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.
OR
- 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.