BELGIUM - Housing benefit in kind - New legislation
Benefits in kind are a commonly used method of remuneration in Belgium. When a company puts a property at the disposal of one of its employees, a taxable benefit in kind arises for the beneficiary. This benefit in kind is valued on a lump-sum basis, and can therefore be tax-efficient. Recently a new Royal Decree changed the valuation of the benefit in kind which will affect a large group of tax payers.
Previous tax legislation
The housing benefit in kind is valued on a lump-sum basis based on the cadastral income (notional rented value) of the real estate. In the case that the housing was provided by a private person, the taxable value of the benefit will be calculated by taking the indexed cadastral income of the real estate and multiplying by 100/60. In the case that the housing was provided by a legal person (company or organisation), the taxable benefit will be multiplied by factor 1.25 if the cadastral income was lower than or equal to 745 EUR. If the cadastral income was higher than 745 EUR it would be multiplied by factor 3.8. An additional increase of 5/3 is applied for furbished real estate.
Old rules proven to be discriminatory
Over the years, many disputes have arisen on the valuation of the taxable benefit. According to judgements by the Court of Appeal of Antwerp and Ghent there is a discrimination between the housing provided by a private person (not multiplied) and the housing provided by a legal person (multiplied by 1.25 or 3.8).
Last year, the Belgian tax administration decided to cancel the difference in tax treatment in anticipation of the new regulation. For housing benefits provided in 2018, the factors 1.25 and 3.8 were abolished. However, a new regulation came through on 7 December 2018.
New tax legislation
According to the new Royal Decree of 7 December 2018, all housing benefits will have to be multiplied by factor 2. As of now, the formula to be used for company provided housing is: indexed cadastral income x 100/60 x 2. The difference in tax treatment between housing provided by a legal or private person and the difference in treatment between real estate with a cadastral income of more or less than 745 EUR is now officially abolished.
The new formula is applicable for all housing benefits in kind provided as of 1 January 2019. The decision the tax administration made last year to use no multiplier in anticipation of the new regulation remains unchanged for 2018.
A few remarks
The new regulation isn’t a positive evolution for all tax payers. Employees with housing provided by a private person now see their benefit in kind doubled. The beneficiaries of housing provided by a legal person with a cadastral income that’s lower than or equal to 745 EUR will also be taxed on a higher benefit in kind. Only the beneficiaries with housing provided by a legal person with a cadastral income that’s higher than 745 EUR will see the taxable benefit lowered.
In light of this new regulation, it’s recommended that companies with an international mobility program check whether it is more beneficial to rent a property for an employee or to reimburse the rent the employee paid themselves.
On a final note, it’s important to mention that the Belgian State Council remains critical in its advice on the Royal Decree. The lump-sum amount of benefit in kind needs to approach the real value of the benefit as much as possible. The Counsel doubts that this is the case since there isn’t an adequate foundation to justify the use of a factor 2. According to the Counsel the legal base of the Royal Decree is fragile. This may mean that there will be further changes on the taxation of housing benefits in kind.