TaxResidence and domicile
How does an individual become taxable in your jurisdiction?
An individual becomes taxable in Belgium when he or she becomes a Belgian resident. A Belgian tax resident is an individual who has his or her main residence in Belgium. An individual who does not have his or her main residence in Belgium, but who has the seat of his or her fortune in Belgium also qualifies as a Belgian resident. Residency is assessed on all relevant factual circumstances. However, the registration of the individual in the National Register creates a rebuttable presumption of residency. An individual will be irrebuttably presumed to be a Belgian resident when his or her spouse (and family) reside in Belgium.
Belgian residency triggers the liability to pay Belgian personal income taxes over the following types of income and gains:
- income of real property;
- income of capital;
- income of professional activities and pensions; and
- income of diverse sources and (capital) gains.
Gift tax and inheritance tax are a competence of the Belgian region (Flemish Region, Brussels Capital Region and Walloon Region) where the donor has or the deceased had his or her residence.Income
What, if any, taxes apply to an individual’s income?
Income of capital is taxed at flat rates.
In principle, dividends are taxed at a flat rate of 30 per cent, whatever the amount of dividends earned. Belgium does not grant a credit for foreign withholding tax. The foreign withholding tax can only be deducted from the gross dividend to determine the taxable basis in Belgium. Upon fulfilment of conditions and deadlines, dividends can be taxed at a flat rate of 15 per cent. Dividends received upon the liquidation of a company qualify for a flat tax rate of 10 per cent if conditions are met.
As for dividends, the basic tax rate for interest income is a flat rate of 30 per cent. Interest income from savings accounts within the European Economic Area (EEA) can qualify for a lower rate of 15 per cent if conditions are met.
Income of professional activities and pensions are taxed at progressive rates up to 50 per cent. The basic rates can be increased with surcharges up to approximately 53.5 per cent.
What, if any, taxes apply to an individual’s capital gains?
Gains realised upon the transfer of shares are not taxed in the hands of a Belgian tax resident when the sale or contribution qualifies as normal private wealth management. In principle, a sale to a third party can qualify as normal private wealth management. The sale of shares to an entity that is controlled by the seller will generally not qualify as normal private wealth management and triggers tax liability at a flat rate of 33 per cent (increased with surcharges).
Gains realised upon speculative transactions and occasional profits are always taxed. The flat rate of 33 per cent (increased with surcharges) is applicable.
The gain on the sale of shares in a Belgian company is taxed when the purchaser is a legal entity established outside the EEA and when the seller directly or indirectly, either alone or together with certain family members, has held a substantial shareholding (of more than 25 per cent) in the sold company at any time during the five years preceding the sale. The applicable flat rate is 16.5 per cent (increased with surcharges).Lifetime gifts
What, if any, taxes apply if an individual makes lifetime gifts?
Belgian gift tax is due when the gift is registered in Belgium. Gifts must be registered in Belgium when:
- real property situated in Belgium is gifted;
- the gift is made before a Belgian notary; or
- the gift is made before a foreign notary and the donor is a Belgian resident. The obligation to register foreign deeds of gift was introduced on 15 December 2020.
Movable assets, however, can (in principle) be gifted without liability of Belgian gift tax when the gift is made in an informal way. However, when the donor of a gift free of Belgian gift tax dies as a Belgian resident within a period of three years after the gift was made, Belgian inheritance tax is due on the gift. Some gifts always qualify as a fictitious legacy subject to inheritance tax, even if the gift was made longer than three years before the donor’s decease as a Belgian resident (eg, gifts made under the condition precedent of the decease of the donor). A Belgian resident can also opt for a gift of movable assets with payment of Belgian gift tax. The gift can be made before a notary. The underlying documents of an informal gift can be voluntarily registered.
Gift tax is levied by regions. Belgium has three regions: Flanders in the north, Wallonia in the south and the capital city, Brussels, in the centre. Each region has specific rates, reliefs and exemptions in the field of gift tax. In principle, the applicable regime is the regime of the region where the donor resides.
