On 12 March 2026, the Court of Justice of the European Union (CJEU) ruled that Belgium’s fixed 7% municipality tax on nonresidents violates the free movement of workers principle in article 45 of the Treaty on the Functioning of the European Union (TFEU).
Belgian municipalities levy a local surcharge on top of personal income tax. For residents, this surcharge varies by municipality and generally ranges between 0% and 9% depending on where the individual is registered in the population register. Nonresidents cannot be subject to a municipality surcharge. Instead, they are automatically charged a fixed federal surcharge of 7% on their base income tax.
Because municipal rates differ significantly across the country, applying a fixed rate of 7% to nonresidents can—“at least in certain cases”—result in a higher taxer burden for nonresidents than for residents.
The case before the CJEU involved a French couple who challenged the 7% surcharge applied to the husband’s Belgian-source professional income, arguing that it violates the EU free movement of workers principle in article 45 of the TFEU. The Court of Appeal of Liège referred the matter to the CJEU for a preliminary ruling.
The CJEU found that the different treatment between residents and nonresidents in Belgium is incompatible with EU law because it can impose a heavier tax burden on nonresidents, thereby restricting the free movement of workers. The court held that this difference in treatment is not objectively justified and is therefore discriminatory.
Importantly, the CJEU did not object to the concept of a municipal surcharge for nonresidents, nor to the replacement of a municipal surcharge with a federal one. The violation of EU law arises solely from the application of different tax rates, which results in nonresidents paying more “at least in certain cases”.
Regardless of the outcome in this specific case, the CJEU’s interpretation is binding, meaning Belgium must amend its legislation. The form of the legislative change, however, remains uncertain:
As of the publication of this article, the Belgian Ministry of Finance has not issued a response to the CJEU decision. It therefore remains uncertain whether claims will be accepted administratively or whether taxpayers will need to pursue litigation to recover the surcharge paid.
Charlotte Lemahieu
BDO in Belgium
Background
Belgian municipalities levy a local surcharge on top of personal income tax. For residents, this surcharge varies by municipality and generally ranges between 0% and 9% depending on where the individual is registered in the population register. Nonresidents cannot be subject to a municipality surcharge. Instead, they are automatically charged a fixed federal surcharge of 7% on their base income tax.Because municipal rates differ significantly across the country, applying a fixed rate of 7% to nonresidents can—“at least in certain cases”—result in a higher taxer burden for nonresidents than for residents.
The case before the CJEU involved a French couple who challenged the 7% surcharge applied to the husband’s Belgian-source professional income, arguing that it violates the EU free movement of workers principle in article 45 of the TFEU. The Court of Appeal of Liège referred the matter to the CJEU for a preliminary ruling.
CJEU Ruling
The CJEU found that the different treatment between residents and nonresidents in Belgium is incompatible with EU law because it can impose a heavier tax burden on nonresidents, thereby restricting the free movement of workers. The court held that this difference in treatment is not objectively justified and is therefore discriminatory.Importantly, the CJEU did not object to the concept of a municipal surcharge for nonresidents, nor to the replacement of a municipal surcharge with a federal one. The violation of EU law arises solely from the application of different tax rates, which results in nonresidents paying more “at least in certain cases”.
What Happens Next?
The Court of Appeal of Liège must now apply the CJEU’s reasoning to the facts of the French couple’s case. Its decision will provide the first concrete confirmation of the discriminatory effect of the 7% surcharge. Close monitoring of the court’s ruling in the coming months will be essential.Regardless of the outcome in this specific case, the CJEU’s interpretation is binding, meaning Belgium must amend its legislation. The form of the legislative change, however, remains uncertain:
- Abolishing the surcharge would have significant budgetary consequences and is therefore unlikely.
- Aligning the nonresident rate with the lowest municipality rate (0%) would have the same budgetary impact and is similarly improbable.
- Linking nonresidents to a specific municipality (e.g., place of employment or the location of real estate) could be a potential solution, but this approach raises practical challenges, particularly when a nonresident has ties to multiple municipalities or none at all.
As of the publication of this article, the Belgian Ministry of Finance has not issued a response to the CJEU decision. It therefore remains uncertain whether claims will be accepted administratively or whether taxpayers will need to pursue litigation to recover the surcharge paid.
Charlotte Lemahieu
BDO in Belgium