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Expatriates taking up employment in Belgiumwill be subject to comprehensive rules and, insome cases, employment visa requirements.

The expatriate tax team at Grant ThorntonBelgium, can help expatriates and theiremployers to deal with Belgian visa and workpermit requirements, with Belgian labour andsocial security issues as well as with Belgianincome tax items.

In particular we can assist expatriates andtheir employers to identify Belgian tax planningopportunities, review tax equalisation policies;as well as providing compliance servicesregarding Belgian tax filing requirements.

Most expatriates will qualify for the specialnon resident tax status. We can prepare theformal application for the special tax status tobe submitted to the competent tax office withina period of six months following the month ofarrival.

Facts and figuresEmployment visasThe employers of non-EEA (European EconomicArea) nationals are usually required to apply for awork permit prior to the employee taking upemployment in Belgium.

A residence visa must also be obtained to allowthe expatriate to live in Belgium. Where theexpatriates spouse and family relocate to Belgium,relevant visas and separate work permits (where thespouse will also work) will be required. Where theexpatriate is an EEA national the above procedureis usually not required.

Tax returns and complianceIndividuals who are Belgian resident for taxpurposes must file their tax return at the latest onthe due date indicated on the tax return (generally30 June). The same rules apply to individuals whoare not Belgian resident for tax purposes. When noreturn is received, the taxpayer should request oneby 1 June at the latest.

Tax-payers providing their tax consultant aproxy to file the tax return on their behalf throughthe so called tax-on-web application are granted anextended filing due date til 31 October.

For employers and directors taxes are normallyalready deducted at source. When no payroll taxesneed to be deducted, taxes will become payablewithin a period of two months following the receiptof a tax bill. Married taxpayers (or legal cohabitants)file a joint income tax return. However professionalincome is taxed separately on behalf of eachtaxpayer. Investment income and real estate incomeis taxed on behalf of the member of the householdwho is the legal beneficiary of this type of income.

Tax yearThe Belgian tax year runs from 1 January to31 December.

Belgium

Income Tax Rates 2013 income

Tax income Tax payable0 8,590.00 25%

8,590.01 12,220.00 30%

12,220.01 20,370.00 40%

20,370.01 37,330.00 45%

>37,330.01 50%

A tax free amount of 6,990 is normally available,possibly increased for dependent children. Standard(3,900 maximum) or itemised business expensescan be deducted.

Sample income tax calculation for a nonresident executive (with application special taxstatus)

Aus ($)Gross salary 50,000.00

Cost of living allowance 10,000.00

Total employment Income: 60,000.00

(of which 11,250 are assumed as tax free allowances (TFA) underthe special tax regime for foreign executives)

LessSocial security contributions (TFA increased with

travel exclusion) (13.07%) (5,964.00)

Travel exclusion (20%) (8,557.08)

Standard business expenses (3,017.80)

Taxable salary 31,210.52

Income tax thereon:

On 20,370 6,496.50

On 10,840.52 @ 45% 4,878.23

Total (A) 11,374.73

Personal allowance (single 6,990)

Income tax thereon:

On 6,990 @ 25% (B) (1,747.50)

Income tax (A-B) 9,627.23

Plus:

Communal tax (7%) 673.91

Income tax due 10,301.14

Basis of taxationCharge to taxA charge to Belgian tax is dependent on whetherthe income arises in Belgium. The extent of thecharge will be determined by an individuals taxresidency status.

ResidenceUnder Belgian law, the place of tax residence isgoverned by several criteria and is generally definedas the place where an individual has his/herpermanent home (i.e. generally where the family isliving) or where an individual has his/her center ofeconomic interest (i.e. place where an individualmanages his/her private affairs).

The Belgian tax code provides also for arefutable assumption that an individual is a taxresident of Belgium when he/she is registered in theNational Register of individual persons in Belgium.This registration takes place in the commune wherethe individual resides. Moreover the Belgian taxcode provides for an irrefutable assumption of taxresidency when in case of marriage or legalcohabitation, the family resides in Belgium.Individuals that are Belgian residents are taxed ontheir worldwide income and gains. Non-residentsare only taxed on their Belgian source income andgains.