The rates for gifts of movable assets are flat rates, irrespective of the value of the gift, and depend on the kinship between the donor and the beneficiary. For gifts in direct line and between qualifying partners, the flat rate is 3 per cent in Flanders and Brussels and 3.3 per cent in Wallonia.
All three regions have introduced a specific regime for the gifting of assets of family-owned businesses and shares in family-owned companies established in the EEA. The regions grant an exemption when conditions are met.
Real property situated in Belgium is subject to progressive gift tax rates depending on the market value of the real property and the degree of kinship between the donor and the beneficiary. The three regions uphold the same progressive gift tax rates. In direct line and between (qualifying) partners, progressive rates from 3 per cent up to 27 per cent are applicable (27 per cent above €450,000).
Belgium does not levy gift tax when a Belgian tax resident gifts a real property that is situated outside Belgium.Inheritance
What, if any, taxes apply to an individual’s transfers on death and to his or her estate following death?
If the deceased individual was a Belgian resident, Belgian inheritance tax is due over his or her worldwide estate.
In principle, each of the three regions applies progressive inheritance tax rates, depending on the degree of kinship between the deceased and the heir, and on the market value of the inherited assets. In direct line and between qualifying partners, the highest applicable inheritance tax rate in Flanders is 27 per cent (above €250,000). In Brussels and Wallonia, the highest rate is 30 per cent in direct line and between qualifying partners.
In Flanders, the inheritance tax due by the qualifying partner and by the heirs in direct line is calculated separately over the movable and immovable assets. This distinction does not exist in Brussels or Wallonia.
All three regions grant an exemption to the qualifying partner of the deceased from payment of inheritance tax over the value of the inherited share in the family home. No substantial exemptions are granted with respect to movable assets (eg, the exemption for the surviving (qualifying) partner in Flanders is limited to €50,000).
All three regions have introduced a specific regime for the inheritance of assets of family-owned businesses and shares in family-owned companies established in the EEA. If certain conditions are met, assets in family-owned businesses and shares in family-owned companies can be inherited at a flat rate of 3 per cent in Flanders and Brussels. In Wallonia, those assets and shares can be inherited free of inheritance tax upon fulfilment of conditions.
Qualifying partners are both spouses and official cohabitants. In the Flemish Region, persons who cohabited (without establishing an official cohabitation) and formed a common household for a certain period with the deceased individual are also qualifying partners.
If the deceased individual was a non-Belgian resident, Belgium only levies inheritance tax on the deceased’s Belgian real property.Real property
What, if any, taxes apply to an individual’s real property?
Upon purchase of real property situated in Belgium, registration rights are due over the purchase price at, in principle, a flat rate of 10 per cent in Flanders. If conditions are met, the flat tax rate is reduced in Flanders to 6 per cent for the purchase of the family home. Flanders has plans to reduce the rate for the purchase of the family home to 3 per cent, and to increase the basic rate from 10 per cent up to 12 per cent. The Walloon Region levies a flat tax rate of 12.5 per cent upon the purchase of real property. The Brussels Capital Region also levies a flat tax rate of 12.5 per cent but reduces the taxable basis by €175,000 for the purchase of the family home when conditions are met.
An individual who owns property situated in Belgium needs to pay a property tax on an annual basis.
When an individual rents a house situated in Belgium to another individual, income tax is due by the owner at progressive rates up to 50 per cent (increased with surcharges) over the cadastral income (ie, the fictitious rental income) of the property. If the tenant rents the house for professional use, income tax is due by the owner at progressive rates up to 50 per cent (increased with surcharges) over the actual net rental income.
If real property situated outside Belgium is rented out by a Belgian individual, Belgium has no authority to levy taxes over the rental income according to the double tax treaties. Income of foreign real property must be declared in the Belgian income tax return to be exempted with reservation of progression. Until assessment year 2022, either the actual rental income (irrespective of the professional or non-professional use by the tenant) or a (higher) fictitious rental income (when the property is not rented out) had to be declared. As from assessment year 2022, the cadastral income will also form the basis to determine the foreign property’s income. The cadastral income of foreign properties will be determined by the Belgian tax administration. Hereto, the Belgian tax administration has sent a questionnaire to Belgian residents owning a foreign property.
