Belgium Tax System: How It Works
Welcome to the world of Belgian waffles, chocolate, and, you guessed it, taxes! Navigating the tax system in Belgium can feel like trying to solve a Rubik’s Cube blindfolded.
But don’t worry; we’re here to remove the blindfold and guide you through the intricate dance of income brackets, deductions, and tax rates. Ready to become a tax-savvy expat in the land of Trappist beer?
Let’s dive in!
Who Needs To File Taxes In Belgium?
In Belgium, residents and non-residents who earn income from Belgian sources must file a tax return with the Belgian tax authorities. This comprises earnings from jobs, self-employment, investments, and rental income.
Residents pay taxes on all earned income, whilst non-residents only pay taxes on income generated in Belgium. Belgium, like the United States, has a progressive income tax system.
However, the rates are far higher, beginning at 25% and rising to 50%.
Tax System In Belgium
Belgium’s tax rates are one of the highest in Europe. For example, the highest income earners can pay up to 50% in personal income tax, which is significantly higher than in many European countries.
If you are a foreigner working in Belgium, you usually have to pay Belgian taxes and submit a tax return. Property owners may also be responsible for property tax, gift tax, and inheritance tax.
However, if you earn money from a source outside of Belgium, you will almost likely avoid double taxes. There are around 150 agreements in effect with other countries that prevent residents from paying additional income taxes in their own country.
Qualifications For Belgian Residents
Those who have applied for residency in Belgium or were born and awarded citizenship in the country are called residents. You can become a resident by obtaining a work visa or the country’s entrepreneurship visa.
In brief, if you live in Belgium, you are taxed on your entire income.
Belgium Non-resident Qualifications
If you’re a US expat without a work visa, you’re probably not a Belgian resident. In this instance, you are considered a non-resident and will be taxed on any Belgian-earned income rather than foreign income.
Belgium Federal Taxes
Some Belgian taxes are collected and charged at the regional level, whereas others are controlled by specific municipalities. In Belgium, income tax, VAT, and corporate tax follow the same regulations across the country.
Taxes are usually collected by the national government.
Other taxes vary significantly depending on where you live in Belgium. For example, inheritance tax rates differ in Brussels, Flanders, and Wallonia.
Local taxes In Belgium
Municipal taxes on utilities such as TV, garbage collection, and water are levied by the respective regions, provinces, and municipalities (communes/gemeenten) at rates of up to 9%. This is part of your income tax.
The exact amount you’ll have to pay is determined locally. For example, each of Brussels’ 19 municipalities sets its rate. Non-residents do not pay municipal taxes. Instead, they pay a fixed 7% federal tax rate.
Tax On Goods And Services
In Belgium, VAT is known as Taxe sur la Valeur Ajoutée (TVA) or Belasting over Toegevoegde Waarde (BTW). This applies to the majority of goods and services.
The usual rate is 21%, although there are lower rates for some types of goods and services. Food provided in restaurants and social housing is taxed at 12%, whereas the majority of essential products, such as food, water, books, and medicine, are taxed at 6%.
Some daily and weekly magazines, as well as recycled goods, offer a 0% rate.
Who Has To Pay Taxes In Belgium?
The amount you must pay in Belgium varies depending on whether you are a resident or a non-resident. If you live in Belgium for at least six months (183 days) per year and are registered with your local commune, you are considered a resident for tax reasons.
As a result, you must pay Belgian income tax on your worldwide earnings.
Your taxable income is the amount left over after deducting things like social security contributions, personal allowances, and professional fees.
Belgian Tax System For Foreigners
If you live in Belgium for less than six months (183 days) per year, you are only taxed on income earned within the country, including rents and capital gains.
Expatriates working in Belgium temporarily may be eligible for a special taxation scheme that allows them to pay Belgian income tax on their income in Belgium (rather than their total income), even if they are categorized as Belgian residents.
Expatriate Tax Regime For Executives And Specialists
In 2022, a new tax regime for executives and specialists was implemented. This arrangement applies to employees and directors hired abroad or assigned to Belgium, who are free from paying taxes on 30% of their income, up to €90,000.
Unless they are a researcher, their income must exceed €75,000, and the regime is valid for five years.
The objective of this tax regime is to establish a more transparent system and to make involving international CEOs easier.
Income Tax In Belgium
Belgian residents pay personal income tax on their total worldwide earnings on a sliding basis. The tax brackets for 2023 are listed below:
Income Tax Bands For The 2023 Tax Year
| Belgian income tax bands | Belgian tax rate |
| Up to €15,200 | 25% |
| €15,200–€26,830 | 40% |
| €26,830–€46,440 | 45% |
| €46,440+ | 50% |
Your income is defined by your pay minus any mandatory social security contributions (made in Belgium or abroad). Everyone is entitled to a personal tax-free allowance.
This is €9,270 in 2023 (based on profits from 2022) and will increase to €10,160 in 2024 (based on earnings from 2023). If you have children, your tax-free allowance grows.
If your income falls below the tax-free threshold, you are eligible for a tax refund. The Belgian government gives instructions on how to do this; however, if you want to save time and energy, consider using a service like Taxback.
In this manner, the specialists will handle the process and documentation for you, ensuring that you receive the most amount back.
Individual income taxes in Belgium are progressive, which means that higher income levels are taxed more heavily. The tax rate for those with very low incomes is merely 25%, whilst the wealthiest members of society pay 50%.
