Eu officials and Belgian Taxes
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Transcript of Eu officials and Belgian Taxes
1.7323 1.5271 1.50544.23 0.75 2015
EU officials and Belgian taxes
Summary
&
FAQs
Marc Quaghebeur
© Marc Quaghebeur [email protected]
De Broeck Van Laere & Partners www.dvp-law.com
Rue Jules Besme 126 Tel : 02.423.00.42
B-1081 Brussels Fax : 02.423.00.32
Introduction
This document is a summary introduction to the tax rules governing
EU officials in accordance with Articles 12 and 13 of the Protocol on
Privileges and Immunities of the European Union as well as the tax
rules in Belgium and in a number of other EU Member States.
These insights have been gained by giving presentations to EU
officials in Brussels, answering their questions and trying to
anticipate misunderstandings. The first part is a summary of the
rules, and the tax implications for EU officials who are either
domiciled outside Belgium or for whom Belgium is their tax
domicile. The second part covers some of the frequently asked
questions at the lectures I gave for the Union Syndicale.
This text does not have the ambition to be comprehensive, and to
cover all issues and situations. However, it can be read as a guide to
understand the rules and to ask your adviser the correct questions.
Marc Quaghebeur
Brussels, 17 February 2015
CONTENTS THE PROTOCOL EXPLAINED......................................................... 9
Why a Special Tax Regime for EU Officials? .................................. 9 Article 12 - Exemption ................................................................. 13
Article 12 – What does “exempt” mean? ................................ 14 Article 12 – What does “exempt” not mean? ......................... 15
Article 13 – Domicile ................................................................... 17 Article 13 – Can an EU Official change his domicile? .............. 19 Article 13 – Domicile of the Spouse ........................................ 20 Article 13 - Gainful occupation ................................................ 24 Article 13 – Domicile of the Children ...................................... 25 Article 13 – Consequences of domicile ................................... 25 Article 13 – Domicile – For which taxes? ................................ 26
MY DOMICILE IS OUTSIDE BELGIUM ........................................... 29
I am not domiciled in Belgium, do I pay tax? .............................. 29
You have earnings ................................................................... 29 You own real property in Belgium ........................................... 29 You have a Belgian bank account ............................................ 31 You hold shares or bonds issued by a Belgian company ......... 32 You sell and make a capital gain ............................................. 32
Do I need to file a tax return if I am not domiciled? ................... 33 Do I declare my Income at home as well? .................................. 34 If I pay tax in Belgium and at home, do I pay tax twice? ............. 35 What is the EU Savings Directive? ............................................... 38
A common misunderstanding about the EU Withholding Tax 39 What information does Belgium give to EUMmbria? ............. 39 What does this mean for you? ................................................ 40 What can EU officials do to prevent reporting? ...................... 40
If I am not domiciled, which taxes do I pay in Belgium? ............. 42 Inheritance tax when a non-domiciled EU official dies ............... 43 Inheritance Tax - Double Taxation?............................................. 44 A non-domiciled EU official makes a donation ........................... 45
BELGIUM IS MY DOMICILE ......................................................... 47
I am domiciled in Belgium, do I pay tax? ..................................... 47
Earnings ................................................................................... 47 Income from Real Property ..................................................... 48 Dividends ................................................................................. 49 Interest .................................................................................... 49 Capital gains ............................................................................. 50
Inheritance tax when a domiciled EU official dies....................... 51 Inheritance Tax - Double taxation ............................................... 53 Gift Tax and other Estate Planning .............................................. 54
FAQS AT THE UNION SYNDICALE LECTURES ................................ 55
Exemption of income................................................................... 55 Pensions ................................................................................... 55 What does exemption mean? ................................................. 56 Taking account of the EU income ............................................ 56
Domicile ....................................................................................... 59 Where is my domicile? ............................................................ 59 Spouses and partners .............................................................. 63 How does it work? ................................................................... 64
Belgian Income Tax ...................................................................... 65 Dividends and interest ............................................................. 65 Rental income .......................................................................... 68 Titres service ............................................................................ 70 Capital gains tax ....................................................................... 71
Inheriting and Inheritance Tax .................................................... 73 What is the applicable law? ..................................................... 73 Making a will ............................................................................ 74 The European Regulation on Successions ............................... 76
Gift tax ......................................................................................... 81 Questions of Estate Planning ....................................................... 83
ANNEXES .................................................................................. 86
Model of a Handwritten will ........................................................ 86 Gift and Inheritance Tax Rates .................................................... 88
EU OFFICIALS AND BELGIAN TAXES
8
THE PROTOCOL EXPLAINED
9
THE PROTOCOL EXPLAINED
Belgium is the host country for many international institutions.
Before establishing their seat in Belgium, most of these institutions
sign a convention with Belgium in which their privileges and
immunities are secured. These conventions usually have one or two
provisions that deal with the tax situation of the officers of the
international institution.
Usually, these provisions grant a tax exemption for income received
from the institution, while any other income is liable to tax in
Belgium. For officials of the European Institutions, the situation is
completely different.
Why a Special Tax Regime for EU Officials?
1. It is a principle of diplomacy that when an international
organisation sets up its seat in a country, that state will not tax the
institution or its officials. By granting fiscal immunity in a bilateral
agreement, it secures the institution’s independence.
When the founding fathers of the European Union worked out the
status of the Institutions, they had to take measures to avoid
double or triple taxation. And they had to combine that with
immunity for the Institutions and the EU officials.
Of course, the Institutions would levy their own taxes on the
remuneration they pay to their officials, but not on any other
income. Theoretically, income tax could be claimed by the country
where they are working for the institution, in the country where
they are living and by their country of origin. And that could be the
state that has given them their citizenship or the state where they
were living before joining the institution.
2. They had to come up with a solution that would guarantee a sort of
‘free movement of EU officials’. If an official decided to go and
EU OFFICIALS AND BELGIAN TAXES
10
work in another country, he should not be worse off … and the
Court of Justice of the European Union will later add that he should
also not be better off.
The rules were laid down in Article 12 and Article 13 of the Protocol
on Privileges and Immunities of the European Union.
THE PROTOCOL EXPLAINED
11
EU OFFICIALS AND BELGIAN TAXES
12
Article 12
Officials and other servants of the Union shall be
liable to a tax for the benefit of the Union on salaries,
wages and emoluments paid to them by the Union, in
accordance with the conditions and procedure laid down
by the European Parliament and the Council, acting by
means of regulations in accordance with the ordinary
legislative procedure and after consultation of the
institutions concerned.
They shall be exempt from national taxes on salaries,
wages and emoluments paid by the Union.
THE PROTOCOL EXPLAINED
13
Article 12 - Exemption
3. Article 12 lays down the principle that 'Income from the Union' paid
to EU officials is liable to the Union Tax and that it is exempt in any
of the Member States. That is the case for his earnings (salaries,
wages and emoluments), but also for :
– allowances;
– child benefit;
– an invalidity pension;
– his retirement pension;
– the survivor’s pension paid to his spouse or children;
These types of income are exempt from income tax in the country
where the EU official works, where he lives, where he was recruited
... in short in every Member State.
Of course, a State that is not an EU Member State is not held by the
Protocol, and the Union Income may well be liable to income tax
there. This would not be a problem for EU officials who are working
in a diplomatic mission outside the EU. However, this is something
that EU officials who are considering retiring outside the EU should
keep in mind that if they retire in e.g. Australia or in the U.S., they
will be liable to income tax there. There is one exception:
Switzerland1.
EU officials who have a double nationality, the nationality of an EU
Member State and that of a non EU Member State risk paying tax
on their EU remuneration if the other state taxes its citizens based
on their citizenship, even if they are living abroad. That is in
particular the case for U.S. citizens.
1 Agreement of 26 October 2014 between the Swiss Federal Council and
the Commission of the European Communities with a view to avoiding the double taxation of retired officials of the institutions and agencies of the European Communities resident in Switzerland.
EU OFFICIALS AND BELGIAN TAXES
14
Article 12 – What does “exempt” mean?
4. Exempt under Article 12 of the Protocol means in the first place
that the official does not have an obligation to declare the Union
Income in an income tax return or to pay income tax on that Union
income in any Member State.
5. That also means that a Member State cannot indirectly charge
income tax on that income. The Court of Justice of the European
Union has confirmed that:
– the tax authorities of a Member State cannot charge more
tax to the official's spouse by calculating the tax on her
income and on that of the official (Case 6/60, Humblet,
[1960] ECR, 1125) ;
– the tax authorities of a Member State cannot refuse to grant
a tax reduction of the annual real estate (précompte
immobilier) to a landlord when an EU official is renting his
property and has two or more dependent children (Case
260/86 Commission v Belgium, [1988] ECR 955);
– the tax authorities of a Member State cannot discriminate EU
officials by refusing them certain tax advantages (Case C-
229/98, Vander Zwalmen and Massart v. Belgian State,
[1999] ECR, p. I-7113).
– the tax authorities of a Member State cannot take account of
the income paid by the European Union to its officials and
other staff (or pensions and allowances paid to former
officials), in calculating the cap on a tax such as the wealth
tax (impôt sur la fortune) (Case C-558/10, Bourgès-Maunoury
and Heintz v Direction des services fiscaux d’Eure-et-Loir,
[2012] ECR, p. I-418).
THE PROTOCOL EXPLAINED
15
Article 12 – What does “exempt” not mean?
On the other hand the state where the EU official works or lives
does not have to give him any preferential treatment. The Court of
Justice has confirmed this in a couple of cases:
– The public authorities may calculate a charge or due (a
school levy for a child that attends a public school) on the
basis of the salary paid by the Union to the EU official. That
charge is not a tax in the sense of article 12 paragraph 2 of
the Protocol (Case 32-67, I.G.F. Van Leeuwen v. City of
Rotterdam, [1968] ECR, p. 63).
– EU officials must not be treated as low income taxpayers;
they must not be given the same advantages as low income
tax-payers to subsidise the purchase of property (Case C-
333/88, Tither v. Commissioners of Inland Revenue, [1990]
ECR, p. I-01133)
– the taxman must not give a tax deduction to the spouses of
EU officials as if they were married to someone who was not
working or who had low earnings (Case C-229/98, Vander
Zwalmen and Massart v. Belgian State, [1999] ECR, p. I-7113).
6. Furthermore, that state must not give exemptions for other taxes
than the income tax: inheritance tax, VAT, real estate tax, stamp
duty (or registration tax on the purchase of property), water tax,
garbage collection tax, etc … may be due.
The taxman in the country of domicile may:
– charge income tax on the rental value of a property in
anothepr Member State (Case C-263/91, Kristoffersen v.
Skatteministeriet, [1993] ECR, p. I-02755) ;
– charge inheritance tax on a survivor’s pension paid by the
European Institutions (Brouerius van Nidek v. Inspecteur der
Registratie en Successie, Case 7/74 [1974] ECR 757).
EU OFFICIALS AND BELGIAN TAXES
16
Article 13
In the application of income tax, wealth tax and
death duties and in the application of conventions on the
avoidance of double taxation concluded between Member
States of the Union, officials and other servants of the
Union who, solely by reason of the performance of their
duties in the service of the Union, establish their residence
in the territory of a Member State other than their country
of domicile for tax purposes at the time of entering the
service of the Union, shall be considered, both in the
country of their actual residence and in the country of
domicile for tax purposes, as having maintained their
domicile in the latter country provided that it is a member
of the Union. This provision shall also apply to a spouse, to
the extent that the latter is not separately engaged in a
gainful occupation, and to children dependent on and in
the care of the persons referred to in this Article.
