Belgium

Expatriates taking up employment in Belgium will be subject to comprehensive rules and, in some cases, employment visa requirements. The expatriate tax team at Grant Thornton Belgium, can help expatriates and their employers to deal with Belgian visa and work permit requirements, with Belgian labour and social security issues as well as with Belgian income tax items. In particular we can assist expatriates and their employers to identify Belgian tax planning opportunities, review tax equalisation policies; as well as providing compliance services regarding Belgian tax filing requirements. Most expatriates will qualify for the special non resident tax status. We can prepare the formal application for the special tax status to be submitted to the competent tax office within a period of six months following the month of arrival. Facts and figures Employment visas Tax returns and compliance

Individuals who are Belgian resident for tax purposes must file their tax return at the latest on the due date indicated on the tax return (generally 30 June). The same rules apply to individuals who are not Belgian resident for tax purposes. When no return is received, the taxpayer should request one by 1 June at the latest. Tax-payers providing their tax consultant a proxy to file the tax return on their behalf through the so called tax-on-web application are granted an extended filing due date til 31 October. For employers and directors taxes are normally already deducted at source. When no payroll taxes need to be deducted, taxes will become payable within a period of two months following the receipt of a tax bill. Married taxpayers (or legal cohabitants) file a joint income tax return. However professional income is taxed separately on behalf of each taxpayer. Investment income and real estate income is taxed on behalf of the member of the household who is the legal beneficiary of this type of income.
Tax year

The employers of non-EEA (European Economic Area) nationals are usually required to apply for a work permit prior to the employee taking up employment in Belgium. A residence visa must also be obtained to allow the expatriate to live in Belgium. Where the expatriates spouse and family relocate to Belgium, relevant visas and separate work permits (where the spouse will also work) will be required. Where the expatriate is an EEA national the above procedure is usually not required.

The Belgian tax year runs from 1 January to 31 December.

Expatriate tax ebook 2013 35

Income Tax Rates 2013 income

Tax income 0 8,590.00 Tax payable 25% 30% 40% 45% 50%

8,590.01 12,220.00 >37,330.01

12,220.01 20,370.00 20,370.01 37,330.00

A tax free amount of 6,990 is normally available, possibly increased for dependent children. Standard (3,900 maximum) or itemised business expenses can be deducted.
Sample income tax calculation for a non resident executive (with application special tax status)
Aus ($) Gross salary Cost of living allowance Total employment Income: the special tax regime for foreign executives) Less Social security contributions (TFA increased with travel exclusion) (13.07%) Travel exclusion (20%) Standard business expenses Taxable salary Income tax thereon: On 20,370 On 10,840.52 @ 45% Total (A) Personal allowance (single 6,990) Income tax thereon: On 6,990 @ 25% (B) Income tax (A-B) Plus: Communal tax (7%) Income tax due 673.91 10,301.14 (1,747.50) 9,627.23 6,496.50 4,878.23 11,374.73 (5,964.00) (8,557.08) (3,017.80) 31,210.52 50,000.00 10,000.00 60,000.00

The Belgian tax code provides also for a refutable assumption that an individual is a tax resident of Belgium when he/she is registered in the National Register of individual persons in Belgium. This registration takes place in the commune where the individual resides. Moreover the Belgian tax code provides for an irrefutable assumption of tax residency when in case of marriage or legal cohabitation, the family resides in Belgium. Individuals that are Belgian residents are taxed on their worldwide income and gains. Non-residents are only taxed on their Belgian source income and gains. However, expatriates who qualify for the special non resident tax status continue to be considered as tax non residents during the whole period of their assignment to Belgium. (see below expatriate concessions).
Income from employment

(of which 11,250 are assumed as tax free allowances (TFA) under

A Belgian tax charge arises on employment income derived from duties performed in Belgium. Assessable employment income includes all wages, salaries, overtime pay, bonuses, gratuities, perquisites, benefits etc.
Source of employment

As mentioned above, where duties are performed in Belgium, any remuneration received in respect of these duties is treated as Belgian sourced income and, therefore, subject to Belgian income tax regardless of the expatriates tax residence status (subject to the relevant double taxation treaty).
Benefits (in kind)

Basis of taxation Charge to tax

In general, where the benefit is enjoyed in Belgium, a Belgian income tax charge will arise. Therefore, housing, meal allowances, provision of a car and relocation allowances will come within the charge to Belgian income tax in addition to the individuals salary.
Expatriate concessions

A charge to Belgian tax is dependent on whether the income arises in Belgium. The extent of the charge will be determined by an individuals tax residency status.
Residence

Under Belgian law, the place of tax residence is governed by several criteria and is generally defined as the place where an individual has his/her permanent home (i.e. generally where the family is living) or where an individual has his/her center of economic interest (i.e. place where an individual manages his/her private affairs).

Foreign executives or specialists qualifying for the special non-resident tax status are taxed on all income derived from their employment activity (salaries, bonuses, fringe benefits etc) from which are excluded: the portion of the employment income related to the number of days worked outside of Belgium (so called travel exclusion). Special rules apply for the determination of the foreign working days certain expatriate allowances or expense reimbursements (see further).

