Every Belgian municipality (‘commune’) may subject its residents to an additional surcharge on their personal income tax. This tax is calculated by applying a percentage to the basic personal income tax. The rates vary from 0% to 9% depending on the municipality where the taxpayer is registered on 1 January following the income year. The amount due is typically settled 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. In the straightforward situation where the taxpayer lives and works in Belgium, it is obvious that the earnings will be subject to the communal tax. For example, if an employee lives in the Brussels capital 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).
However, in case of a cross-border employment, things can become more complex. 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. This is where the double taxation agreement (DTA) becomes relevant. The DTA will prevent double taxation by ultimately allowing only one country to tax your salary and allowing you a tax exemption (or a tax credit) in the other.
In the scenario that Belgium exempts your foreign salary from Belgian income tax, this does not automatically mean that you will also be exempt from the communal surcharge. The latter will be due but only if the DTA explicitly provides for this. If the tax treaty stipulates this, a communal tax will be calculated as if the foreign employment income was fully taxable in Belgium.
Traditionally, the DTAs with the Netherlands, France, Germany, the United Kingdom, and Switzerland include a clause that allows the additional communal tax to be levied. This provision has also been included in more recently (re)negotiated DTAs with countries like Bahrain, China, Congo, Japan, Mexico, Norway, Poland, Rwanda, San Marino, Singapore, and Uruguay. If your professional income does not originate from a country in the above list, then no communal taxes can be charged by your Belgian municipality.
For non-resident taxpayers, it is not relevant where exactly they live in Belgium, as they are automatically subject to an (average) surcharge of 7%. This surcharge also applies if the taxpayer does not actually live in Belgium, but only earns income from a Belgian source.
TAXPATRIA® can assist you in analysing the tax consequences of your employment situation and help you to better understand the potential tax liability of cross-border working.