Important amendments of the special tax regime for expatriates in Belgium
As announced a few weeks ago, as part of the 2022 Federal budget measures, the Belgian government has recently agreed on the principles of a new special tax regime for inbound taxpayers and inbound researchers. This new special tax regime will be included in the year end ‘Program Law’ and should therefore enter into force on 1 January 2022.
This article summarizes the most likely amendments based on the proposed legislation and its preparatory documents.
1. Current special tax concessions
For many years, Belgium has a special non-resident tax regime applicable to certain employees and directors, who work temporarily in Belgium for a Belgian entity which is part of an international group of companies.
The current version of this special tax regime was introduced by an administrative circular of 8 August 1983 and is therefore not embedded in legislation.
These special tax concessions mainly provide the following benefits:
- The expatriates are automatically considered as a non-resident taxpayers. As a consequence, they are only taxable on their Belgian source income, except for their professional income.
- They are not taxed on allowances or on reimbursements of expenses which are caused by the assignment to Belgium, within certain limits.
- The expatriate is not taxable on the part of his/her remuneration which is related to his/her professional activity outside of Belgium.
The new regime would be included in the Income tax Code and therefore provides more legal certainty.
2. Qualifying conditions
2.1. Absence of connection with Belgium
During a period of 60 months prior to the arrival in Belgium, the qualifying employee or director should not:
- Have been taxed as a resident taxpayer in Belgium;
- Have been living at a distance of less than 150 km from the Belgian borders;
- Have been taxed as a non-resident on Belgian professional income.
The expatriate must either be recruited from outside Belgium or through an assignment or transfer within a multinational group or non-profit organization.
There is no foreign citizenship requirement anymore: Belgian nationals satisfying the conditions mentioned above are also eligible for these tax concessions.
2.2. Minimum gross compensation threshold: € 75.000
There will be a minimum annual gross salary threshold of € 75.000. This threshold includes gross salary, variable compensation as well as benefits in kind, but not the 30% tax free allowance itself. Should the employment or directorship not cover a full calendar year, this threshold would have to be pro-rated accordingly.
Exception for researchers
This annual minimum salary threshold will not be applicable for researchers as far as they meet the following conditions:
- They hold a master degree in the following expertise area (agricultural sciences, applied sciences, industrial sciences, medical sciences, natural science pharmaceutical sciences, veterinary sciences and engineering); or
- They have at least 10 years of relevant experience in these areas.
Please note that this exception only applies to employees (and not to directors).
This exemption only applies when the researcher spends at least 80% of his/her professional time on research activities.
3. Benefits of the new regime
- The employer may reimburse or compensate the expatriate on a tax-free basis for the recurring additional costs resulting from the expatriation (e.g. cost of living, housing cost,). This reimbursement is limited to 30% of the gross remuneration and capped at a maximum tax free amount of € 90.000. Please note that the social security position should still be aligned with the tax exemption.
- This lump-sum tax free amount of 30% replaces the current travel exemption and deductions of costs proper to the employer (currently capped at € 11.250 or € 29.750).
- The reimbursement of school fees and relocation costs can still be reimbursed as costs proper to the employer on top of the 30% compensation (conditions apply).
4. Maximum duration
The new expat regime would apply for an initial 5-year period with a possible 3-year extension (through the filing of a new request by demonstrating that the qualifying conditions are still met).
This new regime is no longer exclusively linked to the employer. Therefore, it could continue to apply when there is a change of employer.
5. Belgian residency
Unlike the current system, the new special tax regime provides that standard residency rules included in the Belgian income tax legislation apply. Should the concerned expatriate not be considered as a resident taxpayer under the domestic tax rules, he/she would need to provide the tax authorities with a certificate of tax residency from another country.
This residency status implies that qualifying expatriates will be taxable in Belgium on their worldwide income, but are entitled to invoke the double tax treaties concluded by Belgium.
In order to benefit from the special tax regime, the employee/director and his/her employer need to introduce a joint application within 3 months after the start of the Belgian employment/assignment.
Every year, before January 31st, employers will have to provide the Belgian tax authorities with a listing of all the qualifying employees/directors for the preceding year.
7. Entry into force
This new regime should be applicable for all employments/assignments starting as of
8. Transitional measures
The Law provides some opt-in/opt-out mechanisms for existing situations that need to be analyzed on a case by case basis. Although not included in the Draft Law, the government’s intention seems to limit a transitional period to 2 years.
8.1. Opt-in for new regime
Taxpayers benefitting from the current special tax status for less than 5 years may opt for the new regime if they already meet the qualifying conditions of the new special tax regime. This opt-in demand needs to be filed by 30 June 2022 at the latest.
The years of the current special regime will be deducted from the 5 year-limit of the new regime.
Taxpayers benefitting from the current special tax status for less than 5 years and meeting the qualifying conditions of the new special tax regime may also opt out and remain subject to the current regime until 31 December 2023. This option might be interesting for expatriates with high travel exclusion percentages.
8.3. Expatriates not qualifying for the new special tax status.
Expatriates present in Belgium for more than 5 years or not meeting the qualifying conditions of the new regime may continue to benefit from the current concessions until 31 December 2023. Therefore they will become tax resident as of January 1st, 2024 and will then also no longer be entitled to a favourable tax treatment.