Movable property belonging to persons referred to
in the preceding paragraph and situated in the territory of
the country where they are staying shall be exempt from
death duties in that country; such property shall, for the
assessment of such duty, be considered as being in the
country of domicile for tax purposes, subject to the rights
of third countries and to the possible application of
provisions of international conventions on double taxation.
Any domicile acquired solely by reason of the
performance of duties in the service of other international
organisations shall not be taken into consideration in
applying the provisions of this Article.
THE PROTOCOL EXPLAINED
17
Article 13 – Domicile
7. Article 13 of the Protocol puts forward the principle that EU
officials, their spouses (as long as they are not working) and their
dependent children keep their domicile for tax purposes in the
Member State where they had their domicile at the time they were
recruited, if they move their residence only to enter the service of
the Union.
8. Article 13 states that for the application of income tax, wealth tax,
death duties, and in the application of the double tax treaties
between Member States, officials and other servants of the Union
shall be considered to have maintained their domicile in the latter
country. There are a few conditions.
– at the time of entering the service of the Union, they must
have moved to another Member State, i.e. have established
their residence in the territory of another Member State than
the country where they have their domicile for tax purposes,
– they must have moved their residence solely by reason of the
performance of their duties in the service of the Union, and
– the country of domicile must be a Member State.
Usually that will be the Member State where the official was
recruited.
9. Moreover, Article 13 clearly disregards the domicile an EU official
may have solely by reason of the performance of duties in the
service of another international organization. That domicile shall be
ignored. The Protocol does not say what domicile shall be taken
into account, but it stands to reason that that would be the
previous domicile.
EU OFFICIALS AND BELGIAN TAXES
18
10. A few examples will help explain this:
– a Greek national living in Athens recruited in Greece keeps
his domicile in Greece when he comes to work for the
European Parliament in Luxembourg ;
– an Italian national who was living in Belgium where she
worked for a consultancy group before joining the Council
has her domicile in Belgium ;
– a Bulgarian national who was raised in the UK, studied in
Germany and got his first job with a bank in Luxembourg,
married a French lady and lived with her in Metz, while
commuting to Luxembourg, has his domicile in France ;
– a Lithuanian national married an Italian while living and
working in London before joining the European
Parliament keeps her domicile in the U.K.
– An Irish national who joined the Commission in 1974 coming
from Ireland but who retires in Belgium was domiciled in
Ireland as long as he was working for the Commission but
took up domicile in Belgium when he decided to spend
his retirement in Belgium.
THE PROTOCOL EXPLAINED
19
Article 13 – Can an EU Official change his domicile?
11. The question is not without relevance.
12. Article 13 states that the official maintains his domicile if he has
moved his residence solely by reason of the performance of his
duties in the service of the Union. What if an official was already
planning to go and live in that country?
13. The question was submitted to the Court of Justice of the European
Union that decided that Articles 12 and 13 establish a division of
powers between the European Union, the Member State where an
official works and the Member State where he has maintained his
domicile. (Case C-88/92, Jansen van Rosendaal v Staatssecretaris
van Financiën, [1993] ECR, p. I-03315).
The official does not have the free choice to move his tax domicile
to another State. However, the Court does not exclude that the
official was already planning to move to the other state, but in that
case his intentions alone are not sufficient. He must also prove that
he had already taken steps to transfer his domicile irrespective of
entering the service of the Union.
14. Of course, one can change domicile after leaving the service of the
Union. An EU official who stays in Belgium upon retirement will
become a Belgian resident.
EU OFFICIALS AND BELGIAN TAXES
20
Article 13 – Domicile of the Spouse
15. Article 13 of the Protocol extends the benefit of the deemed
domicile to the spouse and the children.
16. For the spouse, the provision (that the EU official maintains his
domicile in the state of recruitment) also applies "to the extent that
the latter is not separately engaged in a gainful occupation".
In the minds of the authors of the Protocol, the situation was quite
clear. The EU official came to work in Brussels, and his wife
followed. As long as she was staying at home, she was also deemed
to have maintained her domicile in the state from where the
husband was recruited, and if she decided to take up a job, she
would then take up residence in the country where she was living.
17. Since then, things have changed a lot. EU officials meet their
spouses at work or after hours, their spouse can be another EU
official or a local resident. Or they come with their partners, they
marry in Belgium (or they don’t), they separate or divorce and their
wife of partner continues to live here. Alternatively, the spouse
starts a job and then he decides that he prefers to be a stay-at-
home dad.
18. How do we have to read article 13 in those circumstances?
First of all, it is important to note that article 13 does not say that
the spouse has the same domicile as the EU official. It states that
“this provision shall also apply to a spouse, to the extent that the
latter is not separately engaged in a gainful occupation”. “This
provision” must then be translated as “the spouse who, solely by
reason of the performance of their [spouse’s] duties in the service of
the Union, establish[es] their residence in the territory of a Member
State other than their country of domicile for tax purposes at the
time of entering the service of the Union, shall be considered, both
in the country of their actual residence and in the country of
THE PROTOCOL EXPLAINED
21
domicile for tax purposes, as having maintained their domicile in
the latter country provided that it is a member of the Union.”
Therefore, the spouse keeps the domicile he or she had when the
EU official came to Belgium. That will usually (but not necessarily)
be the same as the EU official, but that is not always the case. It is
possible that the spouse had kept his/her domicile in another
country and if that is an EU Member State, the spouse keeps
his/her domicile there.
In any event, a spouse who marries an EU official (i.e. after he
joined the institutions) does not take his domicile. Saying that the
spouse takes up the domicile of the EU official is, therefore, clearly
not correct. The spouse has a domicile of his/her own.
19. A few examples:
– An EU official comes to live in Belgium from Milan with her
Italian husband. As long as the spouse does not work, he is
deemed to live in Italy, but when he takes up a “gainful
occupation” (see p. 24 ) in Belgium he will become a Belgian
resident.
– An EU official whose domicile is in the UK works in Belgium
meets a Belgian girl who lives in Waterloo. They marry and
she gives up her job to look after the children. She was a
Belgian resident and she remains a Belgian resident.
– If an EU official marries a Croatian girl he met on holiday, and
she comes to live with him, then she takes up Belgian
residence. They met when he was already an EU official, she
takes up domicile in Belgium when she comes to live in
Belgium.
– An EU official meets another EU official in Brussels and they
marry. Both keep their domicile of recruitment, even if he
EU OFFICIALS AND BELGIAN TAXES
22
was recruited in Sweden and she came from Greece. See on
p. 23 to see for what happens upon retirement.
– An EU official with domicile in the Netherlands married a
Belgian resident man (Belgium accepts same sex marriages).
Because they met in Belgium, the Belgian husband keeps his
domicile in Belgium. The official is posted in the EU
representation in Finland. The Belgian husband stops
working to follow his husband to Finland. Will he keep his
Belgian residence? The EU official maintains his Dutch. The
husband will take up Finnish residence.
He does not acquire his husband’s Dutch domicile. He will
not keep his Belgian domicile because he does not “establish
his residence in another Member State at the time of (his
husband) entering the service of the Union” and he cannot
be considered “having maintained his domicile in the latter
country” if he has never had his domicile there. He will take
up residence in Finland.
– If the EU official and his spouse separate, i.e. take up
separate residences, she continues to be his spouse (until
they end the marriage by divorce) and she will continue to
keep her domicile where her husband has his domicile.
– If they divorce, she will become resident where she is living
at that time.
20. The rule only applies to spouses. Partners, even partners who have
registered their partnership (in Belgium “cohabitation légale”, in
the U.K. “civil partners” or in France “pacsés”, cannot claim to have
maintained domicile when their registered partner EU official
comes to work in Belgium.
21. What happens when the spouse stops working? Does the spouse
of an EU official who came to Belgium (or Luxembourg, …) who had
THE PROTOCOL EXPLAINED
23
lost his Italian domicile when he started working, become an Italian
resident again? Or does he remain a Belgian resident?
In my opinion, the wording of the text "to the extent that the latter
is not separately engaged in a gainful occupation" can be read in
one way only. Domicile can vary with the occupation of the spouse,
and that appears to be the way the EU Institutions read this text as
well.
I do not think that this means that the husband becomes a Belgian
resident when he starts to work in Belgium and remains a Belgian
resident until he leaves Belgium. A close reading of Article 13
shows that when he stops working, he takes up the old residence
again: he has the domicile he had before coming to Belgium "to the
extent that he is not separately engaged in a gainful occupation".
And it is only "to the extent that he latter is separately engaged in a
gainful occupation" that he has Belgian residence.
This has a curious effect when the spouse is alternatively working
during odd years and unemployed during even years. He/she would
be alternatively a Belgian resident and an Italian resident. That is
likely to complicate matters.
22. When an EU official retires, he takes up domicile in the country
where he takes up residence. If he goes back to his country of
domicile, e.g. Spain, he will just keep his domicile in Spain. If he
retires in Belgium, he will take up domicile in Belgium, and if he
moves to France, France will be his new domicile.
Normally, his spouse will follow the EU official, and move back to
Spain, stay in Belgium or move to France. If for one reason or
another she stays in Belgium (e.g. because the children are still at
school), she takes up residence in Belgium. If it is because she
continues to work in Belgium, she has taken up domicile in Belgium
and is keeping it here.
EU OFFICIALS AND BELGIAN TAXES
24
There can be a complication when the spouse stays in Belgium
because she is still working as an EU official and has not retired yet.
What about the retired EU official, does he then take up his wife’s
domicile even if he stays in Belgium?
We have seen above (p. 20) that article 13 does not say that the
spouse (in this case the retired EU official) has the same domicile as
the EU official even if that is often the case. A Danish retired EU
official does not take up Greek domicile because his spouse is an EU
official with a Greek domicile.
My conclusion would be the same when they had the same (e.g.
Swedish) domicile as EU officials. If the husband retires first, his
wife may have maintained a Swedish domicile because she
followed her husband and joined the Institutions later or she may
have joined at the same time. If the husband continues to live here,
he is actually making the choice to take up residence in Belgium,
but he cannot invoke the fiction that he has maintained his
domicile in Sweden because he did not come to live in Belgium
“solely by reason of the performance of his spouse’s duties in the
service of the Union”. He has his actual residence in Belgium
because he took up residence in Belgium for the performance of his
own duties and he stayed here. He can only take up Swedish
residence by moving to Sweden.
Article 13 - Gainful occupation
23. What is a gainful occupation? A gainful occupation is any
employment or profession that the spouse carries out. What when
the spouse works as a volunteer, without remuneration?
In this respect it is important to note that the original text, in
French, says "dans la mesure où celui-ci n'exerce pas d'activité
professionnelle propre". In the French text, a professional activity is
sufficient to lose domicile of origin, even if the spouse does not
earn any income (although that will usually not be the case). The
THE PROTOCOL EXPLAINED
25
texts in other languages also refer to a "professional activity" rather
than a “gainful occupation”.
However, receiving unemployment benefit would not qualify as a
“gainful occupation”, whereas working for free as a director or
consultant to a charity could be seen as a “professional activity”.
Article 13 – Domicile of the Children
24. Children shall be deemed to have their residence and domicile in
the country where their EU official parent is deemed to have his
domicile, if they are dependent on and in the care of the EU official.
That does not only apply to the EU official's own children and his
adopted children, but also to those of his spouse or partner, if the
children are dependent on him and are in his care.
Article 13 – Consequences of domicile
25. For an EU official, Article 13 means that he is deemed not to have
moved his residence or his domicile, and that he must pay tax in
that country as if he was still living there, on any income other than
his remuneration from the Union (that is exempt under Article 12).