If a Belgian tax resident sells his or her family home, no income tax is due over the capital gain. However, if an individual sells real property that is not his or her family home, within five years of the acquisition of the property, income tax can be due over the (reduced) capital gain at a flat rate of 16.5 per cent (increased with surcharges).
Belgium has no authority, according to the double tax treaties, to levy income taxes over capital gains if real property situated outside Belgium is sold by a Belgian individual.Non-cash assets
What, if any, taxes apply on the import or export, for personal use and enjoyment, of assets other than cash by an individual to your jurisdiction?
Customs duties, excises (only for goods that qualify as excise goods) and import value added tax (VAT) will, in principle, become due when goods are brought into Belgium from outside the European Union. However, goods having no commercial character (therefore for personal use and enjoyment) contained in personal luggage may be exempted from duties and taxes within certain limits.
There are no customs duties payable when travelling from another EU member state to Belgium. The same goes for excise duties and VAT as long as the goods are purchased tax included and they are destined for personal use.
EU and Belgian legislation foresee certain general reliefs of import duties, excises and VAT, such as for persons transferring their normal residence from outside the European Union to Belgium.
In principle, there are no customs duties, excises or VAT due if goods are taken out of Belgium (eg, export). Individuals having their residence outside of the EU can apply for a refund of the VAT paid on goods purchased in Belgium and intended for personal use when they are exported to a place outside the EU in their personal luggage.
In Belgium, the standard rate for VAT over consumer goods amounts to 21 per cent.Other taxes
What, if any, other taxes may be particularly relevant to an individual?
There is no general wealth tax in Belgium.
However, tax on stock exchange transactions (TSET) is due on stock exchange transactions entered into or carried out in Belgium and on stock exchange transactions entered into or carried out by foreign intermediaries on behalf of Belgian residents. The TSET rate due depends on the underlying financial instrument such that 0.12 per cent is due on bonds, 0.35 per cent on shares and 1.32 per cent on capitalising shares. The TSET due on a transaction is limited to €1,300, €1,600 or €4,000 respectively.
Belgium also levies a tax on securities accounts of 0.15 per cent on securities accounts that include an average value of more than €1,000,000. All financial securities held in the account are targeted, including cash. The tax is due both on the Belgian and foreign securities accounts if the account holder is a Belgian resident. If the securities account is held by an entity targeted by the Belgian Cayman tax, the tax due will be levied in the hands of the Belgian resident who is the founder of the entity. If the account holder is a non-Belgian resident, the tax is limited to securities accounts held in Belgium. The tax is not limited to natural persons. The tax is also applicable to companies and other legal entities.Trusts and other holding vehicles
What, if any, taxes apply to trusts or other asset-holding vehicles in your jurisdiction, and how are such taxes imposed?Targeted foreign legal structures
Belgium applies the Belgian Cayman tax to Belgian residents who are the founder or beneficiary of targeted foreign legal structures. The following foreign legal structures are targeted:
- all trusts;
- (certain categories of entities equated with) low-taxed companies and foundations established outside the EEA, as well as (certain categories of entities equated with) low-taxed companies and foundations established in the EEA that are included in a ‘blacklist’ that defines the categories of targeted entities (eg, the Luxembourg SPF); and
- insurance contracts that either provide for the distribution of assets of (1) or (2), or both, structures or have been funded with assets of (1) or (2), or both, structures.
Further, fund-linked entities are targeted when they are fully controlled by an individual (and his or her family).
Founders are both the legal founders and the economic founders as well as the persons who hold the shares of (2) structures and the persons who concluded the insurance contract and on whose behalf the premiums have been paid (3). Upon the demise of the legal and economic founder, the heirs of this founder will be subjected to the Belgian Cayman tax if they are Belgian residents. Heirs can only avoid the application of the Belgian Cayman tax if they can provide evidence that neither they nor their heirs will ever receive a benefit from the foreign legal structure.
