Tax Residency Challenges for UAE Residents in Belgium
Individuals residing in the UAE are normally not considered Resident for tax treaty purposes in the eyes of the Belgian Taxman. The reason for this is that a tax treaty (DTA) only applies to a ‘Resident’ of a Contracting state. In Article 4 of the UAE-BE DTA, a ‘Resident’ is defined as “any person who, under laws of that state, is liable to tax therein by reason of their domicile”. Since there is currently no Personal Income Tax in the UAE, the Belgian authorities conclude that an individual domiciled or residing in the UAE cannot be considered ‘Resident’ for DTA purposes.
Key Implications of the UAE-Belgium DTA
As a result, UAE residents are generally (i) not entitled to double taxation relief, (ii) do not have access to treaty benefits (e.g. capped source withholding), and (iii) their Belgian source income will be taxed in accordance with Belgian domestic tax law. On top of this, the Belgian Tax Authorities will only grant a tax exemption for UAE sourced income in Belgium to the extent that the taxpayer can demonstrate an effective taxation in the UAE, which is currently not available for personal income.
In a recent case, the Tax Ruling Office determined that an individual, residing in the UAE, could not be classified as a Belgian Tax Resident under domestic tax law, even if this person would register with his married partner in the Belgian national register. Although this ruling holds a unique position regarding Belgian Tax Residency, in our view, it does not constitute a recognition of UAE Tax Residency (Decision of 20 August 2024, No. 2024.0390).
Specific Circumstances Considered by the Belgian Tax Ruling Office
In the case presented to the Ruling Office, the factual circumstances were very specific.
The taxpayer holds Belgian nationality but has not lived in Belgium for many years. He has had an international career and was tax resident in several countries around the world. The taxpayer currently resides and works in Dubai, where his two minor sons live with their mother, his ex-wife. Together with his ex-wife, he shares responsibility for the children’s upbringing, and both sons attend school in Dubai. The taxpayer also has an adult daughter residing and studying in Belgium to whom he transfers a fixed monthly allowance.
The taxpayer’s new partner is Argentinian and also resides in Dubai, working under a visa sponsored by her employer in the UAE. The couple is married in Dubai, handles their banking transactions from there, and has local insurance and mobile phone subscriptions in Dubai. They actively participate in Dubai’s social life. The taxpayer owns an apartment in the UK and shares ownership of a house in Brazil with his ex-wife. He has also purchased real estate in Dubai that serves as the family’s primary residence and continues to do so. His current spouse owns a plot of land in Argentina and a home in Belgium.
Why the Couple Sought Clarity on Tax Residency
The couple wants to have a base in Belgium to return to if, due to unforeseen global circumstances or visa issues in the UAE, their careers require them to relocate in the future. In this context, the spouse would apply for a “Temporary residence card for a family member (spouse) of an EU citizen” from the relevant municipality in Belgium due to her marriage to the taxpayer. He will therefore register in the Belgian population registry, and his spouse will register in the Belgian foreigners’ registry. Applicants confirmed to the Ruling Office that the required legal steps regarding Belgian immigration law will be respected, although the latter is not relevant for tax purposes.
The couple will occasionally return to Belgium for short visits, typically over the weekend, and stay at the wife’s investment property in Belgium. They do not own a car in Belgium, nor do they conduct any professional activities here. They have absolutely no intention of making Belgium their primary residence. For this reason, the taxpayers wanted to understand in which country their tax residency lies, in Belgium or in the UAE.
Belgian Tax Ruling Decision on Residency
Remarkably, the Ruling Office concludes that, based on the above circumstances, the family’s residency is in Dubai, and not in Belgium.
Since they own real estate in the UAE, where the couple resides and spends a significant amount of time, the tax office concludes that the family’s centre of vital interests is in Dubai. Additionally, the centre of the taxpayer’s wealth management (seat of wealth)is not located in Belgium either, since his assets are entirely managed in the UAE. The centre of his economic, material, and financial interests is located outside of Belgium. For these reasons, the taxpayer cannot be considered a Belgian Tax Resident.