This rule binds the taxman in the country where the officially
actually lives and works and the taxman in the country where he is
deemed to have his domicile for tax purposes.
26. But what about any other countries, the country where he owns
property, the country where a company is paying him a dividend, or
where he teaches? These countries are held by Article 13 of the
Protocol, but indirectly through a reference to the double tax
treaties. In fact, all Member States have signed a double tax treaty
with all or most of the other Member States, in which they
determine in which country income can be taxed: the country of
origin of the income (the source of the income) or the country of
residence.
EU OFFICIALS AND BELGIAN TAXES
26
When a British EU Official who is living in Belgium but has
maintained his domicile in the U.K., has income from a third
country, e.g. France, he can invoke the double tax treaty between
the U.K. and France, not the treaty between Belgium and France. If
necessary the country of his deemed domicile will deliver a
certificate of fiscal residence so that he can invoke the treaty
benefits and avoid double taxation.
Article 13 – Domicile – For which taxes?
27. According to Article 13 their original country of domicile will be
their domicile for income tax, wealth tax, inheritance tax, and for
the application of the double tax treaties between Member States.
Income Tax
In the first place, Article 13 applies to income tax: that is the tax on
income from real property, on income from investments (dividends,
interest, royalties, etc ... ) as well as on the earnings from any
professional activity other than that as an EU Official.
Wealth Tax
The EU Official also retains his original domicile for the wealth tax.
Fortunately, that is a limited problem. Sweden has abolished its
wealth tax in 2008 and only France levies a wealth tax (impôt de
solidarité sur la fortune (ISF)) from its residents if their wealth
exceeds € 1,300,000.
In Spain, the government has temporarily reintroduced the
"Impuesto sobre el Patrimonio" ; it was extended for 2015.
Inheritance Tax
Finally, the EU official retains his original domicile for the death
duties or inheritance tax, at least if he dies in office. Article 13
clarifies that movable property belonging to an EU official or other
THE PROTOCOL EXPLAINED
27
servant, their spouse (who is not gainfully employed) or their
children (if dependant and in their care) is exempt of inheritance
tax in the country where they are staying (for work). It will be
taxed in the country of his tax domicile.
28. Article 13 only applies to income tax, wealth tax and inheritance
tax. Other taxes are due in Belgium. That is the case for
– Registration tax or stamp duty on the transfer of real
property. Usually this is charged only in the country where
the property is located. There is little or no chance of double
taxation; in general, this does not cause any difficulties.
– VAT
– Gift tax is not covered by the protocol either and is normally
seen as separate from inheritance tax.
– Capital Gains Tax is not listed in Article 13. Does that mean
that it falls outside the ambit of article 13? There may be a
historic explanation why the capital gains tax is not
mentioned. At the time there were only six member states,
but some of the newer Member States have a separate
Capital Gains Tax code (U.K., Ireland, ...), while others do not
have any capital gains tax or include it in their income tax
code.
Moreover, the double tax treaties that cover income tax
issues usually have a provision dealing with Capital Gains Tax.
It appears that the U.K. tax authorities have taken a literal
reading of the Protocol. Since that does not mention the
Capital Gains Tax, an EU official who has maintained his U.K.
domicile must be treated as 'not resident and not ordinarily
resident' for Capital Gains Tax purposes, while 'resident but
not ordinarily resident' for income tax purposes.
EU OFFICIALS AND BELGIAN TAXES
28
– Garbage collection taxes
– Road taxes
MY DOMICILE IS OUTSIDE BELGIUM
29
MY DOMICILE IS OUTSIDE BELGIUM
I am not domiciled in Belgium, do I pay tax?
29. If you are an EU official with a domicile in another EU Member
State (let’s call it EUMmbria), you pay income tax in Belgium on
income from a Belgian source like any non-resident, i.e. like any of
your friends who still live in EUMmbria. The difference, of course is
that you have a higher chance of having income in Belgium because
you live in Belgium and they do not, but you are assimilated to a
resident of EUMmbria like them.
In principle, you pay tax on your worldwide income in your country
of domicile or residence (the “state of residence”, EUMmbria) but
not on the remuneration you receive from the EU Institutions, and
in the country where the income has its source (the “state of
source”). If that is Belgium, you are taxed here on any income that
originates in Belgium.
You have earnings
30. If you earn remuneration other than “EU income” e.g. from a
Belgian employer, as a self-employed in Belgium, etc … that income
has to be declared and will be liable to tax in Belgium
31. However, tax may be due as well in your country of domicile,
EUMMbria, see, p. 34.
You own real property in Belgium
32. If you own property in Belgium, you will receive every year a bill for
the real estate tax (précompte immobilier / onroerende
voorheffing). It is charged automatically by the region. It is
calculated as a percentage of the cadastral revenue, depending on
the commune. There is no uniform tax rate for the whole of
EU OFFICIALS AND BELGIAN TAXES
30
Belgium. In some communes the rate can be very low, while in
others, it can go up to 50 % of the indexed “cadastral revenue”.
The cadastral revenue (revenu cadastral / kadastraal inkomen) is
the theoretical rental value for the property in figures dating back
to 1975.2
33. If you own property you must also declare the income in your
annual income tax return. The tax regime depends on the situation:
– you do not have to declare the cadastral revenue of your
main residence, you are not liable to income tax on it.
– If you have a second residence in Belgium, you have to
declare the cadastral revenue. The tax will be calculated on
140% of the cadastral revenue corrected for inflation; that
means you pay tax on 2.43 times the cadastral revenue.
– If you own a property that is let out you (but not to a
company or for a business), you also declare the cadastral
revenue. The tax is calculated on 2.43 times the cadastral
revenue.
As a rule of thumb, the cadastral revenue is about one
month’s rent. As a landlord, you pay income tax on
about two and a half months’ rent.
– If your tenant is a company or an individual who uses the
property for his job (e.g. a ‘liberal profession’), you have to
declare the rent you actually receive (including any expenses
paid by the tenant) but you are entitled to a deduction of
40% of the cadastral revenue. However, this deduction is
limited to 2.82 times the cadastral revenue.
2 If the property is let, the landlord cannot charge back the real estate tax
to a private tenant for whom the property is his main residence.
MY DOMICILE IS OUTSIDE BELGIUM
31
Generally speaking, the landlord pays tax on about ten
months’ rent.
34. If you receive rent, you can deduct the interest paid (during the tax
year) to finance the acquisition or the renovation or refurbishment
of the property. The deduction is limited to the taxable income.
35. When you sell the property, the capital gain realised on your main
residence is exempt. The capital gain on a second residence or
other property in Belgium is tax exempt if you have kept the
property for five years. If you buy and sell before the five years are
over, capital gains tax is due at 16.5 %.
36. However, tax may be due as well in your country of domicile,
EUMmbria, see, p. 34.
You have a Belgian bank account
If you receive interest on a Belgian bank account 25% tax is with-
held at source (précompte mobilier/roerende voorheffing). There is
an exemption for the first €1,880 (per spouse or partner) in interest
received on a savings account.
37. As a non-resident, you can get an exemption of tax on interest. As
an EU official, you can obtain a form “HIS 276” that confirms that
you have maintained your domicile outside Belgium; the bank will
accept that as proof of non-residence. Check p. 38 about the EU
Savings Directive.
38. If you hold shares or bonds on an account with your bank, the bank
will deduct 25% withholding tax.
39. You do not need to declare income on foreign bank accounts.
EU OFFICIALS AND BELGIAN TAXES
32
You hold shares or bonds issued by a Belgian company
40. If you hold shares in a Belgian company, or if you have bonds issued
by a Belgian company, that company will deduct tax at source at
25% (15 % for dividends paid on certain shares issued since 2013).
41. However, tax will probably be due as well in your country of
domicile, EUMMbria, see, p. 34. Note that you can get an
exemption or a reduction of the withholding tax under the double
tax treaty between Belgium and EUMmbria.
You sell and make a capital gain
42. When you sell your main residence in Belgium, the capital gain is
exempt. When you sell a second residence or other property in
Belgium, there is no capital gains tax if you have kept the property
for five years. It is only if you buy and sell within five years that
capital gains tax is due at 16.5 %.
43. Please note that capital gains tax may be due as well in your
country of domicile, EUMMbria, see, p. 34.
44.
MY DOMICILE IS OUTSIDE BELGIUM
33
Do I need to file a tax return if I am not domiciled?
45. In principle, an EU official living in Belgium but with a domicile
outside Belgium, in EUMmbria, must file an income tax return as a
non-resident (impôt des non-residents / belasting van niet verblijf-
houders) if they have income that is taxable in Belgium. That will
be the case if they have rental income from a property that is
rented out, if they sell a second residence within five year or if they
have earnings (see above).
It is on the resulting net income that the income tax is calculated in
accordance with the following rates for year of assessment 2016
(income 2015).
On the bracket Rate The tax is between
between € 0 and € 7,090 0% 0
€ 7,090 and € 8,710 25% € 0 € 405
€ 8,710 and € 12,400 30% € 405 and €1,512
€ 12,400 and € 20,660 40% € 1,512 and €4,816
€ 20,660 and € 37,870 45% € 4,816 and €12,561
over € 37,870 50% over € 12,561
Husband and wife or civil partners (cohabitants légaux/wettelijk
samenwonenden) are taxed together. Each has a personal
allowance of € 7,090 that can be increased with other allowances
(e.g. for dependent children). However, as the table indicates, the
tax is calculated starting from € 7,090. If the allowances exceed €
8,710, the tax is calculated at 30%, etc.
The EU official and his spouse are not taxed together if the EU
official has income in excess of €10,230.
EU OFFICIALS AND BELGIAN TAXES
34
Do I declare my Income at home as well?
46. If you have your tax residence in another EU Member State, you
will normally have to declare all your income with the exception of
the remuneration from the Institutions, in your country of domicile,
in EUMmbria. Failure to declare you income may expose you to
penalties and possibly criminal prosecution.
47. Please note that it is more than likely that the rules to calculate the
taxable income and the deductions you are allowed to set off
against the taxable income are different at home than they are in
Belgium.
That means that you may have to declare and pay tax on all the
rent you receive for your Belgian property while you pay minimal
tax in Belgium.
It also means that you may have to pay capital gains tax at home,
while you do not pay capital gains in Belgium.
48. Furthermore, if you have any income from your country of
domicile, you may want to check that you are treated as a resident
there because taxation may be lower or you may be entitled to tax
deductions that are not available for non-residents.
MY DOMICILE IS OUTSIDE BELGIUM
35
If I pay tax in Belgium and at home, do I pay tax twice?
49. If you receive income from Belgium or from any other country than
your country of domicile, there is indeed a risk that you pay tax in
both countries.
This is where we need to explain how double taxation arises and
how double tax treaties work.
When you live in one country and work in another, there are two
countries that want to tax you: the country where you live (your
“country of residence”) and the country where you work (the
“country of source” of your income. And that results in double
taxation, both in the country of your residence and in the country
of source of the income.
Each country has some rules of its own to avoid double taxation,
but they also sign double tax treaties, or rather “conventions for the
avoidance of double taxation and the prevention of fiscal evasion
with respect to taxes on income and capital gains”. In such a
convention the two states agree which of them can tax income
from real property, dividends, interest, royalties, salaries, pensions,
etc. More importantly, it also states what the other has to do to
prevent double taxation.
If you live in Belgium and have income from the Netherlands, we
need to look at the double tax treaty between Belgium and the
Netherlands to see which of the two may tax you.
