In view of a proper functioning of the European Institutions, a ‘European School’ was set up in 1957 for the education primarily of children of staff members of the European institutions. Their mission is to provide a multilingual and multicultural education for nursery, primary and secondary level pupils. Other children may also attend, under certain conditions.
The schools are controlled jointly by the governments of the EU Member States. There are currently 13 European Schools in 6 different countries. Belgium has European Schools in Uccle, Woluwe, Elsene, Laeken, and Mol.
Seconded or not?
When the first European School was established in Belgium in 1958, the tax authorities outlined the school’s particular tax status in an administrative instruction of 1976, following the Agreement signed already on 12 October 1962. The authorities have recently issued an updated version in respect to the European Schools based in Belgium (Circular Letter Nr. 2023/C/7, 5 January 2023).
The Agreement does not provide a general tax exemption for every official working at the European School.
In general, directors, teachers and administrative staff of the school are exempt from Belgian income tax on their salaries, emoluments and allowances paid to them directly by the School. This is not the case for the emoluments paid to them by the administrative board in their country of origin, the latter remaining subject to a domestic taxation in their country of origin.
We need to make the following distinction:
- Foreign nationals employed by a European School in Belgium as directors, teachers or administrative staff are not taxable in Belgium on the additional emoluments paid by the School or those paid by a body in their country of origin. These earnings should also not be taken into account to determine the effective tax rate that applies to any other income taxable in Belgium (i.e. ‘exemption with progression’ does not apply).
- Belgian nationals employed by a European school in Belgium as directors, teachers or administrative staff are exempt from tax on the additional remunerations paid by the school. They do remain taxable on the remunerations paid to them by the Belgian state. Any additional remuneration should also not be taken into account to determine the effective tax rate that applies to any other income taxable in Belgium (i.e. ‘exemption with progression’ does not apply).
If the salary is paid by an administration in their country of origin, then this remains normally taxable in the country of origin (but will be exempt in Belgium). The additional payments made by the School on top of the normal salary, are tax exempt in Belgium. The latter aims to equalize the working conditions and grant an expatriation allowance to the relevant staff members.
The tax exemption can therefore only refer to seconded staff since they are the only ones to receive remuneration from two different sources.
For this reason, the tax exemption in Belgium shall not apply to staff members who do not receive a salary from their country of origin. The Agreement does not cover staff recruited directly by the European Schools who are paid exclusively by the Schools (in particular administrative and ancillary staff). The remuneration of the latter is governed by domestic law, potentially subject to the applications of the relevant DTA.
No Tax Residence Exception
Furthermore, the Belgian authorities reconfirm that no provision of the Agreement grants an ‘exception of fiscal residence’ to the directors and staff members of the European Schools.
This exception applies to officials working for the European Union institutions.
Officials that establish their residence in Belgium solely by reason of the performance of their duties in the service of the EU, shall be considered (for income tax, wealth tax and death duties) both in the country of their actual residence and in the country of domicile for tax purposes, as having maintained their tax residence in the latter country (if it is an EU Member State). This provision usually also extends to the spouse (to the extent the latter is not separately engaged in a gainful occupation), as well as to children and other dependent persons.
As the exception does not apply to those working at the European School, the staff members are subject to personal income tax in Belgium (as well as wealth tax and death duties), on the condition that they have established their tax residence or their seat of wealth here. If this is the case, the staff member will be required to file a resident tax return in Belgium every year and report their worldwide earnings.
Where relevant, the provisions of the double taxation agreements (DTAs) must be taken into consideration. In view of this, if they meet the conditions, they could potentially qualify as a Non-Resident Taxpayer in Belgium.
On 1 December of each year, the European School communicates the names, function and addresses of their directors, teachers and administrative staff and their family members to the Belgian tax authorities. We have no further information to what extent this information is afterwards effectively used by the Belgian authorities.
Belgian Tax Courts
The Court of Appeal in Brussels has also confirmed that the exemption from Belgian income tax only applies to salaries, emoluments and allowances paid by the European Schools, in addition to those paid by the administration in their country of origin. The exemption is an exception to the general rule of taxation and should therefore be interpreted strictly.
For this reason, the special tax status of the European schools is quite different from that of most other international organizations.
In the case at hand, the taxpayer was a Belgian national, resided in Belgium and was employed in Belgium (as the country of origin). The staff member was not expatriated nor seconded to Belgium by a foreign administration. The Brussels court therefore refused to apply the tax exemption. The earnings are fully taxable here (Court of Appeal of Brussels, Nr. 2020/FR/19, 5 November 2020).
The latter has also been confirmed before by several lower tax courts (Court of First Instance Brussels, Nr. 1999/4365/A, 9 December 2013, Nr. 2001/2205/A, 12 January 2005; Court of First Instance Leuven, Nr. 01/865/A, 24 December 2004 and 13 December 2002; Court of First Instance Antwerp, Nr. 04/2013/A, 29 September 2004, and other decisions of 2 December 2002 and 30 November 2001).