Belgian residents are automatically subject to an additional surcharge on their personal income tax depending on the municipality (‘commune’) where they live. The rates vary from 0% to 9%, but in general amount to approx. 7%. Only in a few municipalities at the Belgian Coast, the communal tax rate is currently 0% (i.e. in Knokke-Heist, Koksijde & De Panne). The surcharge is paid every year via the personal income tax assessment.
The communal tax is a mandatory contribution to cover the general expenses of a city or municipality. Its purpose is to finance local public services like law enforcement, social assistance, housing, education and so on. For those resident taxpayers that live and work in Belgium, their worldwide earnings will be subject to the communal tax. For example, if an employee lives in the Brussels-Capital Region and earns a taxable salary of let’s say € 50,000 p.a. on which they need to pay an income tax of approx. € 13,000, there will be an additional communal tax due of € 780 (or 6% of € 13,000).
Non-resident taxpayers, on the other hand, are generally only taxable on their Belgian earnings originating either from an activity carried out on Belgian territory, or from assets located here. While some non-residents do live and work in Belgium, a large number of them do not reside here and are often residents in another country. In the absence of a Belgian domicile, it would in that case not be possible to subject non-resident taxpayers to a communal surcharge.
The Belgian legislator therefore considered it justifiable and proportionate that non-residents pay a surcharge like the one due by resident taxpayers. This surcharge is not considered a ‘communal’ tax, but a ‘federal’ surcharge on the Belgian income tax due. The latter currently amounts to a fixed rate of 7% and automatically applies, even if the taxpayer does not live in Belgium. The federal surcharge itself is calculated the same way as the communal tax owed by resident taxpayers.
While this approach has been challenged before the Constitutional Court, it was not considered to be discriminatory or in violation of the principle of equal treatment of taxpayers.
The reasoning behind this is that non-residents also benefit from public installations and services provided by the Belgian authorities to the extent these enable them to generate Belgian income on which they pay non-resident income tax. The federal surcharge thus makes it possible to finance the different tasks in the public interest entrusted to the Belgian State.
Both resident and non-resident taxpayers are therefore equally subject to a surcharge on their Belgian income tax.
TAXPATRIA® can assist you in determining your personal tax situation and help you to better understand the potential tax liability of living and/or working in Belgium.