50. The Protocol adds a layer of complication. You live in Belgium and
you may have income from the Netherlands, but in accordance
with article 13 of the Protocol, your country of residence is not
Belgium but EUMmbria, and the country of source of your income
is now not only the Netherlands but also Belgium.
EU OFFICIALS AND BELGIAN TAXES
36
51. Most EU Member States have signed double tax treaties with most
other EU Member States to eliminate double taxation and you will
have to check two double tax treaties, the double tax treaty
between EUMmbria and the Netherlands and the double tax treaty
between EUMmbria and Belgium.
Take an Irish EU Official who is living in Belgium but has maintained
her domicile in Ireland, and receives income from Spain. In
accordance with the double tax treaty between her country of
domicile (Ireland) and the country of source (Spain), she can claim
the treaty benefits to avoid or limit double taxation. Spain cannot
refuse to apply that treaty with Ireland. And Ireland will have to
help her get the treaty benefits, e.g. by giving her a certificate of
residence.
If there is no double tax treaty between the country of domicile and
the country of source, an EU official will have to see whether his
country of domicile has any provisions in its domestic tax legislation
to unilaterally eliminate double taxation.
52. There are two ways to eliminate or reduce double taxation.
Taxation with credit
In most countries, you declare your worldwide income; tax is
calculated on your worldwide income in EUMmbria and if the
double tax treaty allows
Belgium to charge tax on
the income, you can,
normally speaking, deduct
the Belgian income tax from
the tax in EUMmbria.
That is called the ‘taxation
with credit’ method. The
MY DOMICILE IS OUTSIDE BELGIUM
37
tax in the country of source is credited against (deducted from) the
tax in the country of residence.
That means that you always pay the local tax at home. In the
example, that is 40 %. If you pay more tax in Belgium than at home,
you cannot get the difference back.
Exemption with progression method
53. Some countries (Austria, Belgium, Bulgaria, Cyprus, France,
Germany, Luxembourg, Portugal and Romania) apply a different
method, the so-called “exemption with progression method”. That
means that they do not tax the Belgian income. However if you
have income tax is taxable at home, they will only tax the local
income at the rate that would (theoretically) apply to your
worldwide income.
When determining the
tax rate, they look all your
income, i.e. you Belgian
income and your
EUMmbrian income, they
calculate the theoretical
tax rate on your
“worldwide income” and apply that to your EUMmbrian income.
The good news is that if you have no income in EUMmbria, you will
not pay any income tax in EUMmbria.
However, if you have some taxable income there, the Belgian
income will push the tax rate up. In this example, the tax rate goes
up from 40 to 43%.
EU OFFICIALS AND BELGIAN TAXES
38
What is the EU Savings Directive?
54. Council Directive 2003/48/EC of 3 June 2003 on taxation of savings
income in the form of interest payments is also known as the ‘EU
Savings Directive’ or as the ‘EU Savings Tax Directive’. This is a bit
of a misnomer because the directive does not impose a tax; it
obliges Member States to exchange information about the interest
you receive in another country.
If you are a resident of Denmark you receive interest from a Dutch
bank, the Dutch bank has to report that information to the Dutch
Tax Authorities and they will pass that information on to the Danish
Tax Authorities. The main purpose of the Directive is to make sure
that you do not “forget” to declare the interest income; if you have
not declared it, you may get some questions from the Danish Tax
Authorities.
Most EU Member States are exchanging information with each
other. If you have bank accounts in another EU Member State, the
bank will report information on the interest you received to the tax
authorities of your country of domicile.
55. The following countries exchange banking information : Belgium,
Bulgaria, Czech Republic, Cyprus, Denmark, Estonia, Finland,
France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania,
Luxembourg (since 1 January 2015), Malta, the Netherlands,
Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden,
United Kingdom. Some other countries and territories do the same:
the British Virgin Islands, Cayman Islands, Guernsey and Jersey the
Isle of Man, Montserrat and Turks and Caicos.
Until 2009, Belgium and Luxembourg did not report that
information but withheld tax at source. Austria, Switzerland,
Andorra, Aruba, Liechtenstein, Monaco, the Netherlands Antilles,
and San Marino, are still doing that. They withhold an EU
MY DOMICILE IS OUTSIDE BELGIUM
39
Withholding Tax (withholding tax for the state of residence /
prélèvement pour l’Etat de Résidence (PER) / woonstaatheffing) .
This tax is 35% and three quarters of that tax are paid back to the
state of residence of the tax payer – on a no names basis.
A common misunderstanding about the EU Withholding Tax
56. It is not because Belgium has withheld the EU Withholding Tax at
35 % that you have paid all your taxes. You still have to declare that
interest income in your tax return in your country of residence.
If you have not declared the interest income, you may still be in
time to declare the interest income and you should be able deduct
the EU Withholding Tax at 35 %. Please refer to article 13 of the
Council Directive 2003/48/EC
What information does Belgium give to EUMmbria?
Belgium will give the following information to the state of residence
of the taxpayer:
– the name and address of your bank;
– your identity and residence;
– your tax identification number (TIN) or if you do not have
one or if it is not mentioned on your identification
documents (passport, identity card, etc.), your place and date
of birth.
– your bank account number, or a precise description of the
financial instrument (e.g. bond) on which the interest is paid;
– an explanation of the interest payment : interest credited on
your bank account, interest paid upon redemption of a Sicav,
...).
EU OFFICIALS AND BELGIAN TAXES
40
What does this mean for you?
if you are a EU official with a domicile in EUMmbria, you are
exempt from the Belgian withholding tax (25 %). However, your
Belgian bank will report the interest paid on your accounts or
accrued on your investments to the Belgian tax authorities and they
will inform the tax authorities of EUMmbria. And then you may get
questions from the tax authorities in EUMmbria about why you did
not declare the income.
If you are an EU official with a Belgian domicile the Belgian bank
will not report any information about the interest you received.
However, you are not exempt from the Belgian withholding tax (25
%), although for interest on bank deposit accounts the first €1,880
in interest is tax exempt (see p. 31).
What can EU officials do to prevent reporting?
57. First of all, you could move your investments to a country that does
not exchange information (Austria, Switzerland, etc …) and pay 35%
tax, or to a country that is not covered by the EU Savings Directive
(Bermuda, Hong Kong, …), but that still does not mean that you
have complied with your tax obligations; you still have to declare
that income at home. The EU withholding tax is not an income tax
but a penalty for anonymity.
Moreover, as of 2017, it will be almost impossible to keep anything
hidden as nearly 70 countries will start exchanging information
about interest, dividends, pensions, real property under the OECD’s
common reporting standard.
58. A better alternative is to find a financial product at home, in your
country of domicile, with a favourable tax status (e.g. tax exempt
interest or tax exempt capital gains). Banks in your country of
domicile do not report to the tax authorities of your country of
domicile, at least not under the EU Savings Directive. E.g., Belgian
MY DOMICILE IS OUTSIDE BELGIUM
41
banks do not report on Belgian residents; they should invest in
savings accounts (that are exempt for the first €1,880) and Sicavs.
Other countries have similar tax efficient products ; e.g. the U.K.
have ISAs with tax free interest and capital gains. Moreover, the
first £11,000 in capital gains is tax exempt every year.
Finally, life insurance products can be interesting, but interest on
life insurance products will be reported under the new EU Savings
Directive.
EU OFFICIALS AND BELGIAN TAXES
42
If I am not domiciled, which taxes do I pay in Belgium?
59. You are not exempt from VAT on your purchases and shopping in
Belgium. The VAT is 21%.
60. When you buy property in Belgium, a stamp duty or purchase tax
(droit d’enregistrement/registratierecht) is due plus a percentage
by way of notary’s fees. The rate is 12.5% (10% in Flanders). The
stamp duty is calculated on the sales price or the market value of
the property.
61. If you buy new property or property under construction, usually
VAT at 21% will be due.
62. If you finance the property with a mortgage, a registration tax of
1% of the value of the mortgage is due.
63. You also have to pay local taxes such as the garbage collection
taxes, etc…
MY DOMICILE IS OUTSIDE BELGIUM
43
Inheritance tax when a non-domiciled EU official dies
64. We must make a very important distinction : the Protocol deals
with inheritance tax only, not with the inheritance rules. Even if you
are deemed to be domiciled in your country of origin for
inheritance tax purposes, you have probably taken up domicile in
the country where you live for the application of the inheritance
rules (see www.taxation.be About wills and successions). This may
limit your freedom to make wills and you may have to take account
of the forced heirship rules (e.g you cannot disinherit your children
or your spouse).
The same rules apply to your spouse (who has no gainful
occupation) and your children (if they are dependant and in your
care).
65. When an EU official dies in service, his heirs will have to file two
inheritance tax returns: one in Belgium, for the real property he
owned here and one in his country of domicile (say EUMmbria) for
his worldwide estate.
However, some countries have abolished their inheritance tax. The
heirs of EU Officials who have their domicile in Austria, Cyprus,
Estonia, Latvia, Malta, Portugal, the Slovak Republic, or Sweden will
only have to file a Belgian inheritance tax return for their Belgian
real property.
Other countries do not charge inheritance tax on the children
(Bulgaria, Croatia, Czech Republic, Latvia, Lithuania, Luxembourg,
Malta, Poland, Slovenia and certain regions in Spain), while others
do not charge inheritance tax when the spouse inherits (the same
plus Denmark, France, Ireland and the U.K.). An inheritance tax
return may have to be filed but inheritance tax may not be due.
EU OFFICIALS AND BELGIAN TAXES
44
Inheritance Tax - Double Taxation?
66. If the country of domicile charges inheritance tax on the Belgian
property, there is a risk of double taxation and there are very few
treaties for the avoidance of double inheritance tax than for the
avoidance of double income tax.
67. Belgium has only two, with France and with Sweden (that does not
have inheritance tax anymore).
The EU Official (or his spouse) may have to check in their country of
residence if the Belgian property cannot be exempted, or if the
Belgian inheritance tax can be credited against the inheritance tax
at home (for a basic survey of the inheritance tax and gift tax
systems in the EU Member States, see www.successions-
europe.eu).
68. This may actually lead to a difficult situation if Belgium and the
country of domicile have different rules.
69. Most countries charge inheritance tax on the worldwide estate of
the deceased if he was domiciled in the country. However, some
countries (e.g. Spain) charge inheritance tax if the heir lives in the
country. Spain levies inheritance tax if the heirs live in Spain. If a
Spanish EU Official lives in Belgium but is deemed to be domiciled
in Spain, no inheritance tax will be due in Spain if his heirs live in
Belgium (and are not dependant anymore) but inheritance tax is
due if his heirs live in Spain.
MY DOMICILE IS OUTSIDE BELGIUM
45
A non-domiciled EU official makes a donation
70. Making donations during your lifetime is a tax efficient way of
estate planning. What is not in your estate is not normally subject
to inheritance tax.
In Belgium, gift tax is due on any donations before a notary or
donations that are presented for registration to the tax office. Gift
tax is not covered by the Protocol, and, therefore, Belgium must
not give an exemption because you are an EU official with a
domicile outside Belguim.
71. If you make a donation of real property in Belgium, you have no
alternative but to pass before a Belgian notary ; you can never pass
before a notary in another country. Therefore, gift tax will always
be due. The gift tax rates for real property are comparable to the
inheritance tax rates. The gift tax can, however, be mitigated by
making donations over a period of time with intervals of at least
three years.
72. Donations of real property outside Belgium are not liable to gift tax
in Belgium.