However, expatriates who qualify for the specialnon resident tax status continue to be considered astax non residents during the whole period of theirassignment to Belgium. (see below expatriateconcessions).

Income from employmentA Belgian tax charge arises on employment incomederived from duties performed in Belgium.Assessable employment income includes all wages,salaries, overtime pay, bonuses, gratuities,perquisites, benefits etc.

Source of employmentAs mentioned above, where duties are performed inBelgium, any remuneration received in respect ofthese duties is treated as Belgian sourced incomeand, therefore, subject to Belgian income taxregardless of the expatriates tax residence status(subject to the relevant double taxation treaty).

Benefits (in kind) In general, where the benefit is enjoyed in Belgium,a Belgian income tax charge will arise. Therefore,housing, meal allowances, provision of a car andrelocation allowances will come within the chargeto Belgian income tax in addition to the individualssalary.

Expatriate concessionsForeign executives or specialists qualifying for thespecial non-resident tax status are taxed on allincome derived from their employment activity(salaries, bonuses, fringe benefits etc) from whichare excluded: the portion of the employment income related

to the number of days worked outside ofBelgium (so called travel exclusion). Specialrules apply for the determination of the foreignworking days

certain expatriate allowances or expensereimbursements (see further).

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The foreign nationals qualifying for the special nonresident tax status will not be taxed onsupplementary securing and non securing expenseswhich are incurred as a result of their recruitmentor transfer to Belgium, whether paid as lump sumallowances or as specific reimbursements ofexpenses (i.e. housing allowances, cost of livingallowances, tax equalisation, school fees at aninternational school etc). Depending upon thefunction exercised by the foreign executive, themaximum annual excludable expenses orallowances amount to11,250.00 or 29,750.00.However, the above ceilings do not include schoolfees or the reimbursement of moving expenses.

As already indicated, these foreign executivesare considered to be non residents for tax purposes.As such, they can not claim tax treaty benefits as aBelgian tax resident.

There is principally a requirement for theexpatriates employer to deduct Belgian payrolltaxes from the assessable employment income.When the employer has no permanentestablishment in Belgium, withholding taxes arenormally not required.The conditions to obtain special tax status are(summarised) the following: the employing company must be part of the

international group the employing company must be a commercial

organisation the expatriate must be a foreign national the expatriate must exercise a managerial

function the expatriate must demonstrate that he/she has

kept the centre of their economic interestsoutside of Belgium

Grant Thornton Belgium can assist in preparing theformal application which must be filed at thecompetent tax office within a period of six monthsfollowing the month of arrival.

Relief for foreign taxesWhere income has been subject to tax twice (inBelgium and a foreign jurisdiction) expatriates whoare Belgian tax residents may be granted relief bythe Belgian tax authorities where provided for inthe relevant double taxation treaty or relevantinternal tax legislation.

Deductions against incomeIn determining the taxable amount of theemployment income, compulsory social securitycontributions paid either in Belgium or abroad arefully tax deductible. Professional expenses can beclaimed either by itemising the expenses actuallymade or on a lump sum basis using the standardbusiness expenses deduction. A wide range ofdeductions may be taken against the net incomesubject to conditions and limitations: e.g. gifts,payments for child care, alimony payments,mortgage interests, mortgage capitalreimbursements and related insurance premiums.Other expenses incurred may result in tax credits:life insurance premiums, personal contributions topension funds, energy saving investments. Ataxpayer is entitled to standard tax free amountsand dependent (children) deductions.

What taxes?Capital gains taxIn general, capital gains are tax free in Belgium.Only capital gains on Belgian real estate (short-termassets) may be taxable under certain conditions.

