If you are an employee who lives in a property made available to you by your employer, or you are a director of a Belgian company that provides you with free living accommodation, such provision constitutes a taxable benefit in kind for the beneficiary. There is a specific lump-sum valuation method defined in Belgian tax law on the basis of the so-called ‘cadastral value’ (CV) of the property. In this respect it does not matter if it is owned or rented by the employer.
Until recently, the benefit in kind for free housing was calculated according to the following formula: [indexed CV × 100/60 × 3.8] in case the property was made available by a company (which is the most common). When the home is furnished as well, the benefit is further increased by 5/3.
To give you an idea, if the (indexed) cadastral value of the apartment was e.g. €1,250.00, you would be taxed annually (and pay social security) on a benefit of €7,916.67. In case it was also furnished by the company, the taxable benefit would increase to €13,194.44 in total per year.
However, when the property was made available by a private individual (who would act as employer), the value was not multiplied with a factor of 3.8.
Some alert taxpayers challenged this approach as they considered it to be discriminatory and refused to apply the multiplication by 3.8, even though the property was provided by a company. Several Belgian tax courts eventually followed these taxpayers in their claim and confirmed that the difference is not in accordance with the principle of equal treatment.
Surprisingly, the Belgian tax authorities accepted this rather quickly and announced that the overall valuation method would be adjusted. In income year 2018, the benefit was multiplied by a factor of 1 as a transitional measure, but this was only temporary as it was not considered sustainable.
Since 1 January 2019, the difference in valuation between housing provided by a company or a private individual no longer exists and in all cases is multiplied by a factor of 2. The Royal Decree that formalises this change has been published in the Belgian Official Gazette a couple weeks ago. The new formula is therefore the [indexed CV × 100/60 × 2]. This new rule amounts to a tax increase compared to last year. Several comments were made that an increase with a factor of 3 would have been more correct and in line with the actual value of the benefit.
The change in the valuation method evidently also impacts foreign executives who benefit from the special expat tax status who receive a housing benefit as part of their expatriate remuneration package.
The question is how long this new valuation method will be in place, as it is still discriminatory in comparison to free housing provided to Belgian employees working abroad. These properties have no ‘cadastral value’ and will therefore be taxed (higher) on the actual rental value of the foreign property. This illustrates ones more that the concept of the ‘cadastral value’ is outdated.