Global Employer Services News January 2022

Important amendments of the special tax regime for expatriates in Belgium – update

As announced, 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 is included in the year-end ‘Program Law’  and entered into force on 1 January 2022.

This alert summarizes the key characteristics of this new special tax regime for inpatriates taxpayers and inpatriate researchers

1. Legal basis

The new regime is included in the Income tax Code (articles 32/1 and 32/2) and therefore provides more legal certainty than the former special tax status which was based on an administrative circular.

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 inpatriate must:

  • be recruited from outside Belgium by a resident company, a Belgian establishment of a foreign company or a non-profit association; or
  • through an assignment or transfer within a multinational group or non-profit organization. In other words, in case of recruitment from abroad, also Belgian companies who are not part of an international group qualify for this inpatriate tax regime. This was usually not the case under the old regime.

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’s 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 their professional time on research activities.

2.3. Contractual

Based on the explanatory memorandum of the Law, it seems that the employment contract or directorship agreement should include provisions that confirm the application of the new special tax regime and the details of the compensation package and tax free allowance that will be paid. Although it is not confirmed by the Law, we assume that it will be confirmed in an upcoming administrative circular detailing the practical aspects of this new regime.

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, but it has now been clarified that a lower percentage is also possible, which means that more expatriates become eligible for the new scheme. On the other hand, the benefits are 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, moving and installation costs can still be reimbursed as costs proper to the employer on top of the 30% compensation (conditions apply).

4. Maximum duration

The new inpatriate 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, they 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.

6. Procedure

In order to benefit from the special tax regime, the employee/director and their 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 will be applicable for all employments/assignments starting as of 1 January 2022.

8. Transitional measures

The Law provides some opt-in/opt-out mechanisms for existing situations that need to be analysed on a case by case basis. This transitional period will be limited 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 31 July 2022 at the latest.

The years of the current special regime will be deducted from the 5 year-limit of the new regime.

8.2. Opt-out

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 1 January 2024 and will then also no longer be entitled to a favorable tax treatment.

9. Administrative circular

We have been informed by the tax authorities that an administrative circular detailing the practical arrangements for this new regime is expected to be released in January 2022.

Peter Wuyts