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No more double taxation for staff members of Belgian embassies abroad

Staff members of a Belgian embassy that work in a country that has no double tax treaty with Belgium, will no longer have a risk of being taxed twice (namely in Belgium and in their own country).

Before, there was a potential risk for anyone working at a Belgian embassy or consular office abroad, to be considered a Belgian tax resident at the same time and thus considered fully taxable on their worldwide earnings in Belgium. In the Belgian Income Tax Code (BITC92) there is a specific paragraph that qualifies this type of workers as Belgian tax residents (Article 2, §1, 1° c) BITC92 and Com. IB92, nr. 4/8).

On the other hand, a locally recruited gardener, driver or cook will have no link with Belgium, except for the fact that they were hired by a Belgian employer. The Belgian legislator recently came to the conclusion that such tie to Belgium is insufficient to justify being subject to Belgian income tax. As a result, the definition of a Belgian tax resident will be modified and locally recruited staff of a Belgian embassy or consulate will no longer fall within the scope of Article 2.

Staff who have the Belgian nationality remain in any case taxable in the Belgian income tax. Also, non-Belgian staff can remain subject to the Belgian income tax. This has to do with the fact that, consistent with European rules, diplomatic functions have to be available to residents of other EEA countries. Those non-Belgian staff members remain considered to be Belgian tax residents.

For Belgian (and European) staff there is in principle no risk of double taxation, as they are exempt from taxation in the country where they are stationed on the virtue of diplomatic reciprocity (even without a double tax treaty).

In the case of technical or administrative personnel, the diplomatic exemption does not apply to staff who have the nationality of that country or those who are a permanent (tax) resident there. If the embassy recruits locally, these workers do not qualify for any tax privileges provided by the Vienna treaties, and can only be taxed in the country where they live or work. Hence the problem of double taxation when there is no double tax treaty (and even if a DTT does exist, the rules concerning government functions will likely apply, and they usually allocate the right to tax to the country from where the salaries are paid).

However, the general problem of double taxation is not completely solved by excluding the above category of staff members from the definition of a ‘Belgian tax resident’. A Belgian non-resident would still be taxable (in the Non-Resident Income Tax) when there is a connection with Belgium, since the salary is still paid by a Belgian employer (the Belgian State in particular). Therefore, not only the definition of Belgian tax resident is adjusted, but also the scope of the Non-Resident Income Tax category.

The NR tax no longer applies to non-residents who have been recruited abroad by the Belgian State in a country that has no double tax treaty with Belgium. The new rules apply as from tax year 2018 (income year 2017).