As well as the waffles, fries, chocolate and beer, Belgium is famous for its high taxes. However, if you understand the rules that apply, you can plan your financial affairs accordingly. Here, we set out the important basics to consider.
What Is Your Tax Status In Belgium?
If you are living or working in Belgium, you will usually be legally classed as a resident taxpayer. This means you will be taxed at Belgian rates on all your income from all sources around the world.
However, your circumstances may mean that you can claim non-resident tax status in Belgium, and so fall under the expatriate special income tax regime. You will need to prove that your economic and personal life is centred outside of Belgium. For example, if you live in Belgium for fewer than 183 days a year and your family home is in another country, you will qualify. Any employment in Belgium must be temporary and provided by a scientific research centre or an international group. You must show that you continue to have economic links with your home country by providing financial proof – such as mortgages, credit cards and so on – or through your business interests.
If you want the tax authorities to issue you with non-resident tax status, you and your employer must formally apply for it within six months of your arrival.
If the tax authorities accept your application, then tax demands by the Belgian government will only be applied to your earnings related to activity within Belgium. These include wages, rental income and capital gains. Standard levels of tax rates will be applied, although adjustments to reduce taxable pay levels are very generous. Income from elsewhere in the world will not be considered.
The federal public service has a useful website explaining tax issues in Dutch, French, English and German.
Completing An Annual Tax Return In Belgium
The tax year in Belgium runs from the 1st January to 31st December each year. You must file a tax return each year if you live in Belgium or receive income from activity there. The deadline is normally 30 June following the end of the financial year, unless you are a non-resident taxpayer, in which case the deadline is either September 30th or three months after you have left Belgium.
The penalties for late filing can be expensive for any taxpayer.
Using the online service is the fastest way to complete your tax return, since it will direct you to the sections that are relevant to you. The majority of taxpayers in Belgium prefer to submit online returns.
Couples who are married or in a registered civil partnership file their tax returns jointly. However, they pay tax on their incomes separately. Also included on the family return must be any income received by all children who live in your household.
Valid Allowances For Your Belgian Tax Return
Income tax rates are applied on taxable income, which is your total income for the year, less valid allowances.
Income includes wages, investment income and rental income.
The most significant allowance to deduct is likely to be your contributions for health cover. Employees and their employers pay a percentage of each wage over to a mutuality, which will provide a high level of refund on health care and dental charges.
There are a number of other costs which may be deducted, such as pension contributions, life insurance contributions, mortgage payments, childcare costs and charitable donations. You may also consider outlay used to make your property safer from the threat of burglary and fire.
If you are married or in a registered civil marriage and only one of you works, up to 30 percent of the working partner’s income is taxed at the lowest tax band, as though it was earned by the non-working partner. There is, however, a cap on the total amount that can be transferred, which is set each year.
Personal allowances can also be claimed by resident taxpayers. The amounts will depend on your household circumstances, such as how many children you have and their ages.
Double taxation treaties between Belgium and ninety other countries prevent Belgian residents being taxed twice for the same income. Even if your source of income comes from a country not subject to a double taxation treaty, you are likely to be able to find some tax advice that will help. The services of a specialist tax advisor will be valuable in these cases.
Income Tax Rates Depend On How High Your Taxable Income Is
Tax is only applied on your taxable income. The percentage is progressive, so income up to a certain limit are taxed at the set rate for the income band, income within the next band is taxed at a higher rate and so on.
Taxes due from income and company profits will be paid to the state tax authorities, either to a local tax office or through the online payments system. Since employees pay tax each time they are paid – with the employer subtracting the tax and paying it over to the tax authorities by the 15th of the following month – and self-employed people pay tax using a monthly returns system, there should be few unexpected tax bills due once your tax return has been processed.
However, if an amount is due, full payment must be made within two months of filing the tax return.
Additional Local Taxes Are Also Charged
If you own a property in Belgium, you will be charged a property tax on 1st January of each year. The amounts will vary according to how much the rental value of the property is deemed to be, and the rates charged by the local authority running the area that the property sits in.
In addition to this, a further tax is levied to cover the provision of local services such as refuse collection, water and TV services. The tax due is levied according to your level of income.
If you are staying in Belgium as a non-resident taxpayer, you will be charged a flat seven percent of your income to cover the local tax for services.
Sales Tax In Belgium
Sales tax is known in French as Taxe sur la Valeur Ajoutée, or TVA, and in Flemish as Belasting over de Toegevoegde Waarde, or BTW.
Most goods and services sold in Belgium will have sales tax of 21 percent applied, including electricity bills. Some exceptions exist; 12 percent is applied to food in restaurants, for example, and the goods which meet basic needs, such as food and medicines, only attract six percent.
Capital Gains Tax Is Rare In Belgium
Capital gains taxes will seldom be demanded in Belgium. The rationale appears to be that you have paid taxes on your income, investments are then purchased post-tax, and therefore you have the right to keep the full benefit of those investments.
This principle causes debate in Belgium, as in other countries the government receipts from capital gains tax help keep the income taxes lower.
However, non-residents who make capital gains in Belgium must pay capital gains tax. This is assessed as part of the annual income tax returns.
Inheritance Tax In Belgium
If a resident in Belgium dies, their whole estate will be subject to inheritance tax rules regardless of where the assets are located. If the deceased lived elsewhere, only the assets held in Belgium will be assessed.
The inheritance tax bill is paid by each heir, calculated according to the value of inheritance they individually received.
Specific Taxes Levied On Car Ownership In Belgium
Once you have lived in Belgium for six months, you must register your foreign car with the authorities. Should you do this, or if you purchase a car in Belgium, a number of taxes will become due.
The vehicle registration tax must be paid for each individual car, motorcycle or other vehicle, whether new or second hand. If you are registering the vehicle in Wallonia and it emits more than 145g of CO² per kilometre, you must also pay the eco-malus tax.
Each year you must pay the road tax charge. The horse power, cylinder capacity and maximum authorised mass of the vehicle will determine which tax bracket it falls into and the amount therefore due. Furthermore, an additional Liquid Petroleum Gas (LPG) road tax is levied for vehicles which run fully or partially on LPG.
There are a number of exclusion clauses relevant to each of these taxes which are worth considering if you have disabilities or vehicles solely for a permitted specific purpose.
Professional Tax Advisers In Belgium
Everyone in Belgium is taxed according to their specific residency, household and financial circumstances. It can be particularly complicated for expats with financial ties to other countries. As a result, the cost of a professional tax advisor can be a good investment.
Have you lived in Belgium? Share your tips in the comments below, or answer the questions here to be featured in an interview!