Individual taxation

Residence and domicile

How is residence/domicile determined for tax liability purposes in your jurisdiction?

Inhabitants of Belgium (ie, persons whose domicile (or seat of wealth if not domiciled in Belgium) is located in Belgium) are subject to personal income tax. ‘Domicile’ refers to a factual situation characterised by the person’s habitual residence, which implies a certain continuity; ‘seat of wealth’ refers to the central place where a person’s assets are managed. In practice, an individual’s domicile and seat of wealth are usually the same.

Unless proven otherwise, all individuals listed in the National Register of Individuals are considered inhabitants of Belgium for income tax purposes. A taxpayer is liable to the additional income tax of the region (ie, Flemish region, Brussels capital region or Walloon region) in which their tax residence is located on 1 January of the tax year.

For Belgian inheritance and gift tax purposes, although the wording of the law differs, the criteria ‘domicile’ and ‘seat of wealth’ apply in the same way to determine someone’s residence. In the Flemish region – and despite the fact that inheritance tax law does not provide for this legal presumption – the Flemish tax authorities take the position that an individual was a resident of Belgium/the Flemish region for inheritance tax purposes if they were listed in the National Register of Individuals, unless their heirs prove otherwise.

Income

Describe the income tax regime in your jurisdiction (including tax base, rates, filing formalities and any exemptions, reliefs or deductions).

An individual’s taxable income is determined by four income categories:

  • real estate income;
  • income from movable property (including dividends, interests and royalties);
  • professional income (including employment income, business income and pensions); and
  • miscellaneous income (ie, income that does not fall under the other categories).

Each category has specific rules for calculating net income. In general, the net real estate income and net professional income is taxable at progressive rates from 25% up to 50% (the latter applies to income exceeding €40,480 for income year 2019).

Net real estate income is either the deemed income (‘cadastral income’) or net rental income.

Professional income consists of:

  • business income from commercial or industrial activities;
  • gains from professional services;
  • profits and gains from a former professional activity;
  • employment income; and
  • pension income.

In general, taxable professional income is calculated by reducing the gross income by any professional or business expenses and operating losses of the relevant year and losses of preceding years.

In principle, income from movable property is subject to withholding tax if paid in Belgium. Since 1 January 2017, a rate of 30% has applied to most dividends and interest. If no withholding tax is levied, the income must be declared in the annual tax return and a tax equal to the withholding tax will be levied.

Any income that is listed as miscellaneous is taxed separately without being added to the other types of income. The primary forms of miscellaneous income are:

  • capital gains on the sale of shares, except if realised as part of the normal management of private wealth (33% tax);
  • capital gains realised on the transfer of an important share participation in a Belgian company (more than 25%) to a non-EEA legal entity (16.5% tax);
  • capital gains on the sale of Belgian real estate (other than the family dwelling) within five or eight years after acquisition (33% tax for land within five years; 16.5% tax for built property within five years and for land in the sixth, seventh or eighth year); and
  • occasional (non-professional) profits and proceeds with speculative intent (33% tax).

Several exemptions and reductions apply such as child allowances and reductions for qualifying gifts or for energy saving expenditures. The tax amount is increased with communal tax (7% on average).

The tax year is the same as the calendar year.

The annual personal income tax return can be filed on paper or electronically via www.taxonweb.be. In practice, the paper version of the tax return must generally be filed by the end of June, while taxpayers that file their return electronically are generally granted an extension of some weeks. Tax advisers and accountants that file clients’ tax returns are generally granted an extension of some months. Special terms apply in case (for example) a taxpayer emigrates during the year.

Tax must be paid within two months of receiving a tax bill.

Capital gains

Describe the capital gains tax regime in your jurisdiction (including tax base, rates, filing formalities and any exemptions, reliefs or deductions).

Capital gains realised outside professional activities on the sale of shares are taxable at a rate of 33%, except if realised as part of the normal management of a person’s private wealth, in which case they are exempted. However, capital gains realised outside professional activity on the transfer of an important share participation (more than 25%) in a Belgian company to a non-EEA legal entity are taxed at 16.5%. In both cases, the taxable net capital gain must be declared in the annual income tax return and corresponds to the difference between the sales price and the acquisition cost.

Capital gains on the sale of Belgian real estate (other than the family dwelling) within five or eight years after acquisition are taxed at 16.5% or 33% (33% tax for land within five years; 16.5% tax for built property within five years and for land in the sixth, seventh or eighth year). The taxable net capital gain must be declared in the annual income tax return and corresponds to the difference between the sales price and the adjusted acquisition price, which is raised with at least 25%.

Inheritance and lifetime gifts

Describe the inheritance and gift tax regime in your jurisdiction (including tax base, rates, filing formalities and any exemptions, reliefs or deductions).

Competence of the regionsGift and inheritance tax fall under the competence of the three regions:

  • the Flemish region;
  • the Brussels capital region; and
  • the Walloon region.

Therefore, different gift and inheritance tax rules apply in the three regions. The most relevant differences relate to the categories of gift and inheritance tax rates and the criteria to be considered as partners (eg, spouses and cohabiting persons).

