Belgium's Federal Government implemented a new Expat Tax Regime, which came into effect on 1 January 2022.

The updated legislation completely overhauls the 38-year old expat tax regime, providing legal clarity and adapting Belgium's tax rules to the present day's legal and tax needs.

The new Expat Tax Regime will also be incorporated into the Belgian Income Tax Code of 1992 (articles 32/1 and 32/2) and given a statutory basis.

The legislation's primary purpose remains the same: To promote Belgium as a competitive and business-friendly place for international companies and foreign investment.

Whether you're looking to move your business to Belgium, expand internationally, or launch your start-up, the new Expat Tax Regime aims to attract your business.

Belgium's new tax rules seek to:

  • Allow companies to assign decision-makers and crucial global talent to Belgium at an affordable, competitive, and sustainable cost
  • Mitigate the high-income tax rates of individuals
  • Curtail high, uncapped social security contributions

Scope and Criteria

Belgium's new Expat Tax Regime applies to expat employees hired from 1 January 2022 who fit the following criteria:

  • An expat recruited by an enterprise that's part of an international group, either outside of or seconded to Belgium
  • Must not have been a resident of Belgium in the past 60 months from employment
  • Has not lived within 150 kilometres (93.2 miles) of the Belgian border
  • Was not taxed as a non-resident for professional income in Belgium
  • Earns a gross salary of at least €75,000 per year, excluding researchers

This annual minimum salary doesn't apply to researchers, who must meet the following criteria to benefit under the new regime:

  • They hold a Master's degree in veterinary sciences and engineering, pharmaceutical sciences, industrial sciences, agricultural sciences, applied sciences, or medical sciences.
  • Alternatively, an expat researcher must have a minimum of ten years of relevant experience (or equivalent).
  • The researcher must spend at least 80% of their professional time on research activities

The above exception for researchers only applies to employees and not directors.

How will expats and employers navigate this new regime? Let's take a look.

Decisions, Decisions

The Belgian tax rules allow expats under certain conditions who have been under the old regime for less than five years (at 1 January 2022) to:

  • Opt-in to the new regime within an 8-year total time limitation
  • Stay under the old regime for a 2-year transition period (the practice of which must still be further confirmed by Belgium's tax authorities)

Such expat employees must make a decision before 31 July 2022.

Expats who have been under the old Expat Tax Regime for more than five years can't transition to the new tax regime until 31 December 2023.

The tax authorities must also confirm the relevant procedures.

Tax Residency Status

Under the old regime, an expat was considered a "non-resident" for Belgian tax purposes, even when residing in Belgium with family members for an extended period.

As a non-resident, an expat was only taxable on their Belgian-sourced income.

The new Expat Tax Regime changed all that. Now, an expat's tax residency status is determined by the general rules of the Belgian Income Tax Code. 

As such, an expat working and living in Belgium with their family is taxable on their worldwide income and not only on their Belgian-sourced income.

Such an expat is considered a resident in Belgium for tax reasons.

Banes and Benefits of Belgium's New Expat Tax Regime

While Belgian tax authorities must still clarify or confirm certain aspects of the new Expat Tax Regime, there are a few key amendments that stand out.

Despite the two-year transition period, companies, employers, and employees must prepare for the following changes:

The New Tax Exemption

30% of the expat's salary becomes tax-exempt for "costs proper to the employer." However, a €90,000 salary cap applies, so expats earning above €300,000 per annum won't benefit here. (300,000 x 30% = €90,000).

Tax-Free Allowances and Travel Exclusion

The tax-free travel exclusion for time spent outside of Belgium no longer applies under the new Expat Tax Regime.

The 30% tax exemption replaces tax-free allowances for certain additional expenses incurred by an expat. The cap of €90,000 for costs proper to the employer applies.

The following incurred costs can be reimbursed as tax-free allowances (subject to certain conditions):

  • An expat employee relocating to Belgium
  • Furnishing of an expat employee's house in Belgium
  • School tuition expenses paid for the expat's children

These are just some of the primary changes you can expect as the Belgian authorities still iron out the kinks.

In principle, social security authorities aren't bound by "costs proper to the employer" laid down in the Belgian Income Tax Code.

Nonetheless, as with the old regime, the authorities will likely align with this new tax treatment per formal instruction or administrative letter.

Out With the Old in With the New

Belgium's new Expat Tax Regime is set to shake things up.

Considering the scope, benefits, and conditions of this new system, companies in Belgium must prepare for some significant changes.

It's still early days, but it's best to get your ducks in a row.

Whether you're an expat entrepreneur or employing expats for your business in Belgium, a tailor-made tax strategy can help you navigate Belgium's new Expat Tax Regime for maximum tax optimization. You can learn more here.

_________________________________________________________________________

Sources:

http://news.pwc.be/new-expat-regime-in-belgium-voted/

https://news.pwc.be/changes-to-the-belgian-expat-tax-regime-draft-law-filed-in-parliament/

https://amcham.be/blog/reform-expat-tax-regime-belgium

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.