If Belgium's tax residency rules have got your head spinning, then you're not alone.
Whether you've just landed that new job, launched your startup, or bought an existing business in Belgium, the tax regulations can be complicated.
Add to that your home country's tax laws, and knowing how or where to even start is daunting.
Are you a Belgian tax resident or non-resident? Does your legal residency status play a role? What about double taxation treaties?
Keep your piece of the EU economy pie while satisfying the tax authorities in Belgium—and your home country.
Read on for answers to all these questions and more as we dive into Belgium's tax residency rules and regulations.
Legal Residency and Tax Residency in Belgium: Are They the Same?
No, not necessarily.
It's true that your legal residency status in Belgium typically dictates your legal rights and responsibilities (including taxes).
However, there's no necessary correlation between a person's legal residence and where they're legally bound to pay taxes on their income.
In other words, a resident of Belgium may be considered a "non-resident for tax purposes" and therefore pay all or part of their taxes abroad.
So, who is considered a resident of Belgium?
Generally, a person who has established their domicile or their centre of economic interests in Belgium is considered a resident for tax purposes.
If you plan on staying in Belgium for longer than three months, Belgian law requires you to register with the population register in the municipality in which you reside.
Registered as such, the Belgian tax authorities presume you to be a resident taxpayer. In this case, you're taxed on your worldwide income—unless you can prove otherwise.
To do this, you must demonstrate that your primary place of residence or the centre of your economic interests remains located abroad.
If the Belgian tax authorities consider you a non-resident for tax purposes (regardless of your legal residency status), then you're only taxed on your Belgian-sourced income.
Of course, these are just the basics.
Determining your tax residency status in Belgium is slightly more complex. Different rules apply to individuals vs. legal entities.
Before we dive into the details, let's take a quick look at Double Taxation Treaties (DTTs).
What is a Double Taxation Treaty? (DTTs)?
A Double Taxation Treaty is an agreement reached between two countries. It allows for the elimination of double taxation of an individual's or legal entity's income in cross-border situations.
DTTs are bound by the laws and regulations of the contracting countries to determine whether an individual or legal entity is considered a tax resident in those countries.
The DTT only applies in cases where an individual or legal entity is considered a tax resident in both contracting countries.
Who is a Belgian Tax Resident According to DTTs?
To answer this question, we need to take a closer look at Belgian tax law regarding tax residency for both individuals and companies.
As an Individual
According to the Belgian Income Tax Code (BITC), you'll qualify as a Belgian tax resident if the following is established in Belgium:
- Your domicile: Defined as the place where you effectively and enduringly reside, where your family lives, and where your personal contacts are maintained.
- Your seat of wealth: Defined as the place where you manage your personal estate or where the centre of your business activities is located. (Not necessarily the place where property and assets are situated, though.)
As a Belgian tax resident, you're subject to income tax on all taxable income the BITC refers to—even if that income is collected or produced abroad.
Remember, your registration in the population register at the municipality in which you reside allows the Belgian tax authorities to presume that you're a resident taxpayer.
But this can be refuted by proving your domicile or seat of wealth is not materially established in Belgium.
If you're married and your family resides in Belgium, then you (and your spouse) are irrefutably deemed to be Belgian tax residents. No converse provision exists under Belgium's tax laws, though.
While it comes down to factual analysis, "family residence" is typically defined as the centre of household interests or day-to-day family life.
As a Company
In terms of the BITC, a company is defined as any corporate body, corporation, institution, or association which has a legal personality and engages in business or profit-making activity.
A company is considered to be a resident of Belgium for tax purposes if it possesses its own legal personality and meets at least one of the conditions below:
- Has its registered office in Belgium: Defined as the official office of the company indicated by the CBE (Crossroads Bank for Enterprises) and in the company's "deed of incorporation.
- Has its principal establishment in Belgium: Defined as the place where a company's officers coordinate, direct, and control the company's activities. This can also be the headquarters, so long as it's the centre of coordination, direction, and control of the company and not merely the place where board meetings are held.
- Has its seat of management in Belgium: Defined as the place where corporate decision-making, effective management, and central administration take place. It's further defined as the place where:
- The general assembly gathers on a regular basis.
- Management holds meetings.
- The company keeps documentation, including documents related to accountability, employment and social contributions, and archives.
- The company trustees perform actions on behalf of the company or where the company has its bank account (for foreign companies).
- Professional correspondence is sent.
Although a company may have numerous places of management, it can only have one place of effective management at a time. It boils down to where key management and commercial decisions necessary for the company's operations as a whole are made. If that is from a Belgian office, a company is considered a Belgian tax resident under Belgian law.
The Belgian Non-Tax Resident
A Belgian non-tax resident or a non-resident for tax purposes is defined by the BITC as:
- A person who has not established their seat of wealth or domicile in Belgium.
- A legal entity that has no registered office, principal establishment, or seat of management in Belgium.
As a Belgian non-tax resident, you or your company are only taxed on income received from Belgian sources. You must still inform your tax collector's office of your non-tax residency status.
Remember, even if you claim non-residency status for tax purposes, the Belgian tax authorities still have the right to prove otherwise. They could demonstrate that you qualify as a tax resident based on your personal situation. Here are some red flags:
- Living in Belgium with a spouse or partner
- Opening a Belgian bank account
- Buying a car or house in Belgium
While no single factor is decisive on its own, all circumstances are considered by the Belgian tax authorities.
That said, certain taxpayers automatically qualify as non-residents. This typically includes diplomats (and their family members), foreign state officials, agents, and representatives, regional entities, and public law institutions.
While Belgian tax residents are taxed on their worldwide income, non-residents are only taxed on their Belgian-earned income (such as professional, real estate, or movable income).
Any income derived from abroad and not originating from a Belgian source is not subject to Belgian income tax.
That said, as a non-resident for tax purposes, you must still declare your overseas income in your Belgian tax return.
The average tax rate applicable to your taxable (Belgian-sourced) income is calculated on both your taxable and exempt income. This is known as the exemption-with-progression method.
Investment income (whether sourced abroad or in Belgium) is generally excluded from such aggregated taxable income. However, in certain circumstances, investment income may still be subject to Belgian tax.
Non-resident taxes on Belgian-sourced income are levied according to the same rules and rates as normal resident taxes in Belgium. This excludes certain federal tax reductions that are either disregarded or limited.
Of course, there are always exceptions.
For example, if a non-tax resident has a property in Belgium or receives 75% or more of their worldwide professional income from a Belgian source, they are entitled to the same tax allowances and deductions as Belgian tax residents.
As a non-resident for tax purposes in Belgium, you aren't liable for municipal taxes. Instead, a flat-rate federal tax of 7% on income tax (calculated on your taxable income in Belgium) applies.
Make the Best of Your Tax Residency in Belgium
Belgium's tax residency rules can seem quite complex at first. But once you understand the fundamentals, it's a lot easier to get your head around.
Legal residency on its own doesn't necessarily equate to tax residency in Belgium. If you're claiming non-residency status, you still have to prove it, though.
Get your ducks in a row and make the best of your tax residency status in Belgium.
A tailor-made tax optimization strategy can help you legally reduce your taxes—whether as an individual, company, tax resident, or non-tax resident. You can learn more here.
Stay on the right side of the Belgian tax authorities, and make sure you understand your tax residency, rights, and responsibilities.
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.