There are a number of tax advantages for expats in Belgium, depending on whether they are considered Belgian residents or not.
Gregory Goossens, a tax lawyer with Taxpatria, shares a thorough overview of the incentives for this special status, including foreign business travel exclusion, expatriate allowances and tax benefits on income and property.
Finding your way around the many tax codes, exemptions and deductions available can be a challenge for foreigners who need to file in Belgium, especially as most information is only available in French, Dutch or German. To assist you, Taxpatria provides expat-focused financial services, including an updated (unofficial) English version of the tax return.
Resident status in Belgium
The Belgian tax system distinguishes between ‘resident’ and ‘non-resident’ taxpayers when it comes to determining what income is subject to taxation. “As a general rule, Belgian residents are taxed on their worldwide income, while non-residents are only taxable on their Belgian source income”, explains Gregory.
However, he adds, “when a foreigner comes to Belgium temporarily to work, it does not necessarily mean that he will automatically be qualified as a non-resident.” To obtain this special status, it is required to file an application with the tax office with the necessary supporting documentation.
A Belgian resident is any person who has his family home (place of residence) or the place from where he manages his personal wealth, in Belgium. People registered at their local town or city hall are presumed to be residents, unless proven otherwise. Consequently, each foreigner will be considered a resident for tax purposes as soon as he is entered into the local population register and, as a result, domiciled in Belgium. In this respect, in Belgium the ‘183-day rule’ is never used to determine your tax residency.
Special expat tax status
Gregory says that, however, “in a number of situations, the resident foreigner may be granted a special tax status, allowing him to be taxed as a non-resident on certain categories of income.” For example, he expands, “foreign executives, directors, specialists and researchers appointed by a foreign employer to work ‘temporarily’ in Belgium, are allowed, under certain conditions, to exclude part of their income from Belgian income tax.” According to Gregory, this so-called ‘special expatriate tax status’ has no legal basis, but is “an administrative tolerance that has been in place for more than 30 years.”
Since the special status only applies to foreign executives, specialised foreign staff or foreign research staff, those eligible for this regime will have to prove that they perform activities that require a special knowledge and responsibility, thus executive functions. Gregory adds that “the level of your gross salary is also used as an indication to determine the executive level of your Belgian employment contract.”
Furthermore, explains Gregory, “the secondment (work transfer) to Belgium should be temporary, to work either in a specialised research centre or in a branch or a company that is part of an international group. The residence or centre of economic and personal interests of the executive should remain located abroad for the duration of the contract (e.g. property, bank accounts, life insurance policy, etc.).”
Filing US taxes from Belgium
Despite the fact that every US citizen and green card holder is required to file a tax return with the IRS even when living abroad, many expatriates still fail to do so. Many are unaware of these obligations, thinking that as an expat they do not need to pay or file tax returns in the US. You do! For more information and help filing your US tax returns from Belgium, contact Taxes for Expats and see our Guide to taxes for American expats.
In brief, according to Gregory, those who are entitled to the special status are treated as non-residents for tax purposes. The benefits are twofold: (1) certain ‘expatriate allowances’ or reimbursements of expenses and (2) the so-called ‘foreign business travel exclusion’ will be excluded from the taxable basis.
1. Expatriate allowances
Some ‘expatriate allowances’ (i.e. tax equalisation, cost-of-living allowance, housing allowance, home leave allowance, etc.) are treated as “costs proper to the employer” and are therefore, within certain limits, not taxable. It is namely the reimbursement of expenses by the employer to cover the additional costs as a result of the secondment to Belgium.
Gregory expands: “A distinction is made between recurring and non-recurring costs. The recurring expenses are limited to €11,250 per year (€29,750 in some exceptional cases). Certain other expenses (e.g. refurbishing and moving expenses, international schooling fees for children, etc.) can be excluded without any limitation, but within reasonable limits.”
2. Foreign Business Travel Exclusion
An additional benefit under the term “foreign business travel exclusion” is provided to the expatriate who travels abroad on business during his secondment to Belgium. The executive’s taxable remuneration will be further reduced to the extent that his compensation relates to business activities carried out abroad. Specific rules are provided by the Belgian tax authorities to determine the number of days worked outside Belgium. Gregory warns: “Proof of the presence abroad for professional reasons is evidently a requirement in case of a tax audit”.
Both the ‘expatriate allowances’ and the ‘foreign business travel exclusion’ will be excluded from the taxable income from employment. The taxable income after this deduction is then taxed in the same way as the taxable income of any other Belgian resident (i.e. applying the same tax rates, deductions and exemptions) and is likewise added to the other Belgian source income of the expatriate.
According to Gregory, “non-residents only have access to certain personal tax allowances if they earn at least 75% of their worldwide income in Belgium during the calendar year, applying for non-resident status might not always have the desired result.”
He advises that in some cases, it can be more interesting to opt for a normal resident taxation and report your foreign earnings, to avoid that your personal tax deductions would be disregarded or limited.
Furthermore, real estate income (e.g. from renting out a house) will only be subject to taxation to the extent that the income is derived from property located in Belgium. Executives, generally, are not taxed on (foreign) investment income either, unless it comes from a Belgian source. Dividends and interest in Belgium are generally subject to a withholding tax rate of 30%. Anything earned outside Belgium stays out of reach of the Belgian taxman if you can successfully apply for the non-resident status.
A final word from Gregory about this special status: “If the status is granted, a non-resident tax return has to be filed each year in October/November for the previous calendar year in which you claim your expat benefits.”
Gregory Goossens, founder of Taxpatria, obtained his Law Degree in 2004 and graduated in 2005 with a Master’s degree in Tax Law (University of Antwerp). After a brief career as a tax advisor with a Big Four company, he moved to the legal profession in September 2006. A member of the Brussels Bar as well as the Antwerp Bar, his main focus has been on increasingly important global mobility, but he also specialises in the prevention and resolution of tax disputes. He is a native Dutch speaker but is also fluent in English and French.Make an appointment