
Inheritance tax for married couples
Inheritance tax in Belgium, like gift tax rates, varies according to the asset amount and degree of kinship between the benefactor and heir. The region you live in also determines this.
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 can claim certain assets of the deceased. Meanwhile, 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. Non-residents must follow a different rule; they must pay standard inheritance tax rates on the gross value of the benefactor’s Belgian located real estate. Only residents of the European Economic Area (EEA) will pay tax on the net amount.
In Flanders, for example, if you gift an investment portfolio worth €1m, only a 3% flat tax rate applies. If you passed it onto your partner via a will, however, they would have to pay inheritance tax. This is on a scaled rate between 3% and 27%. Essentially, they would have to pay 3% tax for the first €50,000, 9% tax on the next €250,000, and 27% on the rest.
Current inheritance tax rates in Belgium
The current inheritance tax rates in Belgium for spouses and registered partners are as follows:
- Brussels – from 3% (on amounts up to €50,000) to 30% (on amounts over €500,000)
- Flanders – from 3% (on amounts up to €50,000) to 27% (on amounts over €250,000)
- Wallonia – from 3% (on amounts up to €12,500) to 30% (on amounts over €500,000)
Tax-free allowances on inheritance tax for spouses and registered partners are:
- Brussels – €15,000
- Flanders – €500 for inheritances less than €50,000
- Wallonia – €25,000 for inheritances less than €125,000; €12,500 for inheritances above €125,000.
Find more information about rates and allowances in this guide to inheritance in Belgium.
“If your main intention is to stay in Belgium, my advice would be to opt for the separate system,” suggests Bollen. “You can even avoid the 3% by opting for a gift that is not organized 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 taxes at all.”
Important changes to inheritance and succession in Belgium
As of September 2018, the law states that children of the deceased can claim half of the estate. This would be divided between them, regardless of how many children there are. The remaining 50% will be subject to a continued life interest for the surviving spouse or legal partner.
In 2015, the European Union initiated a new law on cross-border successions and inheritance. This can affect expats living in Belgium who are married or in a partnership. According to the European Commission, around 450,000 cross-border successions take place in the EU yearly; the new law aims to simplify this complicated and costly process.
Under the law, if an expat living in Belgium dies without making a will, taxes automatically apply to their assets. This includes the Belgian inheritance law and inheritance tax law. Before the death, however, expats in the EU have the option to apply the civil inheritance law from their country of nationality to their estate. The country of nationality can be within or outside of the EU.
The law of inheritance tax in Belgium, however, will always apply to all expats residing in Belgium. This also applies to those who have 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.
How to change your marriage status
You can change your marriage status by simply making a trip to a notary in Belgium. They will construct a new contract of marriage and will end the previous one once both partners sign. However, it’s important to discuss the pros and cons of your marriage contract with a financial expert, 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. Whether you want to protect your partner or children, they will see which marital status provides the most marriage tax benefits.
“Financial experts will advise on whether to choose marriage, divorce, registered partnership, or cohabitation. They can then outline the financial consequences that you might get from each option,” explains Bollen.
If you wanted to protect an investment or asset, or transfer a percentage of it to your children, an expert would explain how; with the three-year rule, as a gift, or via a will with inheritance taxes.
“They would calculate the taxes at every step, and then it’s up to the client to make their choice,” says Bollen.