Understanding Belgian Tax Residency Rules
The Belgian Tax Code defines a Tax Resident as ‘any private individual who has established either their residence or seat of wealth in Belgium’. It is further stipulated that whether your residence or seat of wealth is established in Belgium, is assessed based on the factual circumstances.
Unless demonstrated otherwise, private individuals that are registered in the National Register of Belgium, are deemed to have established their residence or seat of wealth in Belgium. If you register at the city or town hall in Belgium for immigration purposes, you will automatically trigger a legal presumption that you have established your tax residency in Belgium as well.
How to Challenge Tax Residency in Belgium
However, this is a legal presumption that can be challenged. It is possible to demonstrate to the Belgian Tax Authorities that your principal place of residence or the centre of your social/economic interests remains located abroad. If your stay in Belgium is only temporary and if there are elements in your personal situation that tie you closer to your home country, you can demonstrate to the Belgian tax inspector that he should qualify you as a Non-Resident Taxpayer instead.
Specific Rule for Married Couples
However, there is an important proviso for married couples/legal cohabitants who are living together in Belgium: they can never obtain Non-Resident Status, as the above legal presumption can never be challenged in that case. Belgium will always be considered as the place of your family residence if you live here together with your partner. In Belgian tax law, there is an irrebuttable presumption that married or legally cohabiting partners share the same tax residence. This means that, regardless of the factual situation, both partners are usually considered tax Residents of Belgium if one of them has their tax residence there (although the tax authorities have also decided differently on this matter in the past: Decision of 19 December 2023, No. 2023.0887).
Significance of the Ruling Office’s Decision
This Ruling Decision is remarkable as it deviates from the traditional irrebuttable presumption and demonstrates that it is possible to challenge this presumption based on factual elements. This implies that married or legally cohabiting couples residing in the same country (Belgium) are not automatically both considered Belgian Tax Residents, provided they can demonstrate their tax residence lies elsewhere.
The above general principles for determining residence or seat of wealth in Belgium must be assessed in practice through factual circumstances. These should indicate whether a taxpayer intended to establish their domicile or permanent residence abroad. Based on these facts, it must be determined whether the taxpayer, despite residing abroad, maintains significant personal, social, economic, or financial ties to Belgium that would justify their status as a Belgian Resident. It is important to note that such decisions are case-specific and heavily depend on the particular facts and circumstances of each situation.
The Ruling Commission, on all these grounds, concludes that the taxpayer and his Argentinian partner are both ‘domiciled’ in the UAE, and the centre of their interests is located over there. Whether intentional or not, the Ruling Office does not explicitly say that the applicants are UAE Tax Residents. It only confirms they should be consideredNon-Resident for Belgian tax purposes instead. This is an important nuance.
Key Takeaways for UAE Residents with Belgian Ties
As indicated before, the Belgian authorities are of the opinion that an individual domiciled or residing in the UAE cannot be considered ‘Resident’ for DTA purposes. For this reason, they can generally not benefit from any tax treaty benefits or double taxation relief.
The tax treaty between Belgium and the UAE, which dates back to 2 August 2002, defines in Article 23 that Belgium is only required to give a tax exemption (under the progression clause) if the income in the UAE has indeed been ‘taxed’, which is currently impossible due to the absence of any personal income tax (for Corporations that is now different). Taxation implies that income is subject to an assessment that is usually applied, resulting in either a levy or an exemption, which currently does not occur in the UAE for personal income. Therefore, income cannot be effectively taxed there in the absence of an applicable tax regime. We believe that this approach represents an unilateral interpretation of the UAE-BE DTA provisions. It would be advisable for treaty partners—especially if one does not impose income tax—to agree on how to handle double taxation or exemptions.
However, in practice, if you are a Belgian Tax Resident earning an income in the UAE (e.g. salary, pension, rental income or other) you will likely be asked to demonstrate that your earnings have been taxed in the UAE before Belgium will allow them to be exempt. Regardless of the number of days you have spent in Belgium and regardless of whether Belgium effectively has taxing authority according to the DTA, you will be taxed in Belgium on your UAE income, unless you can convince the authorities you are not a Belgian Tax Resident.