73. If you want to make a donation of movables, you are not required
to go to a notary. There are valid alternatives (see below). If you are
living in Belgium (even if you are an EU official with a domicile in
EUMmbria) and you pass before a notary or you present the
donation for registration, there is a flat gift tax. The rate is 3% for
(grand)children, (grand)parents, spouse and civil partner, 7% for all
others. Wallonia has rates of 3.3% and 7.7% with an intermediate
rate of 5.5% for donations between brothers and sisters and uncles
and aunts and nephews and nieces.
74. Hand to hand donations are, however, perfectly valid and they are
tax free. Nevertheless, if the donor dies (as a Belgian resident)
within three years after he made a tax exempt donation, the
EU OFFICIALS AND BELGIAN TAXES
46
donation is added back into the estate and subject to (Belgian)
inheritance tax. Of course, that is only a problem for EU officials
who have their residence in Belgium when they die.
75. Other alternatives are donations from one bank account to another
or donations before a Swiss of Dutch notary (if you are resident in
Belgium).
76. Please note that there are situations where gift tax is due twice.
Most countries charge gift tax if the donor is a resident. Some
countries (e.g. France, Germany, Poland and Spain) charge gift tax
not only when the donor is domiciled in these countries but also
when the beneficiary is domiciled there. If an EU official with a
French domicile but living in Belgium makes a donation, only
Belgian gift tax will be due if the beneficiary is his daughter who
lives with him in Belgium. However, if he makes a donation to his
son who lives in France, gift tax will also be due in France.
BELGIUM IS MY DOMICILE
47
BELGIUM IS MY DOMICILE
I am domiciled in Belgium, do I pay tax?
77. You may have your domicile in Belgium because
– you were recruited as an EU official from Belgium ;
– you retired as an EU official and you decided to stay in
Belgium ;
– you are the spouse of an EU official and you have gainful
employment,
– you are the child of an EU official and you are not dependent
of and in the care of the EU official.
Earnings
78. If you retire, you may earn a salary or receive a pension from other
sources than the European Institutions. Earnings are usually taxable
in Belgium.
79. Pensions built up outside Belgium may be taxable in Belgium, but
that depends on the double tax treaty with the country from where
the pension is paid.
Please check out http://www.taxation.be/content/view/83/45/ for
the list of double tax treaties signed by Belgium.
EU OFFICIALS AND BELGIAN TAXES
48
Income from Real Property
80. For property in Belgium, we refer to p. 29.
81. If you have property in another country, any income from that
property is (normally) taxable in that country. Even if that property
is not taxed, you may have to declare it in a tax return that country.
If you are resident in Belgium you have to declare the income of
that property as well. If you have a tenant, you must declare the
rent you received and any costs that are paid by the tenant that are
normally paid by the owner of the property. That is not the heating
and electricity but e.g. the cost of double-glazing the windows.
If you have a second residence that you do not rent out, you
declare the rental value of the property.
82. However, in Case C-489/13, Verest and Gerards, the Court of
Justice of the European Union declared that this obligation (to
declare the rental value for an overseas property) was an
infringement of the free movement of capital since a Belgian
taxpayer only has to declare the cadastral revenue for a Belgian
property. Note that the property Mr and Mrs Verest had was in
France where a similar concept of cadastral revenue exists.
The income will be exempted “with progression” (see p. 37).
BELGIUM IS MY DOMICILE
49
Dividends
83. If you receive dividends from a foreign company, that company will
normally deduct withholding tax abroad. The net dividend after
deduction of the foreign withholding tax will be liable to income tax
in Belgium. E.g. for dividends from a French company, the French
withholding tax will be 15% and Belgian tax will be due at 25% on
85.
84. If the dividend is paid out via a Belgian bank, the bank will withhold
tax at a rate of 25%. That tax is the final tax and you do not you
need to declare the dividend in your Belgian income tax return
anymore. If, on the contrary, you collect the dividend directly, e.g.
on a bank account in another country, you have to declare the
income. The tax will be 25%.
Interest
85. The same rule applies if you receive interest from another country.
Tax may be withheld and the net interest is taxable in Belgium at a
rate of 25 %. If the interest is collected on a foreign bank account, a
Belgian bank has not withheld tax at 25 % and you must declare the
income; the tax will be 25 % (plus local tax at a rate between 6 and
9 %; that makes it 26.5 to 27.25%). If you are a Belgian resident, the
first €1,880 (per spouse or partner) of interest income on a bank
deposit account with a bank approved by law is exempt.
86. In principle, one does not have to declare dividends and interest in
a tax return. However, taxpayers with a low pension and little
interest or dividend income may opt to declare the dividends and
interest and have all their income taxed at the progressive rates. If
the result is less than the tax withheld at source, the taxpayer
recovers the difference. Since 2013, EU officials are excluded ; and
so are other taxpayers who have income that is tax exempt by
treaty and that is not taken into account to determine the tax on
other income.
EU OFFICIALS AND BELGIAN TAXES
50
Capital gains
87. Generally speaking, capital gains are tax exempt in Belgium if they
are normal capital gains. That means that the gains are made in the
normal management of your personal property, e.g. on shares.
88. What is not normal management anymore is “day trading” or
speculation. Gains from day trading would normally constitute
earnings and be taxed at full progressive rates.
89. Speculative gains, made by buying and selling property or shares to
make a capital gain with almost professional means, are taxed at
33%.
90. Also taxable are capital gains on the sale of a substantial
participation in a company to a legal entity outside the European
Economic Area. The rate is 16.5%.
91. When you sell your main residence in Belgium, the capital gain is
exempt. When you sell a second residence or other property in
Belgium, there is no capital gains tax if you have kept the property
for five years. It is only if you buy and sell within five years that
capital gains tax is due at 16.5 %.
92. If you sell property in another country, capital gains tax may be due
there, but not in Belgium. In accordance with the double tax treaty,
Belgium would have to exempt such capital gains.
93. Normal capital gains on investments (shares) are not taxable in
Belgium. That has inspired the creation of SICAVs (Société
d’Investissements à Capital Variable). The SICAV is an investment
company that does not distribute but capitalizes its profits. The
investor buys shares of the SICAV and makes a (tax exempt) capital
gain when the SICAV buys back its shares. However, the interest
accrued within the SICAV is taxed as interest income.
BELGIUM IS MY DOMICILE
51
Inheritance tax when a domiciled EU official dies
95. If you are domiciled in Belgium, Belgian inheritance tax is due on
your entire estate (i.e. all real estate and all movables) including on
real property outside Belgium. Within Belgium, the inheritance tax
rates vary from one region to the other. The applicable rate is the
rate of the region where the deceased was living at the time of his
death. If he moved within the last five years, it is the region where
he lived longest in the last five years.
There are different inheritance tax rates. The following are the
rates for children, grandchildren, parents, grandparents, spouses
and civil partners for the three regions. The inheritance tax is
calculated, for each heir separately, on his share of the estate,
according to the following rates :
Wallonia
There is a tax-free allowance of €12,500 each heir (€25,000 if the
estate is worth less than €125,000). For children under 21, €2,500 is
added to the allowance for each year under 21.
€ 1 – € 12,500
€ 12,500 – 25,000
€ 25,000 – 50,000
€ 50,000 – 100,000
€ 100,000 – 150,000
€ 150,000 – 200,000
€ 200,000 – 250,000
€ 250,000 – 500,000
above € 500,000
3%
4%
5%
7%
10%
14%
18%
24%
30%
If the deceased owned or co-owned his principal residence, there is
a tax exemption for the first €160,000 or a tax reduction.
EU OFFICIALS AND BELGIAN TAXES
52
Brussels
Each heir is taxed on his own share with a tax-free allowance of
€12,500 each. For children under 21, €2,500 is added for each year
under 21.
€ 1 – 50,000
€ 50,000 – 100,000
€ 100,000 – 175,000
€ 175,000 – 250,000
€ 250,000 – 500,000
Above € 500,000
3 %
8 %
9 %
18 %
24 %
30 %
If the deceased owned or co-owned his principal residence, there is
a reduction of the inheritance tax.
Widow(er)s and registered partners do not pay inheritance tax on
the family home or the usufruit on the family home.
Flanders
Each heir is taxed on his own share. The inheritance tax due is
calculated separately for real estate and moveable assets. Liabilities
are set off against the moveable assets, unless they have been
specifically incurred to acquire real estate.
€ 1 – 50,000
€ 50,000 – 250,000
Above € 250,000
3%
9%
27%
Widow(er)s and live-in partners do not pay inheritance tax on the
family home or the usufruit on the family home.
There are separate (higher) rates for brothers and sisters, for uncles
and aunts, nephews and nieces of the deceased and for anyone
BELGIUM IS MY DOMICILE
53
else. These rates can be found at the end of this document. Rates in
that category can go up to 60% or 80 % for larger legacies.
In Flanders and Brussels, the surviving spouse, the registered
partner (or the live-in partner, only in Flanders) does not pay
inheritance tax on the part of the family home he inherits.
Inheritance Tax - Double taxation
96. If inheritance tax is due in Belgium (because the deceased was
domiciled in Belgium) and in another country (because he had real
property there or because he had shares in a local company or
because he has the nationality of that country (think USA), Belgium
does not give full relief for double taxation.
97. It is only the inheritance tax paid abroad in respect of real property
in the other country that can be set off against the inheritance tax
due in Belgium.
98. Any other capital taxes paid abroad can only be set-off against the
net value of the assets as a liability of the estate.
There are no double taxation treaties in respect of inheritance tax
except for one with France and one with Sweden (since Sweden has
no inheritance tax that is ineffective).
In practice, this means that, even if there is no inheritance tax
between spouses in e.g. the United Kingdom, they will still have to
declare the British property in the Belgian inheritance tax return,
and pay Belgian inheritance tax on the British property. They can
offset the British inheritance tax, but since that is nil, there is no
effective relief.
EU OFFICIALS AND BELGIAN TAXES
54
Gift Tax and other Estate Planning
For the rules on gift tax, we refer to p. 45.
For further ideas on Estate Planning, we refer to our book:
FAQS DURING THE UNION SYNDICALE LECTURES
55
FAQS AT THE UNION SYNDICALE LECTURES
Exemption of income
Pensions
There was an example mentioned, whereby if you retire in the US, there is no tax agreement, so my [EU] pension would be taxed. I would be grateful if you could inform me about this issue with regard to New Zealand, where we're planning to retire to. Is there a tax agreement in place, i.e. would my pension be taxed? If so, should I keep my tax domicile in Europe?
99. The exemption for your EU pension is to be found in the Protocol
on Privileges and Immunities that is signed by the 28 Member
States of the European Union. As New Zealand is not a Member
State of the European Union, New Zealand does not have an
obligation to exempt you from New Zealand taxes. Switzerland is
the only country that exempts the pensions of EU officials.
The first question is whether New Zealand taxes pensions arising in
other countries. If so, your pension risks being taxed by the
European Institutions and by New Zealand. There is no double tax
treaty that eliminates double taxation. An existing double tax treaty
between New Zealand and an EU Member State (including Belgium)
would normally give the right to tax the pension to your state of
residence.
100. Unless you find a solution under the laws of New Zealand that give
an exemption for your pension, you will need to keep your tax
residence in Europe, and that should be more than a mere
letterbox. You would need to keep a place in Europe where you
actually live most of the time and that should be the centre of your
vital interests.
EU OFFICIALS AND BELGIAN TAXES
56
101. That means that your address in New Zealand can be no more than
a second residence, if not, New Zealand may disregard your main
residence in a European country and consider that you are actually
residents of New Zealand and, therefore, that your pension is
taxable in New Zealand.
What does exemption mean?
An EU official lost her husband in 1986, he was a Belgian resident working in Belgium. She applied for a survivor’s pension from the Belgian State, but it was refused because her income from the European Institutions was too high.