In each region the categories of gift and inheritance tax rates depend on the degree of kinship between the donor or deceased and the beneficiary, the value of the gift or inheritance and the nature of the donated or inherited goods.

Relevant factorsThe relevant factor that causes Belgian gift tax to apply is the registration of the donation with the Belgian tax authorities. Such registration is mandatory for each donation that is done before a Belgian notary. The registration of a donation of tangible movable property is not mandatory if not done before a Belgian notary; such donation is not subject to gift tax unless it is voluntarily registered with the Belgian tax authorities.

Belgian inheritance tax is due if the deceased was a resident of Belgium (ie, if they had their domicile or seat of wealth in Belgium).

For Belgian residents, the region where the donor or deceased has their place of residence will in principle determine which rules will apply (ie, Flemish, Brussels or Walloon).

For non-residents, gift and inheritance tax is due on the donation or inheritance of Belgian immovable property, according to the rules that apply in the region where the immovable property is located. Gift tax on movable property is only due if the donation is registered with the tax authorities. Upon the death of a non-resident, no inheritance tax is due on their Belgian movable property.

Inheritance taxWhen a Belgian resident passes away, inheritance tax is due on the net value of their worldwide estate. Subject to certain conditions and within certain limits, foreign inheritance tax on foreign immovable property can be offset against the Belgian inheritance tax on the foreign immovable property.

For non-residents, inheritance tax is only due on their Belgian immovable property. If the deceased was a resident of the European Economic Area, inheritance tax is due on the net value, while for non-EEA residents, inheritance tax is due on the gross value.

An inheritance tax return must be filed within four, five or six months from the deceased’s death, depending on the physical location where the deceased was at the time they passed away (ie, in Belgium or within or outside the European Economic Area, respectively). In the Flemish region, the tax is due within two months of receiving the tax bill. In the Brussels and Walloon regions, tax is due within two months of the last day of the filing period.

In the Flemish region, inheritance tax is due as follows:

  • In direct line and between partners: movable and immovable property are taxed separately at rates of 3% to 27% (27% above €250,000). The calculation is made on the net share per beneficiary.
  • Between brothers and sisters: no split between movable and immovable property. On 1 September 2018, tax rates were lowered and now range from 25% to 55% (55% above €75,000). The calculation is made on the net share per beneficiary.
  • Between all other beneficiaries: no split between movable and immovable property. On 1 September 2018, tax rates were lowered and now range from 25% to 55% (55% above €75,000). The calculation is made on the total net shares of these persons, then divided among them according to their share in the inheritance.

In the Brussels capital region, inheritance tax is due as follows:

  • In direct line and between partners: tax rates range from 3% to 30% (30% above €500,000). The calculation is made on the net share per beneficiary.
  • Between brothers and sisters: tax rates range from 20% to 65% (65% above €250,000). The calculation is made on the net share per beneficiary.
  • Between uncles or aunts and nephews or nieces: tax rates range from 35% to 70% (70% above €175,000). The calculation is made on the total net shares of these persons, then divided among them according to their share in the inheritance.
  • Between all other beneficiaries: tax rates range from 40% to 80% (80% above €175,000). The calculation is made on the total net shares of these persons, then divided among them according to their share in the inheritance.

In the Walloon region, inheritance tax is due as follows:

  • In direct line and between partners: tax rates range from 3% to 30% (30% above €500,000). The calculation is made on the net share per beneficiary.
  • Between brothers and sisters: tax rates range from 20% to 65% (65% above €175.000). The calculation is made on the net share per beneficiary.
  • Between uncles or aunts and nephews or nieces: tax rates range from 25% to 70% (70% above €175,000). The calculation is made on the net share per beneficiary.
  • Between all other beneficiaries: tax rates range from 30% to 80% (80% above €75,000). The calculation is made on the net share per beneficiary.

Gift taxA donation of movable property that is registered, will be taxed at flat rates:

  • Flemish region and Brussels capital region: 3% in direct line and between partners and 7% between all other persons; and
  • Walloon region: 3.3% in direct line and between partners and 5.5% between all other persons.

Immovable assets are taxed at progressive rates. Since 3 September 2018 they are the same in all three regions. The rates range from 3% to 27% in direct line and between partners (27% above €450,000). For other persons, the applicable rates are higher and range from 10% to 40% (above €450,000).

Exemptions and reliefsThe most important tax reliefs concern the family dwelling and the assets of family owned businesses or shares of family owned companies. In the Flemish region, as from 1 September 2018, a new inheritance tax exemption was introduced for the first €50,000 of movable assets that are inherited by the deceased’s partner.

Family dwellingIn all three regions, the part of the family dwelling that is inherited by the partner is exempt from inheritance tax. A ‘partner’ is defined as:

  • the deceased’s spouse;
  • the deceased’s legal cohabitant; or
  • in the Flemish region only, the person that de facto cohabitated with the deceased provided they cohabitated for at least three years and shared a common household.

In the Walloon region, the exemption is subject to the supplementary condition that the family dwelling has served as the main residence of the couple for at least five years at the time of the deceased’s death.