36 Expatriate tax ebook 2013

The foreign nationals qualifying for the special non resident tax status will not be taxed on supplementary securing and non securing expenses which are incurred as a result of their recruitment or transfer to Belgium, whether paid as lump sum allowances or as specific reimbursements of expenses (i.e. housing allowances, cost of living allowances, tax equalisation, school fees at an international school etc). Depending upon the function exercised by the foreign executive, the maximum annual excludable expenses or allowances amount to 11,250.00 or 29,750.00. However, the above ceilings do not include school fees or the reimbursement of moving expenses. As already indicated, these foreign executives are considered to be non residents for tax purposes. As such, they can not claim tax treaty benefits as a Belgian tax resident. There is principally a requirement for the expatriates employer to deduct Belgian payroll taxes from the assessable employment income. When the employer has no permanent establishment in Belgium, withholding taxes are normally not required. The conditions to obtain special tax status are (summarised) the following: the employing company must be part of the international group the employing company must be a commercial organisation the expatriate must be a foreign national the expatriate must exercise a managerial function the expatriate must demonstrate that he/she has kept the centre of their economic interests outside of Belgium Grant Thornton Belgium can assist in preparing the formal application which must be filed at the competent tax office within a period of six months following the month of arrival.
Relief for foreign taxes

Deductions against income

In determining the taxable amount of the employment income, compulsory social security contributions paid either in Belgium or abroad are fully tax deductible. Professional expenses can be claimed either by itemising the expenses actually made or on a lump sum basis using the standard business expenses deduction. A wide range of deductions may be taken against the net income subject to conditions and limitations: e.g. gifts, payments for child care, alimony payments, mortgage interests, mortgage capital reimbursements and related insurance premiums. Other expenses incurred may result in tax credits: life insurance premiums, personal contributions to pension funds, energy saving investments. A taxpayer is entitled to standard tax free amounts and dependent (children) deductions.
What taxes? Capital gains tax

In general, capital gains are tax free in Belgium. Only capital gains on Belgian real estate (short-term assets) may be taxable under certain conditions.
Inheritance, estate & gift taxes

Inheritance tax rules and taxes differ according to the region where the deceased had his/her fiscal residence in Belgium. Gifts are subject to gift taxes (but many exceptions can apply). Transfer taxes apply to various asset (principally property) transfers and leases at rates ranging from 0.2% to 12.5%.
Investment income

Where income has been subject to tax twice (in Belgium and a foreign jurisdiction) expatriates who are Belgian tax residents may be granted relief by the Belgian tax authorities where provided for in the relevant double taxation treaty or relevant internal tax legislation.

The expatriates Belgian tax residency status will determine whether investment income such as interest, dividends etc, will become liable to Belgian income tax. Belgian source interests are in principal subject to a withholding tax of 25% (15% under some conditions). Dividends are taxed at a rate of 25%. Expatriates qualifying for the special non resident tax status may only be taxed on Belgian source interest and dividend income.
Local taxes

Local taxes are payable as a percentage of the federal income taxes (usually 7%).
Real estate tax

A tax is levied on the annual rental value of the immovable property. The rate varies according to the region in which the property is located.

Expatriate tax ebook 2013 37

Social security taxes

Where duties are performed in Belgium, a charge to Belgian Social Security may arise. The expatiate will be treated as an employee subject to personal social security contributions of 13.07% on total gross compensation. The employer will also be required to contribute about 34% of the relevant income and benefits to Belgian social security system. Social security contributions must be collected at source along with the payroll taxes. Where the expatriate is transferring from an EU jurisdiction and holds the relevant documentation (A1) an exemption to Belgian Social Security will apply. (limited in time usually five years) Where the expatriate is transferring from a jurisdiction outside the EU with which Belgium holds a Bi-Lateral Agreement and the expatriate holds the relevant documentation (certificate of coverage), an exemption to Belgian Social Security will apply. (limited in time) Where the expatriate is transferring from a jurisdiction that does not fall into one of the above categories, the Belgian rules will determine his liability. Compulsory Social Security contributions are tax deductible. Expatriates benefiting from the special tax status, who are subject to Belgian social security are also allowed to exclude the tax free allowances from social security. Moreover under certain circumstances these tax free allowances can be increased with the travel exclusion resulting in an additional social security saving.
Stock options

When the offer of the options is not accepted within the sixty day period referred to above, taxation will occur at exercise. The taxable benefit will be determined as the possible difference between the market value of the shares at exercise and the exercise price. Social Security contributions will normally also be due. Subsequent capital gains upon sale of the shares are tax free.
Wealth tax

There is no wealth tax in Belgium.

Other specific taxes

There are no other specific taxes in Belgium.

Tax planning opportunities

For foreign nationals who do not qualify for the special non resident tax status and who perform duties outside of Belgium, split payroll arrangements could be considered. When free housing is provided by the employer, the taxable fringe benefit can be substantially reduced if the rental agreement is contracted by the employer. Company cars normally constitute a tax effective fringe benefit. Deferred compensation schemes can be set up subject to certain conditions. tock options offered by a foreign employer are preferably granted before the assignment to Belgium as taxation may occur at grant.
Earnings description Base salary Bonus Cost of living allowance Housing Home leave Club membership Moving expenses Foreign service premiums Education/schooling Planning possible Y Y Y Y Y N Y Y Y

The taxable moment is at the time of grant of the stock options under the condition that the employee accepts the offer in writing within the sixtieth day following the offer date. The taxable benefit is at that moment determined on a lumpsum basis. The basic rule is that the taxable benefit amounts to 18% of the value of the underlying shares for an option valid for a maximum of five years. This percentage is increased by one percent per year started after the five year maturity period of the option. The percentage thus obtained can even be reduced by half if certain conditions are met. Normally, the taxable benefit is exempted from social security contributions. The capital gain realised upon exercise and sale of the shares is tax free.

Contact us for further information on expatriate tax services in Belgium please contact: Stefan Creemers T +32 2 242 11 41 E stefan.creemers@be.gt.com

38 Expatriate tax ebook 2013