102. Article 12 of the Protocol only states that the Member States
cannot directly or indirectly charge income tax on the income from
the European Institutions. Although this benefit has been extended
to the income of the official's spouse (Humblet), and although the
Court of Justice of the European Union has confirmed that the tax
authorities of a Member State cannot discriminate EU officials by
refusing them certain tax advantages (Vander Zwalmen), the court
has also confirmed that article 12 only applies to taxes and not to
e.g. a school levy for attending a public school (I.G.F. Van Leeuwen).
It would not apply to social security benefits or pensions.
Taking account of the EU income
You seem to state two different things re Vanderzwalmen? Has the Court of Justice of the European Union not come back on this decision in 2012?
103. In case C-229/98, Vander Zwalmen and Massart v. Belgian State,
the CJEU has confirmed the principle that the tax authorities of a
Member State cannot discriminate EU officials by refusing them
certain tax advantages.
104. The EU official had complained that his spouse did not get the
“quotient conjugal”, a tax deduction of a maximum of €10,230
FAQS DURING THE UNION SYNDICALE LECTURES
57
given to a Belgian tax payer whose spouse is not working or has low
earnings (less than €10,230). An EU official and his spouse file a
joint tax unless the official earns more than €10,230.
105. The conclusion of the Court was: “The reason for exclusion from the
benefit is not the fact of being a Community official in receipt of an
income in excess of the index-linked sum, but stems from the
general condition, which applies without discrimination to spouses,
one of whom is an official, as it does to any other taxpayer,
regarding the amount of income giving entitlement to the benefit at
issue.”
106. In other words, the tax authorities must not give a tax deduction to
the spouse of an EU official as if he or she were married to
someone who was not working or who had low earnings under
€10,230.
107. In 2012, the Court of Justice of the European Union confirmed that
“the tax authorities of a Member State cannot take account of the
income paid by the European Union to its officials and other staff
(or pensions and allowances paid to former officials), in calculating
the cap on a tax such as the wealth tax (impôt sur la fortune)” (Case
C-558/10, Bourgès-Maunoury and Heintz v Direction des services
fiscaux d’Eure-et-Loir, [2012] ECR, p. I-418).
108. The court added that “In the interest of legal certainty “… a person
in receipt of such income is also exempt from any obligation to
declare the amount of such income to the authorities of a Member
State”.
109. The main difference in this case was that the French state required
the EU official to declare the amount of his remuneration or
pension to allow France to determine a cap on the wealth tax. In
Vanderzwalmen, the actual income did not matter, just the fact
that the EU official has income in excess of €10,230. That was all he
was asked to declare in his tax return.
EU OFFICIALS AND BELGIAN TAXES
58
FAQS DURING THE UNION SYNDICALE LECTURES
59
Domicile
Questions about domicile are always a favourite
Where is my domicile?
When does a retired EU official become a Belgian resident? Immediately on the day after he leaves the service of the European Institutions? After a transitory period? Upon demand?
110. The exception (domicile in the country of recruitment) is based on
the premise that EU officials “establish their residence in the
territory of a Member State” (e.g. Belgium) “solely by reason of the
performance of their duties in the service of the Union”.
On the day he leaves the service of the European Union, it is not
“solely by reason of the performance of his duties in the service of
the Union” anymore that he is in Belgium. He is here out of his own
volition. Therefore, he loses the benefit of his fiscal domicile on
that day. If he stays in Belgium, he becomes resident in Belgium.
And it is only when he takes up residence in another country – with
an actual residence in a house or apartment – that he can claim
residence there. Without a place to live, one cannot have a
residence.
111. There is no transitory period in the Protocol, but in practice the
retired EU official may stay for a couple of months in Belgium
without incurring any income tax here. He may be domiciled and
resident in Belgium but he may not have any taxable income.
112. Moreover, he will not immediately be registered as a resident and
receive an identity card which is prima facie evidence of tax
residence. If he does receive an identity card, he will be deemed to
be resident from the day he retired until the day he hands in his
identity card and files an exit tax return. He will have to declare
any (Belgian and overseas) taxable income, except for interest and
EU OFFICIALS AND BELGIAN TAXES
60
dividends received on a Belgian account for which the bank has
withheld tax at source.
A spouse comes to Belgium from Latvia with her husband who is an EU official. She works for a private organisation and subsequently as an agent for the Union. She becomes unemployed and receives unemployment benefit. Her husband takes CCP and starts working for the Permanent Representation of his country as a diplomat. What is her status?
113. When she came to Belgium, she kept her domicile in Latvia (her
country of origin, i.e. the country where she had her domicile when
he joined the Union. When she started working, first for a private
organisation and subsequently for the Union, she took up domicile
in Belgium. When she became unemployed she reverts to her
domicile in Latvia.
Under the terms of the double tax treaty between Belgium and
Latvia, the unemployment benefit is normally taxable only in
Belgium, where the benefit is paid.
When her husband took diplomatic status, Belgium will consider
that she is not resident in Belgium (that does not necessarily mean
that she is resident in the country for which her husband is a
diplomat (see below), the spouse does not take the domicile of her
spouse).
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61
The spouse of an EU official is working for a company in France. Because she is working, she takes up domicile where she lives in Belgium. However, because she works from home for her employer in France, she pays tax in Belgium and that is more tax than in France. Is she not being punished for following her husband to work for the EU institutions in Belgium?
114. The Protocol only gives the spouse a fictitious domicile in the
country of origin when he/she is not working. When the spouse
works, the Protocol does not apply to the spouse anymore.
The spouse does actually have three possibilities.
First of all, she can stay in France and work there for her employer.
Because she lives and works in France, she pays tax in France. If the
family wants to stay together, the EU official then has to live in
France and come to work in Belgium.
Alternatively, the spouse can come and live in Belgium, and then
the double tax treaty between Belgium and France will determine
whether she pays tax in the country where she is working or in the
country where she is living. Usually, the double tax treaty says that
an employee who lives in Belgium but works in France is taxed in
Belgium only. However, if the link with France is sufficiently
important, she can be taxed in France for the days she works on
France ; that means she either works in France for at least 183 days
per year or she works in France and is paid by an employer in
France. In any case, for days worked outside France, she cannot be
taxed in France. When France can tax the income, Belgium must
exempt it.
Finally, if the employee lives and works in Belgium from home (as
this spouse seems to do), there is not a sufficient link with France
for her to be taxed in France.
EU OFFICIALS AND BELGIAN TAXES
62
I came to Belgium with my husband who came to work for a multinational company. He had a special tax status that assimilated him to a non-resident coming from the U.K. He had a certificate of non-residence that shows he is not a residence. When I joined the European Institutions, it was determined that my status was EUMmbrian domicile. What happens when he leaves the company?
115. This situation is quite unique. Your husband (and yourself while
you were not working) was granted the special tax regime for
expatriates. That tax regime has been introduced to make it
attractive for non-Belgian executives (like your husband) to come
and work in Belgium. The employer must file an application
showing that the employee has maintained the centre of his vital
interests abroad ; in your case, I assume that is the U.K. The expat
tax regime is actually an extra statutory concession whereby
Belgium unilaterally considers that you are (your husband) is a non-
resident and only pays tax on Belgian source income and on
remuneration for work in Belgium.
However, you did not have a residence in another country and your
tax domicile should probably be Belgium. However, the expatriate
tax regime (and the certificate of non-residence) may have puzzled
the Institutions and they may have relied on the certificate of non-
residence to consider that you are not a Belgian resident and
because you originally came from EUMmbria, I think that the
Institutions have labelled you as an EUMmbrian resident.
As far as your husband is concerned, when he leaves the company,
he will become a Belgian resident while you will continue to be
domiciled in EUMmbria.
FAQS DURING THE UNION SYNDICALE LECTURES
63
Spouses and partners
Does the partner of an EU official have the same domicile as the EU official?
116. The Protocol only applies to spouses.
117. A partner, even a registered partner, cannot claim to have
maintained his domicile in the country where he has living when his
partner came to work in Belgium as an EU official.
Does a retired EU official take the domicile of his spouse who is still working as an EU official?
In my personal opinion, it is a misunderstanding to read the
Protocol as saying that the spouse of an EU official takes up the EU
official’s domicile (see p. 22). The spouse of an EU official keeps
his/her domicile when his/her spouse, the EU official, comes to
Belgium to work for the Union. He/she keeps his/her own domicile,
which usually happens to be the domicile of the EU official.
When the EU official retires and stays in Belgium, he takes up
domicile in Belgium because he lives or continues to live in Belgium
and not because he has followed his spouse (the other EU official)
when his spouse came to Belgium to work for the European
Institutions. If they have the same nationality that may seem
confusing, but when they have a different domicile, the situation
seems more obvious. E.g. when a Danish EU official is married to a
Greek EU official and retires, he stays in Belgium and takes up
Belgian nationality; he does not take up Greek domicile because his
spouse is an EU official with a Greek domicile. The same rule
applies when they have the same domicile.
EU OFFICIALS AND BELGIAN TAXES
64
How does it work?
My tax address is my address during my recruitment, that is to say, my parents address in Greece. I am filing a tax return since 2002 when I bought a holiday home in Greece. Since it is a second home, the electronic reporting system requires me to have a principal residence address. I then use my parent's address. Is that correct? It would be better to use my address in Brussels? Or the address of my holiday home?
In Greece there is a tax department devoted to "people outside the country" (this is mostly Greek living and working in the United States or Australia); Do EU officials belong in the same category?
Am I obliged to declare to the Greek authorities the amount of my annual income?
This is a question of Greek tax law for which I am not qualified. I answer a Belgian perspective.
118. In accordance with the Protocol, you are considered a Greek
resident for the EU, Greece and Belgium.
119. You are required to report to the Greek authorities the amount of
your annual income with the exception of the remuneration you
receive from the European Institutions.
120. The tax department for "people outside the country" is reserved for
real non-residents, people who live in the US and have some
income from Greece. EU officials do not belong to the same
category, since they are considered residents and they have to pay
taxes on their worldwide income in Greece, not just the Greek
income. However, I could not say if there is a tax office just for EU
officials.
121. Your principal residence is indeed in Belgium, but if you report that
on your tax return, I assume that Greece will take the position that
you are a Belgian resident, which would not be correct.
FAQS DURING THE UNION SYNDICALE LECTURES
65
Belgian Income Tax
Dividends and interest
Article 313 Income Tax Code has been modified in 2013 to exclude the reimbursement of withholding tax on dividends and interest.
122. In principle, dividends and interest are taxed at a flat rate of 25%.
However, taxpayers with a low taxable income may opt to declare
the dividends and interest and declare all their (taxable) income to
have it all taxed at the progressive rates. If the result is less than
the tax withheld at source, the difference is reimbursed. Taxpayers
who have investment income under the personal allowance of
€ 7,090 are even able to recover all the withholding tax.
That was an opportunity for EU officials who have their domicile in
Belgium and who had investment income under the threshold of
€ 7,090 ; they could recover all the withholding tax.
In 2013, the law was changed and EU officials3 are now excluded. It
was admitted that this measure was indeed aimed at EU officials.
Does an EU official have a chance with the Court of Justice of the EU? It is indirectly taxation of the income of the EU official since Belgium takes account of the income of the EU official to determine whether they have a right to reimbursement.
123. Please note that the rule on exemption with progression (article
155 ITC) refers to double tax treaties (that explicitly give Belgium
the right to calculate the other income by reference to all the
taxpayer’s income) and to other international conventions that
3 As well as other taxpayers who have income that is tax exempt by treaty
and that is not taken into account to determine the tax on other income.
