Belgian Tax Reform – Second Draft Law Moves Forward

This newsflash outlines the main new tax provisions introduced by this second legislative package, including some key measures initially left out from the Program Law.

1. Real estate taxation

As from tax year 2026, several federal tax benefits relating to real estate would be abolished. In particular:

• The ordinary and additional mortgage interest deduction for properties other than the taxpayer's main residence– including for existing loans.
• The tax reduction for "green loans" (contracted between 2009 and 2011), except for the 1.5% interest subsidy, which should be maintained.
• The tax reduction for low-energy, passive or zero-energy buildings, normally spread over 10 years, would be repealed.
• The federal housing bonus for second homes. Only repayments of capital and life insurance premiums should remain eligible for long-term savings tax relief.
• The additional tax reduction in case of joint taxation (for contracts before 1 January 1989).

These changes form part of the broader effort to simplify personal income taxation and align it more closely with environmental and budgetary objectives.

2. Inpatriates

The inpatriate tax regime would be slightly amended to improve its competitiveness and accessibility:

• The threshold for employer-specific tax-free reimbursements is raised from 30% to 35%, and the previous €90,000 cap would be removed;
• The minimum gross salary condition for regular inpatriates (excluding researchers) would be reduced from €75,000 to €70,000.

These adjustments are expected to make the regime more attractive for foreign talent relocating to Belgium and would be applicable as of income year 2025.

3. Car taxation

Effective from 1 January 2026, the deductibility rules for car expenses would be further amended:

• Fuel costs would no longer be tax deductible, regardless of the type or acquisition date of the vehicle.
• Electric charging costs remain fully deductible.
• A new deduction schedule would apply to hybrid vehicles used by natural persons (not companies):
  • Deduction of up to 75% for purchases before 2028 (depending on CO₂ emissions),
  • Gradual decrease to 65% in 2028 and 57.5% in 2029,
  • No deduction as from 2030.
• Low-emission hybrids emitting ≤ 50g CO₂/km may qualify for a deduction of up to 95%, capped as from 2027 to ensure no advantage over fully electric vehicles.
• Older vehicles (acquired before 2018) would fall under a new grandfathering regime: 75% deduction in 2026, gradually decreasing by 5% per year to reach 50% in 2031. This measure would be applicable to company cars.

These measures aim to incentivise sustainable mobility while offering transitional relief for those unable to immediately switch to electric fleets.

4. Investment deduction ("ID")

To encourage targeted investment, several amendments would be made to the ID regime on investments made as from 1 January 2025:

• The carry-forward period for unused ID would be now unlimited.
• The increased thematic deduction would be harmonised at 40%, for companies of all sizes, and may now be combined with regional aid.
• The cumulation prohibition between the ID and the R&D tax credit would apply only to technological ID.
• The +10% increase for digital assets would explicitly be limited to small companies.

These amendments enhance the flexibility and impact of the ID while maintaining coherence with R&D incentives.

5. Dividend Received Deduction ("DRD")

Two amendments would be introduced in relation to DRD:

• Under the Group Contribution Regime (GCR), companies would be able to benefit from the DRD on the portion of the contribution that exceeds the negative result of the beneficiary (before applying the contribution) (further to the John Cockerill case, cf. our previous Newsflash).
• For DRD SICAV/BEVEKs, two major changes, effective as of tax year 2026, are proposed:
  • A 5% tax on capital gains previously exempted would apply to disposals of such investment vehicles.
  • The withholding tax credit on distributed income would be subject to a condition: the recipient company must pay itself a minimum director's remuneration during the relevant income year.

6. Tax returns simplification

In line with prior announcements, several deductions and exemptions would be abolished as from tax year 2026 to streamline personal and corporate returns:

• End of the tax exemption for employer-funded PC purchases after 1 October 2025.
• Removal of various personal income tax reductions, including:
  • Flat-rate allowance for long commutes;
  • Export-related internships;
  • Quality training support;
  • Hiring incentives for low-wage workers;
  • Contributions to development aid funds, domestic worker deductions, adoption-related expenses, legal insurance, and PRICAF losses.
• In corporate tax:
  • Abolition of the capital gains exemption on company cars;
  • Removal of the deduction for social liability provisions.

Additionally, the tax reduction for donations would be lowered from 45% to 30%.

These simplifications bring personal and corporate tax treatment into closer alignment and reduce administrative complexity.

7. Tax investigation and assessment period

A new framework is proposed, replacing the current categorisation of tax investigation and assessment periods with three tiers:

• 3 years (standard): for complete and compliant returns.
• 4 years (revised): for complex returns (consolidating former "semi-complex" and "complex" cases).
• 7 years (fraud): reduced from 10 years. Prior written and precise notification of fraud evidence is required again, as under the earlier rules. Similar rules apply to VAT.

All changes would apply retroactively as from tax year 2023.

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This second draft law confirms the government's intention to move forward with the "Easter Agreement"'s full tax agenda. Several measures that were initially postponed or politically sensitive have now been reintroduced.

We also anticipate a third important Program Law later this year, expected to cover additional reforms such as the taxation of capital gains.

Stay tuned for further updates and legal insights.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.