Inheritance, estate & gift taxesInheritance tax rules and taxes differ according tothe region where the deceased had his/her fiscalresidence in Belgium. Gifts are subject to gift taxes(but many exceptions can apply). Transfer taxesapply to various asset (principally property)transfers and leases at rates ranging from 0.2% to12.5%.

Investment incomeThe expatriates Belgian tax residency status willdetermine whether investment income such asinterest, dividends etc, will become liable to Belgianincome tax.

Belgian source interests are in principal subjectto a withholding tax of 25% (15% under someconditions). Dividends are taxed at a rate of 25%. Expatriates qualifying for the special non residenttax status may only be taxed on Belgian sourceinterest and dividend income.

Local taxesLocal taxes are payable as a percentage of thefederal income taxes (usually 7%).

Real estate taxA tax is levied on the annual rental value of theimmovable property. The rate varies according tothe region in which the property is located.

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Social security taxesWhere duties are performed in Belgium, a charge toBelgian Social Security may arise. The expatiate willbe treated as an employee subject to personal socialsecurity contributions of 13.07% on total grosscompensation. The employer will also be requiredto contribute about 34% of the relevant income andbenefits to Belgian social security system.

Social security contributions must be collectedat source along with the payroll taxes.

Where the expatriate is transferring from an EUjurisdiction and holds the relevant documentation(A1) an exemption to Belgian Social Security willapply. (limited in time usually five years)

Where the expatriate is transferring from ajurisdiction outside the EUwith which Belgiumholds a Bi-Lateral Agreement and the expatriateholds the relevant documentation (certificate ofcoverage), an exemption to Belgian Social Securitywill apply. (limited in time)

Where the expatriate is transferring from ajurisdiction that does not fall into one of the abovecategories, the Belgian rules will determine hisliability.

Compulsory Social Security contributions aretax deductible.

Expatriates benefiting from the special taxstatus, who are subject to Belgian social security arealso allowed to exclude the tax free allowances fromsocial security. Moreover under certaincircumstances these tax free allowances can beincreased with the travel exclusion resulting in anadditional social security saving.

Stock optionsThe taxable moment is at the time of grant of thestock options under the condition that theemployee accepts the offer in writing within thesixtieth day following the offer date. The taxablebenefit is at that moment determined on a lump-sum basis. The basic rule is that the taxable benefitamounts to 18% of the value of the underlyingshares for an option valid for a maximum of fiveyears. This percentage is increased by one percentper year started after the five year maturity periodof the option. The percentage thus obtained caneven be reduced by half if certain conditions aremet. Normally, the taxable benefit is exemptedfrom social security contributions. The capital gainrealised upon exercise and sale of the shares is taxfree.

When the offer of the options is not acceptedwithin the sixty day period referred to above,taxation will occur at exercise. The taxable benefitwill be determined as the possible differencebetween the market value of the shares at exerciseand the exercise price. Social Security contributionswill normally also be due. Subsequent capital gainsupon sale of the shares are tax free.

Wealth taxThere is no wealth tax in Belgium.

Other specific taxesThere are no other specific taxes in Belgium.

Tax planning opportunitiesFor foreign nationals who do not qualify for thespecial non resident tax status and who performduties outside of Belgium, split payrollarrangements could be considered.

When free housing is provided by the employer,the taxable fringe benefit can be substantiallyreduced if the rental agreement is contracted by theemployer.

Company cars normally constitute a taxeffective fringe benefit.

Deferred compensation schemes can be set upsubject to certain conditions. tock options offeredby a foreign employer are preferably granted beforethe assignment to Belgium as taxation may occur atgrant.

Earnings description Planning possibleBase salary Y

Bonus Y

Cost of living allowance Y

Housing Y

Home leave Y

Club membership N

Moving expenses Y

Foreign service premiums Y

Education/schooling Y

Contact us for further information on expatriate tax services inBelgium please contact:

Stefan CreemersT +32 2 242 11 41E stefan.creemers@be.gt.com

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