EU OFFICIALS AND BELGIAN TAXES
66
have a clause providing exemption with progression. That does not
encompass the Protocol.
However, in Van Leeuwen, Tither and Vander Zwalmen, the Court
gives the Member States some margin of manoeuvre to take
account of the level of income of the EU official to refuse him or his
spouse certain advantages or deductions.
Please note that the codes 1062 and 1020 (where an EU official
declares he earns more than €10,230), are not new. The tax
authorities have been taking account of the level of income of the
EU official for years in respect of the “quotient conjugal”, the tax
deduction for the spouse of a person who is not working or had low
earnings (under €10,230). The Court confirmed in Vander Zwalmen
that this exclusion of the benefit was not a form of indirect tax (see
p. 56).
FAQS DURING THE UNION SYNDICALE LECTURES
67
I used to have a plan d’épargne-logement (PEL) in France. This allowed me to save money in order to buy property later. My plan started in 1996 and was terminated by the bank because I was not living in France anymore. The bank has given me a document that shows all the interest accumulated since the start. The bank is passing that information to the Belgian tax authorities. Do I have to pay tax on all the interest?
124. The Belgian tax authorities have issued a practice note “Circulaire
n° Ci.RH.231/601.452 (AFER N° 39/2010)” dated 7 May 2010. This is
an issue that has become more relevant with the introduction of
the EU Savings Directive.
125. The tax authorities confirm that the interest is taxable, but they
makes a distinction between
— interest paid when the PEL is closed before the tenth
anniversary of the plan. In that case, Belgium follows the
French tax system and considers that the interest is taxable
at the time the interest is grant or paid.
The full accumulated interest is taxable in Belgium.
— interest pad if the plan is closed after the tenth anniversary.
In that case, the interest that has accrued in the first ten
years is deemed to have been granted (and taxable) on 31
December of the 10th year.
The full accumulated interest for the first ten years is taxable
in Belgium in the tenth year. The interest for subsequent
years is deemed to be paid and taxable every year.
EU OFFICIALS AND BELGIAN TAXES
68
Rental income
I have Slovenian nationality and my partner has Belgian nationality, we own an apartment in Belgium that is rented out. Do we need to pay tax on the rent that we receive?
126. You are an EU official of Slovenian nationality, and I assume that
you have your domicile in Slovenia as well.
127. You do not clarify whether you have registered your partnership
(cohabitation légale) or not. However, that should not make much
difference as you will have to file separate tax returns
128. Indeed, partners who have not formalised their partnership file
separate tax returns in Belgium. In principle, married couples and
registered partners must file a joint tax return, but that does not
mean that their income is added up and taxed together; their
income is taxed separately.
129. However, if the EU official earns income in excess of €10,230, the
EU official and his spouse must file separate tax returns.
130. That means that you and your partner must file separate tax
returns and pay tax separately. Each of you needs to declare half of
the cadastral revenue of your apartment in code 1106-58.
131. The taxable income will be calculated at 2.43 times (x 50% of) the
cadastral revenue. I assume that the tenant is a private tenant, and
not a company or someone who uses it for his business (see p. 30).
FAQS DURING THE UNION SYNDICALE LECTURES
69
My husband and I are both British, he is an EU official, I work in Belgium. We have property in the UK. Do we have to declare that in Belgium and do we have to pay tax on it?
132. Assuming that your husband has British domicile he does not have
to declare anything in Belgium; he has to declare the rental income
in the UK, but not in Belgium.
As you have a Belgian domicile, you have to declare the rental
income in the UK and (your half of the rental income) in Belgium.
Tax will be due in the UK but under the double tax treaty between
Belgium and the UK, Belgium must exempt that rental income, but
Belgium may take account of the (exempt) rental income to
determine the tax rate on your remuneration. See p. 37 for the
elimination of double taxation with the “exemption with
progression method”.
In practice, this means that the tax on your remuneration will go up
a bit. Instead of paying on average 40%, you may pay on average
43% tax but only on your Belgian earnings.
EU OFFICIALS AND BELGIAN TAXES
70
Titres service
I have bought and used titres service for a household help. I did not file a tax return but I received a tax reimbursement<
133. If you have used “titres services” to pay for home help, you will
receive a tax certificate that confirms how much you paid for the
“titres services” and part of these payments (max €1,400 per
person) gives you a tax credit that is deducted from the taxes you
have to pay. For people with a low income, who do not pay income
tax (e.g. because they are under the annual personal allowance of
€7,090), the tax credit is reimbursed.
Because EU officials do not pay any income tax, they would
normally be entitled to a reimbursement of the tax credit, but they
have to declare that they have income that is exempted by
convention and that is in excess of € 10,230. Therefore, they or
their spouse, do not get a tax reimbursement.
If some EU officials have received a reimbursement without filing a
tax return, I presume this is because the information about their
titres services was filed electronically in their tax file and the tax
authorities calculated the tax reimbursement without taking
account of their status.
FAQS DURING THE UNION SYNDICALE LECTURES
71
-
Capital gains tax
Do I pay capital gains tax in Belgium or in my country of domicile?
Generally speaking, Belgium has a favourable tax regime for capital
gains. However, if your country of domicile considers that capital
gains tax is a form of income tax, you may pay capital gains tax at
home.
However, some countries consider that capital gains tax is a
category apart and that it capital gains tax is not due in the country
of domicile because it is not listed in article 13 of the Protocol. The
question of capital gains tax then depends on the country where
you are domiciled (and not the country where you were recruited).
If you are domiciled in Belgium you will not have to pay capital
gains tax. If you are not domiciled in Belgium the tax regime
depends on the place of domicile.
An EU official with a domicile in another Member State intends to sell her principal residence (in Belgium) purchase 20 years ago. Is the amount of tax payables different when she sells (i) before retirement, (ii) upon retirement while temporarily staying in Belgium (see p. 59, or (iii) upon retirement after moving to France or Germany?
134. Let us start with the most simple situation: (ii) : the retired EU
official stays temporarily in Belgium to sell her house. There would
be no capital gains tax because there is only one country involved,
Belgium, and Belgium does not charge capital gains tax. However,
we have to balance this advantage against the possible
disadvantage of having to pay income tax on other income (from
savings), normally at a fixed rate of 25%.
EU OFFICIALS AND BELGIAN TAXES
72
135. The situations in (i) and (iii) would be similar: the retired EU official
is resident in another Member State (e.g. France or Germany) and
owns property in Belgium. As mentioned before, Belgium would
not charge capital gains tax on the principal residence.
136. The next question then is whether the other Member State charges
capital gains tax. Many countries have exemptions for the
taxpayer’s principal residence, and some even extend these to the
main residence the taxpayer had in another country before coming
back to the country. E.g. under certain circumstances, the U.K. gives
an exemption of capital gains tax on the main residence (“Private
Residence Relief”) with 18 months’ retroactive effect.
137. France also has an exemption of capital gains tax for the residence
in which the taxpayer lives at the time of the sale (which is difficult
to achieve if the property is in Belgium and the taxpayer lives in
France). Moreover, I understand that Germany has a capital gains
tax but real estate is exempt if it has been held for ten years or
more (please check with a local counsel).
138. In most countries, the capital gain will have to be declared, but
normally, the country of residence will have to give relief for double
taxation. In other words, if the state of residence charges tax, it
must do something to prevent double taxation.
139. Many countries allow you to credit the Belgian tax against the local
tax. E.g. if the U.K. charges capital gains tax on the Belgian property
and does not give Private Residence Relief, tax will be due at the
rates of 18% and 28%, and you can deduct the Belgian capital gains
tax (0). You always pay the U.K. capital gains tax.
140. As for other countries, such as France and Germany, if they tax the
capital gain, they would give exemption with progression (see p.
37). In other words, France would not tax the capital gain, but may
look at the value of the capital gain to determine the income tax
rate of other income that is taxable in France.
FAQS DURING THE UNION SYNDICALE LECTURES
73
Inheriting and Inheritance Tax
Useful information can be found on www.successions-europe.eu or
www.couples-europe.eu
What is the applicable law?
Do I pay Belgian inheritance tax if I inherit from my parents in EUMmbria on in another country?
141. No, Belgian inheritance tax is only due on the estate of a person
who was domiciled in Belgium at the time of his death. That is
because inheritance tax is usually due in the country of domicile of
the deceased.
What is the applicable tax law when the deceased is an EU official?
142. As explained before, the Protocol adds a layer of complication t the
tax rules.
143. Indeed, while you actually live in Belgium, it is the Protocol that
determines where you have your domicile. While you are an EU
official that is the country where you were recruited. When you
retire as an EU official that is the country where you take up
domicile upon retirement.
If you have your domicile in Belgium, inheritance tax will be due on
your entire inheritance, both in Belgium and outside Belgium.
However, inheritance tax may also be due in the country where you
own real property. That will result in double taxation but under
Belgian law, that inheritance tax can normally be deducted from
the Belgian inheritance tax (see p. 53).
144. If you have your domicile in EUMmbria, the only inheritance tax
you pay in Belgium is the inheritance tax on your property in
Belgium.
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145. If EUMmbria does not have inheritance tax4 or if EUMmbria has
inheritance tax but exempts the estate when it is inherited by the
children5 or by the spouse6 there will be no further inheritance tax
and no risk of double taxation.
146. If EUMmbria does charge inheritance tax, that will (normally) be
calculated on your worldwide estate, and usually you can set off
the Belgian inheritance tax against the inheritance tax in
EUMmbria. That is something that must be checked in the local tax
legislation.
Making a will
How do I make a valid will?
You can make a valid will by writing out your last will in long hand,
put a date in it and sign it with your normal signature. These are the
only three requirements for a valid handwritten will. It does not
need to be witnessed. We give an example in annex 1, at the end.
147. Alternatively, you can go and see a notary and ask him to prepare a
notarized will in front of two independent witnesses. Alternatively,
you can just type out a will, put it in an envelope and hand it offer
to a notary for safekeeping.
148. You do not need to have Belgian nationality to draft a will in one of
these forms in Belgium.
4 Austria, Cyprus, Estonia, Latvia, Malta, Portugal, the Slovak Republic and
Sweden do not have inheritance tax. 5 Bulgaria, Croatia, Czech Republic, Latvia, Lithuania, Luxembourg, Malta,
Poland, Slovenia and certain regions in Spain 6 Bulgaria, Croatia, Czech Republic, Denmark, France, Ireland, Latvia,
Lithuania, Luxembourg, Malta, Poland, Slovenia, certain regions in Spain and the U.K.
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149. Moreover, the will you made in EUMmbria before you came to live
in Belgium will normally be valid as well, but it may have to be
translated. That is not only translated into one of the official
languages of Belgium (Dutch, French or German); it may also have
to be translated into terms that are compatible with Belgian law
(e.g. if you have disinherited your children in your will or if you gave
everything away during your lifetime, the effect of the will is going
to be limited to what is acceptable under Belgian law).
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The European Regulation on Successions
What is the interaction between the Protocol and the European Regulation on Successions?
150. The short answer is that there is no interaction, but there are a lot
of misunderstandings about the European Regulation on
Successions7. The EU Succession Regulation should simplify and
unify the inheritance rules for cross border successions. The
Regulation does not affect the substantive inheritance laws of the
24 EU Member States 8 nor the tax aspects of international
successions.
The Regulation answers two important conflict-of-law questions:
1. which court is competent to deal with a cross-border
succession ; that will be the court of your habitual residence.
If you live in Belgium, your habitual residence will be
Belgium, even if – in accordance with the Protocol – you have
your domicile (for income tax and inheritance tax).
