Introduction
A significant tax deduction is normally available to married or legally cohabiting taxpayers for dependent children living in their household. For example, the annual tax-free allowance is currently €10,570 per taxpayer (tax year 2025), but will increase to €21,660 with three dependent children. This deduction is typically applied to the taxable income of the partner earningthe highest amount.
However, this approach does not always lead to an optimal tax outcome. For instance, if the higher-earning partner works abroad and their income is exempt from Belgian taxation under a Double Tax Treaty, the deduction is effectively nullified. Similarly, the benefit is lost if the partner is employed by an international organization where they enjoy a full income tax exemption.
This approach caused discriminatory tax treatment against certain taxpayers, particularly compared to parents who both have Belgian taxable income and unmarried individuals (who can freely decide who includes the child benefit in their tax return). The Belgian tax authorities’ prolonged inaction lead to numerous legal disputes over the past few years.
Landmark Decision
A recent decision by the Court of Appeal in Ghent (October 1, 2024, Nr. 2022/AR/2003) affirms the rights of Non-Resident Taxpayers to claim tax exemptions for their dependent children, even if their spouse abroad is the higher earner. Historically, such benefits were granted only to the primary earner, leaving secondary earners, particularly Non-Residents, at a huge fiscal disadvantage. The ruling has far-reaching implications, addressing inconsistencies in taxation and reinforcing European principles of fairness and worker mobility.
Context of the Case
The case at the centre of the decision involved a German couple where the wife worked full-time in Belgium and was subject to Belgian Non-Resident Tax. Despite her employment in Belgium, she faced rejection of tax benefits for her dependent children because her husband, an international civil servant, earned a higher income abroad. No significant income was taxable in Germany and consequently no tax benefits could be obtained in the country of residency of the parents.
Key Findings of the Court
Under Belgian law, the wife was treated as a Non-Resident and single filer for tax purposes, a status distinct from the joint assessments applied to resident couples both living in Belgium. However, the increase of the tax-free amount for dependents was denied to the wife due to her lower income. The Court of Appeal found this approach discriminatory, ruling that it violated EU principles by treating Non-Residents less favourably than Residents in similar circumstances.
Role of Residency and Worker Mobility
The court judgment drew attention to the disparity between Resident and Non-Resident taxpayers. Had the couple been domiciled together in Belgium, the wife would have qualified for the tax-free allowance for her children. This differential treatment, based solely on their residency, undermined the EU’s commitment to the free movement of workers and equal treatment for all taxpayers within its jurisdiction. For Resident Taxpayers, Belgian tax law was adjusted a few years ago already, but for Non-Resident Taxpayers, the Belgian authorities simply continued to apply the old principle that the child deduction can only be claimed, in this case, by the higher-earning partner.
Implications for Non-Residents
This case sets an important precedent for Non-Resident Taxpayers within the EU. By ensuring tax benefits are not restricted based on domicile or spousal income disparities, the decision paves the way for more equitable treatment of cross-border workers. It also serves as a call to action for the Belgian tax authorities to revise tax laws that currently disadvantage international workers, both in and outside the EU, potentially making our country a more attractive destination for global talent.
A Step Toward Fairer Taxation
The recent decision underscores the systemic issues in Belgium’s tax framework. Non-Residents continue to face challenges when seeking equitable treatment under laws designed primarily for domestic scenarios. It is in any case an important step in Belgium’s tax policy, promoting fairness for Non-Resident Taxpayers.
If you are in a similar tax situation, you may want to check your prior years Non-Resident Tax Filings and possibly claim the refund of unduly paid Belgian taxes. For this category of deductions, taxes can typically be claimed back up to a maximum of 5 years.