With the new expat status in place since early 2022, the conditions to be eligible have become much stricter. In other words, less people qualify for it. Those who benefit from the ‘old’ status will lose their special tax status in any case at the end of 2023. If you stay in Belgium after that, you will automatically be considered a Belgian tax resident.
If you opted-in for the new status before 30 September 2022, it is also possible the Belgian authorities consider you a Belgian tax resident in case you cannot sufficiently demonstrate you are a tax resident in another country. You will then be considered a resident ‘expat’ taxpayer. Traditionally, executives who acquired Belgian citizenship while benefitting from the old expat status, would no longer be considered non-resident either, but resident instead.
If you suddenly become a Belgian tax resident in one of the above situations, this obviously has important consequences for your personal tax situation and filing requirements in Belgium. Hereafter we give you an overview of the 10 most important considerations.
1. Worldwide income
Belgian resident taxpayers are taxable in Belgium on their worldwide earnings, including their foreign source income. However, ‘taxable’ does not mean that any income received from a foreign source becomes automatically liable for taxation in Belgium. For this, the double taxation agreement (DTA) between Belgium and the other country needs to be checked.
If you earn income from abroad, the applicable DTA with Belgium will determine which country is authorized to tax your income. Subsequently, Belgian domestic tax law will then determine the actual income tax due. If your foreign income is tax exempt in Belgium, it will still impact the effective tax rate that applies to your other taxable income. If there is no DTA, there are special rules in place to reduce your Belgian tax liability.
2. Foreign real estate reporting
Since 2021, Belgian residents who own real estate abroad are required to provide detailed information to the authorities about their foreign properties, irrespective whether they are rented out or not. This reporting will allow the Belgian authorities to valuate your foreign property and asses a (fictitious) cadastral income for it. The same ‘cadastral income’ is used for taxing properties located in Belgium.
However, an important difference is that you will normally not be required to pay Belgian income tax on your foreign property (in case a DTA is place with the country where your property is located). The amount should nevertheless be reported in the Belgian tax filing for compliance reasons and to determine your effective tax rate.
Those who fail to request a timely valuation of their property, risk being fined, with penalties as high as €3,000. We have not seen those fines actually being imposed, but you could in theory be liable for them in case of non-compliance.
3. Foreign bank & investment accounts
Belgian residents are required to report their foreign bank accounts to the Belgian authorities. This is a compliance requirement separate from the obligation to annually report the investment income received on those same accounts. Even if your bank account abroad is dormant, you need to report it.
The annual reporting in your tax return, is accompanied by a one-time reporting to the Central Point of Contact (CPC) of the National Bank of Belgium (NBB). It covers all checking, savings, term deposit, and securities accounts with any foreign bank, exchange, credit, or savings institution. You are only required to submit this report once, unless you would close an account or open a new one.
Failing to comply may result in a penalty of up to €1,250. Again, in practice, it does not happen often that taxpayers are fined for not reporting their bank accounts as such. What is more common are tax evasion charges in case of not disclosing the investment income received on those same accounts.
4. Different approach towards working abroad
Under the ‘old’ expat regime, taxpayers could claim the foreign travel exclusion. Any working days spent abroad for the Belgian employer were considered non-resident income and therefore not taxable. Non-resident taxpayers in Belgium working for a foreign employer, are only considered taxable in Belgium if they meet the 183 day-rule.
However, if you become a resident taxpayer, the rules work quite different. Cross border workers are typically obliged to pay income tax in the country where they earn an income, but their ultimate tax filing responsibility is with Belgium, as their country of tax residency.
While this was never relevant before as a non-resident, the Belgian authorities will now show a special interest in your working time abroad to determine where your salary is taxable. If you were to claim a tax exemption in Belgium for your foreign salary, the authorities will likely challenge the exemption and ask you to demonstrate where you physically worked during the year.
5. ‘Double’ taxation of foreign investment income
Belgian residents need to report their foreign investment income in the Belgian tax return (i.e. dividend, interest and royalty income). This is always the case, even if you already paid tax on them abroad. The DTA allows them to be taxed a second time in Belgium.
Foreign investment income is normally taxable in Belgium at 30%. Only for dividend income, each taxpayer can claim a tax exemption for the first €800 per year. Belgium normally does not apply a capital gains taxation on proceeds from private investments.
If you suddenly see your foreign investment income being subject to a 30% taxation in Belgium, you might want to consider moving your investments to a Belgian bank or broker, to at least avoid the foreign withholding tax.
6. Foreign life insurance policies
Different from bank accounts abroad, foreign life insurance policies that you subscribed to, should never be reported to the National Bank of Belgium (NBB). They only need to be reported in your annual Belgian tax return. Only the country where the policy is located, and the policy holder’s name need to be disclosed.
7. Foreign trust & legal structures
As the tax authorities want to have a clear picture of all assets transferred by taxpayers to foreign private wealth structures, all trust and similar types of legal structures need to be disclosed in your tax return as well. This in view of potentially applying the Belgian Cayman Tax. The reporting allows the Belgian authorities to look through targeted offshore structures to directly tax their founders and third-party beneficiaries on income received by such constructions.
8. Automatic exchange of information (CRS)
The tax authorities perfectly know where you have bank accounts and how much money is on them due to the Automatic Exchange of Information (AEOI) between tax authorities as part of the Common Reporting Standard (CRS). There is no point in hiding anymore nowadays.
While your financial information could have already been shared with the Belgian authorities before when you were considered a non-resident (expat), the authorities did not process this information since your foreign income was not taxable in Belgium anyway. However, as soon as you become a resident taxpayer, the Belgian authorities will be very much interested in your foreign accounts and where they are located.
9. Tax on Stock Exchange Transactions (TST)
The TST will be due every time you buy or sell a financial product, like stocks or bonds. In general, the TST applies to both resident and non-resident taxpayers that trade Belgian or foreign financial instruments via a Belgian bank or broker. The transaction tax will in that case be automatically deducted by the latter.
However, as a resident taxpayer investing via a foreign broker, the TST will also apply to the transactions you do outside Belgium. In that case, you will be responsible for the calculation, declaration, and tax payment yourself. This needs to be done separately from the annual income tax filing.
10. Tax on Securities Accounts (TSA)
As a non-resident (NR) taxpayer, you were only subject to the TSA if you owned a brokerage account with a Belgian bank or broker. NR taxpayers are exempt from the TSA if they hold a securities account outside Belgium.
Resident taxpayers, on the other hand, are liable for the TSA for every securities account with a Belgian or foreign bank or broker. The tax itself amounts to 0.15% and is due if the average value of the brokerage account exceeds 1 million EUR. All types of financial instruments registered in the brokerage account are considered relevant for the TSA (e.g. shares, bonds, turbos and speeders, but also cash).
If you hold your investments with a Belgian bank or broker, they will automatically take care of the necessary formalities and deduct the tax at source. You will again be responsible for the calculation, declaration, and tax payment yourself in respect to your foreign securities accounts.