2. which law governs a cross-border succession? That will be
the law of the country of your habitual residence, but the
Regulation gives you the right to choose the law of your
nationality.
If you live in Belgium and have your tax domicile in
EUMmbria (because that is where you were recruited) you
7 Regulation on Jurisdiction, Applicable Law, Recognition and Enforcement
of Decisions and Acceptance and Enforcement of Authentic Instruments in matters of Succession and on the Creation of an European Certificate of Succession of 4 July 2012, No 650/2012, O.J. L 201/107, 27.7.2012. 8 The Regulation was adopted by all EU Member States, but Denmark, Ireland and the U.K. opted out.
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can still only chose between Belgian law and the law of your
country of nationality, even if that is not EUMmbria.
The law you have chosen will determine
– who can inherit ; under Belgian law that is normally
your children while your spouse has usufruit on your
inheritance ; if you have not children, it is your spouse ;
if you have no spouse or children, your brothers and
sisters inherit with your parents ; etc.
– whether you can disinherit your heirs if you make a
will, and if you cannot disinherit your children or
spouse, how much you have to reserve for them,
– how your heirs accept your inheritance or what they
must do to waive it ;
– whether your heirs are liable for the debts of the
succession,
– whether gifts have to be taken into account when
determining what each heir inherits, and
– what wills are valid.
That law will apply to the transmission of your inheritance,
even if that is real property in another Member State, but
local rules may apply for accepting of waiving succession, for
the administration and liquidation of the succession and the
state where the property is located may make the final
transfer of the inheritance subject to the prior payment of
inheritance taxes.
3. The regulation will introduce a European Certificate of
Succession that will constitute proof that someone is heir or
a legatee or has powers as an administrator of the
succession. The certificate will be recognised throughout the
EU, thereby simplifying and speeding up the procedure.
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Decisions and notarial deeds relating to successions will be
more easily enforceable in the other Member States; the
other Member States cannot impose additional conditions.
The Regulation will enter in force on 17 August 2015 for all
successions of people who died on or after 17 August 2015.
151. The impact of the Regulation is limited since Denmark, Ireland and
the UK have opted out. More importantly, while the Protocol deals
with inheritance tax (where do the heirs pay inheritance tax and
how much inheritance tax they pay), the Regulation just relates to
the inheritance rules (who receives what from an inheritance?).
The big misunderstanding is that you cannot choose a jurisdiction
that has no inheritance tax and avoid inheritance tax in Belgium.
For example, a German national is recruited in the UK and now
works in Belgium. The law applicable to his inheritance can either
be that of Germany (nationality) or that of the Belgium (habitual
residence). Even if the tax law governing his inheritance will be that
of the UK (in accordance with article 13 of the Protocol), he cannot
opt to have his will governed by UK law.
How is the value of the inheritance determined?
152. In principle, the value of the inheritance is determined at the
moment of death on the basis of the market value of the assets in
your inheritance. The heirs must put a value on the assets and if the
tax authorities do not agree, they can object. The tax
administration has a database with the values of properties
resulting from the values declared on the sale of properties.
The rules are a bit different for usufruit or life annuity, where a
value is determined as a percentage of the market value depending
on the age of the beneficiary (e.g. 32% if the beneficiary is between
65 and 70, 8% if he is over 80).
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How do you refuse an inheritance?
153. If you are an heir and you are about to inherit from someone who
was largely in debt, you are not obliged to accept the inheritance.
154. You can renounce it in a formal statement at the court of first
instance of the place where the deceased was living, or before any
Belgian notary.
155. If you are not sure what debts and liabilities you are taking on,
there is another option. You can accept the inheritance on the
condition that an inventory is first made of the estate, its assets and
debts. You have three months to make a formal statement before
the court of first instance and to get an inventory of assets and
liabilities drawn up. You then have another 40 days to decide
whether you accept the inheritance or not.
156. That is the only way you can avoid being held liable for the debts of
the deceased, but there may be nothing left in the estate.
When you are not married, but you have a partner and a child, what is the applicable regime in the absence of a will?
157. According to Belgian law only the child inherits. The partner
gets nothing. If you want the partner to inherit something you will
have to draft a specific will. Either you can stipulate that your
partner gets your house or that your partner gets the usufruit and
your child gets the bare ownership of your house
And what is the best option tax-wise?
158. The second option is better because you split the value of your
estate over two heirs, who pay inheritance tax starting at the lower
inheritance tax rates. Moreover, all three regions have tax
exemptions or tax reductions when you leave the family home to
your partner or spouse.
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159. A lot also depends on the partner’s age because the value of
usufruit depends on the age of the beneficiary.
I am an EU official with a Bulgarian domicile ; I married a Belgian national. We did not sign a marriage contract. When I inherit, do I pay inheritance tax? And if I die, does my husband inherit. Is Belgian inheritance tax due?
160. When two people with different nationality marry, Belgium
assumes that they have opted for the Belgian matrimonial regime
of community property for everything they acquire during the
marriage with the exception for what each owned before, what
they inherited from their family or what they received as a gift from
their family.
161. There is an exception for couples that have the same nationality
and married before October 2004 ; they are deemed to have opted
for their own matrimonial property regime (e.g. two Brits who
married in 2002 have separate properties and no community
property).
162. When your parents die in Bulgaria, you inherit from them and you
do not pay inheritance tax.
163. What you inherit from your parents remains your own under the
default matrimonial property regime. When you die, your
inheritance would be inherited by your children (with a life interest
for your spouse), or, if you do not have children, by your spouse for
the usufruit and by your family for the bare ownership.
At that moment in time, Belgian inheritance tax will be due.
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Gift tax
Does the Protocol also apply to gift tax?
164. No. The tax law governing a gift depends on the country where you
live or donate. Lifetime donations are often a tax efficient way of
estate planning. What is not in your estate is not normally subject
to inheritance tax. However, you need to check the inheritance tax
rules of the country where inheritance tax is due.
165. Belgian gift tax will always be due on a donation of Belgian real
property (see p 45) ; on movables gift tax is only due if you pass
before Belgian notary or if you volunteer to register the donation
and pay registration tax. If inheritance tax will be due on the
donor’s estate, any donations made during the last three years
before his death will attract inheritance tax unless gift tax has been
paid. The equation is 0% gift tax and live for another 3 years or pay
3% gift tax (for donations to children and parents) now and live for
0 years.
166. Of course that rule is a Belgian rule and does not affect donors
whose estate will be liable to inheritance tax in another country.
However, check the local rules. The UK charges inheritance tax on
donations made in the last seven years before death (in the
meantime, they are Potentially Exempt Transfers).
167. Hand to hand donations are perfectly valid and they are tax free. So
are donations from one bank account to another or donations
before a Swiss of Dutch notary (if you are resident in Belgium).
However, if the donor dies within three years after he made a tax
exempt donation the donation is added back into the estate and
subject to (Belgian) inheritance tax. Of course, that is only a
problem for EU officials who have their residence in Belgium.
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Another complication is that if the beneficiary of the donation lives
in a country that charges gift tax on donations received, gift tax
may be due twice and the donation may not be that tax efficient.
Is there a limit to hand-to-hand donations?
168. No, there is no limit.
169. The only limit is what you can physically hand over. You can hand
over the keys of your car, a million euros in cash (preferably in a
branch of your bank – give them advance warning because they
usually do not have that kind of cash lying around) or hundred bars
of gold (it is not necessary to give it all in one and the same hand).
170. The only thing that cannot be handed over are intangible assets
such as the copyright to “Fifty shades of Grey” or the shares of a
company.
Does Belgium have a notion of “dons d’usage”?
There is but not for the same reasons. In France all donations are,
in principle, liable to gift tax over a certain threshold every 15 years.
Dons d’usage (like birthday gifts) are small donations that are not
liable to gift tax.
In Belgium, such dons d’usage would not be liable to gift tax as they
are hand to hand donations. However, dons d’usage are gifts that
could not be contested by one’s protected heirs.
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Questions of Estate Planning
Rather than leaving my property to my brother or sister in my will (or donating it) at a high inheritance tax (or gift tax) rate, can I not just sell it to him or her against an annuity for the rest of my life.
171. Selling property is a valid alternative for an inheritance or gift; in
particular between brothers and sisters or between people who
have not blood ties. The registration tax on the sale is only 12.5%
(10% in the Flemish Region) rather than rates of 60% or more.
However, you must play this by the rules.
172. Of course, it is not necessary to have the price paid in full at the
time you pass before a notary, but if the purchaser does not pay
the purchase price, you have a claim (an IOU, as in “I owe you”) vis-
à-vis the purchaser, and when you die that IOU falls in your
inheritance and is liable to inheritance tax.
173. If your brother or sister inherits the IOU, the inheritance tax rates
are going to be the same as the inheritance tax rates on the
property. You could consider donating the purchase price, but that
could be seen as a form of tax avoidance, in particular if the
donation follows the sale closely. This is a risky transaction.
174. An alternative is to convert the purchase price into a monthly
annuity (a rente viagère or lijfrente). It is usual to have an initial
capital payment and monthly payments that include capital
reimbursements and interest (like a loan guaranteed by a
mortgage). That requires an actuarial calculation, based on the
value of the property, the life expectancy of the vendor and the
interest rates. If the vendor continues to live in the house, a
deduction is taken by way of rent for the house.
175. The interesting thing about such an annuity is that it is a bit of a
gamble. If the vendor dies after one year the purchaser can stop
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paying ; but when the vendor lives much longer than anticipated,
he pays until then. Remember in France, a lady called Jeanne
Calment sold her apartment in rente viagère to her notary when
she was 90. She lived until 122, outliving her notary who was half
her age.
In any event, keep in mind that once you sell or donate you do not
own your house anymore, and there is not much you can do if you
fall out with your brother or sister.
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ANNEXES
Model of a Handwritten will
This is my last will and testament
The undersigned [ your name ] born in [ your place of
birth ] on [ your date of birth ]
(optional) and married to [ name of spouse ] born in [ place of
birth ] on [ date of birth ] with whom I was married at [
place ], on [ date ], without having signed a marriage
contract, and with whom I established my first habitual
residence after our marriage at [ place ]
and currently residing at [ your residence ]
declare to make my last will and testament as follows.
I revoke any other last wills and testaments which I
may have made in the past.
(optional) I appoint [ my spouse / x ] as my general legatee, and I
bequeath [ to him / her ] the highest disposable
portion of my estate, in full ownership and in usufruct
of all my real and personal property at the time of my
death, as such percentage shall be determined by the
law at that time, without prejudice to [ his/her ]
hereditary rights to the usufruct,
(in Flanders and in Brussels)
and in particular, I wish that my [ spouse ] receives my
share in the family home in [ place ].
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I release my [ spouse] from giving a security for the
usufruct. To the extent that the law will permit me, I
deny my children and descendants the right to request
conversion of usufruct.
If my [ spouse ] predeceases me, or dies at the same
time as me, I appoint my child(ren) [ Name(s) ] as my
general legatees.
I leave my [house/apartment/…_] at [ address ] to [
name of beneficiary ] born on [ date of birth ].
I leave [ other assets ] to [ name of beneficiary ] born
on [ date of birth ].
In case my spouse and I were to die before our
children reach majority, I wish to appoint as their
guardian [ Name ] residing at [ place ], and in case he is
not able to accept this appointment, I wish to appoint
as their guardian [ Name ] residing at [ place ].
I wish that my remains be cremated and I leave the
decision about the scattering of my ashes to my heirs
Handwritten in full, dated and signed by me,
Done in [ place ] on [ date ].
Signature
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Gift and Inheritance Tax Rates
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