We have outlined before that financial support payments (or alimony payments) can be deducted from your taxable income in Belgium, up to 80% of the amount paid, provided that some specific conditions are met. However, for Non-Resident Taxpayers this was only allowed before if they earned at least 75% of their taxable professional income from a Belgian source.
In March 2022 already, the European Court of Justice (ECJ) concluded that Belgium applies a discriminatory treatment to non-resident taxpayers (compared to resident taxpayers) in respect to their eligibility to deduct financial support payments from their taxable income (Case C-60/21, European Commission v. Belgium). The ECJ also pointed out that this is clearly in violation of the free movement of workers-principle and creates an unjustified restriction.
The European Commission (EC) also mentioned that the Belgian rules keep non-resident taxpayers from exercising their freedom of movement provided for in Article 45 TFEU and Article 28 of the EEA Agreement.
Non-resident taxpayers who cannot claim the deduction in their country of employment (e.g. in Belgium) nor benefit from it in their country of residence (due to a lack of sufficient income there) would be in a less favourable situation compared to Belgian tax residents. This may discourage taxpayers to start working in Belgium without establishing their tax residence there.
As a result, Belgium has adjusted their tax rules in December 2022 and now provides that even if a Non-Resident Taxpayer does not meet the 75%-rule, the deduction of financial support payments can still be allowed, under certain conditions.
The following conditions should be cumulatively met before a deduction is possible:
- The taxpayer should be a resident of a Member State of the European Economic Area (i.e. EU, Iceland, Norway and Liechtenstein). This unfortunately excludes any non-EU tax residents.
- The taxpayer earns taxable professional income from a Belgian source. This means, for example, that they either work for a Belgian employer, earn an income as a Belgian registered freelancer, or receive a Belgian pension.
- The taxpayer (in theory) has the right to deduct the financial support in their country of residence. It remains to be seen how the taxpayer will be able to sufficiently demonstrate this to the Belgian authorities.
- The taxpayer should also be able to demonstrate that they cannot (fully) benefit from the deduction in their country of residence, due to the limited amount of taxable income. This would need to be demonstrated with a formal attestation issued by the tax authorities of the residence state. The latter would need to be added to the Belgian tax return or submitted later on via an appeal letter. What this document will look like will be determined later on by Royal Decree.
- The taxpayer should also demonstrate that the benefit of the deduction cannot be carried forward to a following taxable period in the country of residence. This will also need to be confirmed in the above ‘formal attestation’.
- The taxpayer should also not be able to apply the ‘Schumacker doctrine’ in another Member State of the EEA. In accordance with this rule, the EEA Member State must (in theory) grant all personal benefits to a taxpayer who derives (almost) all their professional income in that Member State, to the extent that those benefits cannot be granted in the State of residence.
- The financial support payment should also meet all the standard conditions that apply to resident taxpayers, as provided for in the Belgian Income Tax Code (e.g. fixed regular payments, to a relative/ex-spouse who is not part of the household, based on a civil requirement to provide financial support/court decision, etc.).
The new provision entered into force as from tax year 2023 (income year 2022).
In case you have made support payments last year, you may be able to claim the deduction already in the Belgian NR tax filing for 2022 coming September.
It is important to highlight that a rectification can also be requested retroactively for previous assessment years. The NR taxpayer has the possibility to do this via the ‘standard’ administrative appeal procedure (6-month deadline before, now increased to 1 year), or via an ‘exceptional’ request for an ex officio exemption (5-year deadline).
In every case, the taxpayer should be able to sufficiently demonstrate that the conditions for claiming the tax deduction are met.