Family owned businesses and companiesEach region has a specific regime for the donation or inheritance of assets invested in a family owned business or shares of a family owned company, subject to certain conditions. The conditions in the Flemish and Brussels capital regions are almost identical. In the Walloon region a reform of the current regime has been announced, which is expected to result in a similar regime to that of the current Flemish and Brussels regime.

In all three regions, a donation of those assets or shares is tax exempt if all conditions are met. In the current Walloon regime, the exemption can also apply to shareholder loans to the family owned company.

If inherited, these assets or shares are taxed at a flat inheritance tax rate of 3% or 7% in the Flemish and Brussels capital region. In the current Walloon regime, the conditions are more strict, but if met, an inheritance tax exemption applies to these assets or shares and even to shareholder loans to the family company.

Real estate

What taxes apply to individuals’ acquisition and disposal of real estate in your jurisdiction?

On the acquisition of real estate, transfer tax (registration duties) is due on ‘old’ properties, while 21% value added tax (VAT) is due on ‘new’ properties. Real property is considered ‘new’ until 31 December of the second year following the year in which the real property was first occupied or taken into possession. In principle, the buyer must pay transfer tax or VAT.

The taxable base for transfer tax purposes is the highest of the acquisition price and the market value of the real property. The transfer tax rate depends on the region in which the real property is located:

In the Flemish region, transfer tax is in principle 10%. Since 1 June 2018, subject to conditions, a reduced rate of 7% applies for the acquisition by a private individual of their first main residence. For home prices up to €200,000, an extra tax discount of €5,600 is granted.

In the Brussel Capital Region, transfer tax is in principle 12.5%. For homes up to €500,000, the taxable base can be reduced by €175,000 if all conditions are met.

In the Walloon region, transfer tax is in principle 12.5%. Subject to conditions, a reduced rate of 5% or 6% can apply, or the taxable base can be reduced by €20,000.

Non-real estate assets

Do any taxes apply to the acquisition and disposal of other assets apart from real estate?

In principle, VAT applies on the acquisition of assets (other than real estate) if sold by someone whose business activity is subject to VAT. The standard tax rate is 21%.

Other applicable tax regimes

Are any other direct or indirect tax regimes relevant to individuals?

Expatriate tax regimeForeign executives, specialised foreign staff or foreign research staff that are appointed to work temporarily in Belgium can apply for a special expatriate tax regime. Eligible persons must prove that they perform activities that require a special knowledge and responsibility (ie, executive functions). If approved, they are treated as non-residents and are therefore only taxable on their Belgian source income. The benefits are two-fold:

  • certain expatriate allowances or reimbursements of expenses; and
  • the so-called 'foreign business travel exclusion' are excluded from the taxable basis.

Tax on securities accountsThere is no general wealth tax in Belgium. However, real estate is subject to an annual tax which is calculated on its deemed income (‘cadastral income’). From 10 March 2018 a new annual tax of 0.15% is levied on the total value of in-scope securities that are held by:

  • Belgian resident individuals on their Belgian or non-Belgian securities accounts; and
  • non-resident individuals on their Belgian securities accounts, if the average annual value of those securities equals or exceeds €500,000.

This threshold is considered per account holder and irrespective of the number of financial institutions involved.

Cayman taxFor income tax purposes, Belgian resident founders (which is a broadly defined concept) of a ‘legal construction’ must report its existence in their annual income tax return. Trusts and low-taxed foreign legal entities (including foundations) are, among other things, considered as such legal constructions. In addition to this reporting obligation, a look-through approach (commonly referred to as the ‘Cayman tax’) was introduced in 2015 for these legal constructions: their founders are taxed on any income that has not been paid out or distributed by these legal constructions as if they had directly received that income. Any subsequent payment or distribution by a qualifying legal construction is taxed as a dividend (in principle at a rate of 30%) in the hands of the receiver, unless it can be proven that this payment or distribution makes the capital of the legal construction fall below the capital that was contributed by its founder(s) or that the payment or distribution was taxed before under the look-through approach.

Planning considerations

Are there any special tax planning considerations for individuals with a link to your jurisdiction?

In recent years, wealthy individuals and families residing in Belgium have been confronted with a considerable increase of their tax burden, especially on investment income. Some have looked into more complex yet favourable tax regimes (eg, for investments in private equity investment funds). Others examine the structuring of investments through a normally taxed company, since the Belgian corporate income tax regime has recently been reformed quite substantially, providing, among other things, for lower tax rates (base rate of 25% as from 2020) and – subject to certain conditions – a full exemption for qualifying dividends and capital gains.

Especially before migrating to Belgium, persons should also be aware of the so-called ‘Cayman tax’: a look-through approach for legal constructions such as trusts and low-taxed foreign legal entities (including foundations). Such legal constructions must not only be reported, but their founders (which is a broadly defined concept) are also taxed on any income that has not been paid out or distributed by these legal constructions, as if they had directly received that income. Subsequent distributions are taxed as a dividend (in principle at a rate of 30%) unless it can be proven (for example) that the payment has been taxed before under the look-through approach.