Applying a tax allowance might reduce your annual taxable income. Personal and marriage allowances are two of the most popular tax breaks in Belgium. To compute your tax rate correctly, you must first determine your tax resident status.
Belgium’s Corporate Income Tax (CIT) Rate
A firm with its major place of business or management in Belgium (where corporate decisions are made) is considered a resident for tax purposes.
The CIT tax base is generally based on an accrual approach, with corporate revenue consisting of worldwide income less any allowable deduction.
The CIT rate is 25% for Belgian companies and Belgian Permanent Establishments (PEs) of foreign firms. However, the latter is subject to non-resident CIT.
Under certain conditions, small and medium-sized businesses might pay a lower CIT rate of 20% on their first €100,000 profit.
For the 2022 tax year, Belgium’s tax authorities impose a 6.75% surcharge on the final CIT amount assessed.
How To File An Income Tax Return In Belgium?
The Belgian tax year runs from January 1 to December 31. A yearly return is required for all Belgian residents and non-residents who are taxed on income earned in Belgium.
Usually, you receive a tax return (déclaration/aangifte) for the previous year’s income in May or June. Paper tax returns must be received by the end of June.
You normally have until mid-July to file your return if you use the online filing system. Residents who file ‘complicated’ tax returns can receive an extension until mid-October. Non-residents file their taxes in late September or early October.
Self-employed Income Tax In Belgium
Self-employed people pay the same rates of income tax as employed workers in Belgium.
To pay taxes, self-employed individuals and freelancers must register with the tax office and, if necessary, the VAT office. This is accomplished through a one-stop shop or company counter (guichet d’entreprise in French, ondernemingsloket in Dutch).
Belgium’s Wealth And Property Tax
Property owners are required to pay an annual tax based on their ownership as of January 1 of each year. The amount is computed using the presumed yearly rental value (revenue cadastral/kadastraal inkomen) assigned to the property by local authorities.
The tax paid varies by municipality and region. In the Flemish region, it is usually 2.5% of annual rental revenue; in the Brussels-Capital Region, it is 2.25%; and in the Walloon region, it is around 1.25%.
Tax Exemption On Property Purchases
When you buy a property in Belgium, you must pay a transfer tax (also known as registration tax) to transfer ownership of the property to your name.
Depending on where you buy the property in Belgium, you can expect to pay between 6% and 12.5% of the transaction price.
In Brussels, you can get a tax break (abattement) on the first €200,000 (up from €175,000 in 2023) of the property’s price.
Wallonia offers a reduced abattement of €20,000. Properties under two years old are subject to VAT rather than transfer tax.
Inheritance Taxes In Belgium
Inheritance tax is levied on the total worth of a person’s estate who is permanently residing in Belgium, as well as on any property owned in Belgium if they are not.
The amount of tax you pay varies by area. It is paid to the region where the deceased was a tax resident for the bulk of their final five years.
Gift Tax
Belgium has a three-year limitation for donating movable and immovable property. This means that if you give anything to an heir and then die within three years, they must pay inheritance tax on the amount of the gift.
Gift tax rates, like inheritance taxes, vary based on where the deceased lived in Belgium and their relationship with the beneficiary.
Company Taxes And VAT Rates In Belgium
In 2023, Belgium’s basic company tax rate will be 25%. Before 2021, businesses had to pay 29% plus a 2% crisis tax. The rate for companies with profits of less than €100,000 is 20%.
Tax Rebates And Reliefs In Belgium
Individual Belgian taxpayers can deduct up to €5,520 in employment-related expenses when completing their tax returns, in addition to the regular tax-free limit.
They can also claim tax breaks on charitable donations, mortgage payments, pension and life insurance contributions, and childcare expenses.
Tax Avoidance And Evasion In Belgium
Belgian authorities are increasingly attempting to combat tax evasion. In 2023, additional powers were granted to the tax authority to better investigate tax fraud.
These include a four-year tax assessment period for late or unfiled returns, as well as a new law mandating internet platforms to transmit information to tax authorities.
If you fail to submit your tax return on time or pay an outstanding tax bill, you will face a penalty. The amount you must pay is determined by how late the return or payment is, as well as whether you are found to be actively avoiding tax.
Late submissions can result in fines ranging from €50 to €1,250, as well as a tax surcharge of 10% to 200%.
Tax penalties also exist for companies that fail to file returns or pay their taxes. Again, fees of up to 200% are possible, as are further legal penalties. The amount punished varies according to the company’s turnover, number of employees, and sector.
What Other Taxes Are There In Belgium
Aside from personal income and business taxes, the Belgian tax system includes other taxes such as:
- The real estate property tax, which is based on the presumed yearly rental value and varies by location;
- The social security tax, which ranges from 34.58% to 40.58% for companies and 0.05% to nearly 13% for employees;
- The inheritance tax, which is imposed at varied rates depending on the location;
- The standard value-added tax rate is 21%, however, reduced rates of 12%, 6%, and 0% apply to specific product categories.
Tax Advice In Belgium
Paying your taxes in Belgium can be complicated. The information provided here is a basic overview; however, you should always get professional counsel from Belgian financial experts about your specific tax position.
Conclusion
And there you have it—a whirlwind tour through Belgium’s tax system, hopefully with fewer twists and turns than a day in Bruges.
Armed with this knowledge, you’re now better prepared to tackle your taxes with the finesse of a Belgian chocolatier.
Remember, understanding your tax obligations is the key to unlocking a smooth expat experience in Belgium. So, go forth, file wisely, and enjoy the financial waffles that await.
Happy filing!
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