The Belgian Cayman tax includes a transparency measure, a tax on (deemed) distributions and a reporting obligation.
First, the Cayman tax subjects founders to the ‘look-through tax’, a transparency measure on the basis of which founders are taxed on the income of the structure, as if they received the income directly, regardless of whether the income was actually distributed to them or not. The taxability of income and the applicable tax rates depend on the income tax regime applicable to individuals. For example, if a targeted structure sells a substantial shareholding to a third party, the look-through tax can be without consequence (capital gain exempted). If the structure concerns a double layer structure, the look-through tax can be applicable to the income of all targeted entities in the structure.
Further, beneficiaries who are Belgian residents are taxed on distributions received at the flat tax rate of 30 per cent, insofar and to the extent that evidence cannot be provided that the distribution represents the initial capital or income that has been subjected to the look-through tax. Distributions are deemed to be made on a FIFO-basis.
Moreover, the contribution of assets of targeted structures and the transfer of such assets to a state with which Belgium did not conclude an agreement on the exchange of tax information can qualify as a deemed distribution, taxable in the hands of the founder.
Last, founders and beneficiaries (who actually received a distribution) need to report the existence of the targeted foreign legal structure in their annual income tax return and need to declare the income or the (deemed) distribution of the foreign legal structure. Income tax is due through the annual income tax assessment.
Since its introduction, the Belgian Cayman tax has been amended and extended several times. It is expected that the Cayman tax will be extended again in the future.
Belgian holding companies
Profits of Belgium-based holding companies are subject to corporate income tax at a flat rate of 25 per cent. The basic rate of 25 per cent is (partially) increased with a surcharge of 6.75 per cent (as a penalty) if (and insofar) the tax hasn’t been paid in advance during the book year. If certain conditions are met, capital gains realised on subsidiaries are 100 per cent tax exempt, and dividends received from subsidiaries are 100 per cent tax exempt as well. Dividends distributed to shareholders, who are residents of Belgium, are taxed at a flat rate of 30 per cent. Under strict conditions, dividends can be subject to a flat tax rate of 15 per cent. Dividends received upon the liquidation of a company qualify for a flat tax rate of 10 per cent when conditions are met.
The holding needs to submit a corporate income tax return annually. Corporate income tax is due through the annual corporate income tax assessment.Charities
How are charities taxed in your jurisdiction?
A specific Belgian tax regime applies to charities. Mainly, this specific tax regime taxes the charitable entity on capital income, capital gains and real estate income. Private foundations and (international) non-profit associations are subject to an annual tax of 0.17 per cent on the value of certain of their assets.Anti-avoidance and anti-abuse provisions
What anti-avoidance and anti-abuse tax provisions apply in the context of private client wealth management?
On the basis of the general anti-abuse provision, the Belgian tax administration can disregard a legal act or a series of legal acts that frustrate the Belgian Income Tax Code if the Belgian resident cannot demonstrate that the choice for this legal act or this series of legal acts was made for a reason other than tax reasons. The Belgian tax administration can also disregard the sale, cession or contribution of certain assets to a foreign entity that is either not subject to income tax or subject to a significantly more beneficial income tax in the jurisdiction of establishment.
A similar anti-abuse provision has been introduced for legal acts or a series of legal acts that frustrate the Belgian Income Tax Code and that are executed by foreign legal structures targeted by the Belgian Cayman tax.
Such an anti-abuse provision also exists in respect to the tax on securities accounts, for example, to prevent that the tax can be avoided when a securities account is split for tax purposes only.
Belgium also introduced a similar anti-abuse provision for inheritance tax purposes. The tax administration circulated a ‘blacklist’ and a ‘whitelist’ of legal acts that, in principle, are considered to be either tax abuse or not tax abuse.
Further, certain gifts qualify as fictitious legacies, meaning that they will be taxed in the estate of the donor.