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Taxation in Belgium

In Belgium, taxes are collected on both state and local level. The most important taxes are collected on federal level, these taxes include an income tax, social security, corporate taxes and value added tax. At the local level, property taxes as well as various fees are collected. Tax revenue stood at 48% GDP in 2012.[1]

The amount of taxes a person in Belgium has to pay depends on whether you are or you are not a resident of the country. For a resident (a person whose work or family home is in Belgium) it is clear. But in the case of non-resident, there are two scenarios. If you are non-resident who lives in Belgium for at least six months of the year (183 days) and you are registered with your local commune, you are classified as resident. It means you are taxed by Belgium income tax on your worldwide income. But if you are a non-resident who lives in Belgium for fewer than 6 months (183 days) during the year, you have to pay Belgium income tax only on income you earned in Belgium (including rents and capital gains). [2]

The effective taxation rate in Belgium is commonly cited as among the highest in the world; see list of countries by tax rates.

The Belgian tax year for personal income runs from 1 January to 31 December.[2] Both, residents of Belgium as well as non-residents who pay tax on their income (as mentioned above), have to file an annual Belgian tax return. A tax return associated with your income in previous year is generally delivered in May or June. Typically, it has to be returned by the end of June (exact date can be found on the particular tax return). In case you don´t submit your return by the deadline, you will receive a fine. Moreover, tax authorities can determine the amount of tax you have to pay.

As regards regular income tax payments, it is quite simple. If you are employed, your employer will regularly (every month) deduct your income tax payment from your salary. With self-employed workers or paid company directors, the process is similar – tax is paid in advance on monthly basis through collecting agency or bank. In Belgium, it is also possible to pay taxes via post or online (using Belgian government’s tax portal). For non-residents with Belgian-earned income, it is a bit more complicated. A tax return is delivered as soon as they inform competent tax collectors office. On the other hand, they can also pay with the use of post or online.[2]

Income tax is calculated by applying a progressive tax rate schedule to taxable income, with rates that go from 25% to a maximum rate 50%. The rates, as of 2015, were as follows:[3]

Annual income Tax rate
In between 0 and €10,860 25%
In between €10,860 and €12,470 30%
In between €12,470 and €20,780 40%
In between €20,780 and €38,080 45%
In excess of €38,080 50%

Whereas in 2019 the income tax rates are a bit different [4]:

Annual income Tax rate
In between 0 and €13,250 25%
In between €13,250 and €23,390 40%
In between €23,390 and €40,480 45%
In excess of €40,480 50%


Furthermore, a long list of tax allowances can be deducted from both the employer and the employee, including a general deduction, benefits deduction, and a deduction for dependents. Tax deductions are granted according to the following table:[3]

  • Child benefits:
    • Employer - 7%
    • Employee - 0%
  • Unemployment:
    • Employer - 1.46%
    • Employee - 0.87%
  • Medical care in the case of sickness:
    • Employer - 2.35%
    • Employee - 1.15%
  • Occupational illnesses:
    • Employer - 1%
    • Employee - 0%
  • Industrial accidents:
    • Employer - 0.30%
    • Employee - 0%

Employment income is also subject to social security contributions. Employee contributions are 13.07% and are deducted by the employer. In addition, the employer contributes about 35% of employees wage.[5] No ceiling for contributions apply on contributions for either employee and employer.[6]

Value-Added Tax (VAT) applies to most sales of goods and services. The standard rate of value-added tax is 21%.[7] A lower rate of 12% applies to social housing, meals and margarine. Another reduced rate of 6%[8] applies to foods, drinks, hotels and medicine. Certain goods and services are exempted from VAT by law, this includes exports, and financial services. The Belgian VAT is part of the European Union value added tax system. Smaller businesses with a turnover lower than €25000 are exempt as of 01/01/2016.

Corporate tax applies at a standard rate of 33.99%.[9]

The effective corporate tax rate in Belgium can be lowered through the use of various tax schemes. In 2016 the European Commission ruled that a Belgian corporate tax scheme, which had provided tax breaks to 35 multinational companies was illegal.[10][11] Anheuser-Busch InBev is known to benefit from a very low effective corporate tax rate in Belgium, where the company has its headquarters.[12]

Legislation process

The tax topics and laws are managed by government through the Ministry of Finance. The power to levy taxes has only the parliament. After the law is signed by the king, it is published in the official gazette.

Business taxation

In Belgium, there are many taxes connected with business such as corporate income tax (more specified in the Income Tax Code), payroll taxes on remuneration paid to employees and directors, VAT, transfer tax, insurance premium tax. Occasionally, certain regional or local taxes might appear, depending on the area where firm operates. [13]

Taxes also differ depending on the fact whether a certain company is resident or nonresident. In the case of resident company, corporate income tax is levied on company´s capital gains, worldwide profits and income. Whereas nonresident company have to pay a tax on “Belgian-source” income.

For subsidiaries and branches, the corporate tax rate is 33,99% (including 3% surtax). Tax rates on profits of independent nonfinancial companies whose income is less than 322 500 EUR are as follows (including 3% surtax) [13] :

Profits Tax rate
In between 0 and €25,000 24,25%
In between €25,000 and €90,000 31%
In between €90,000 and €322,500 34,5%


According to Deloitte study Taxation and Investment in Belgium 2017, taxable income can be defined this way: “The taxable income of resident company comprises its annual worldwide income, less allowable deductions. Income derived by a resident company from foreign real estate or branches located in countries with which Belgium has concluded a tax treaty is exempt. Although subsidies are, in principle, part of taxable income, certain job creation subsidies, capital grants and interest rate subsidies are exempt for corporate income tax purposes.” [13] However, during the process of calculating taxable income, companies can deduct all business expenses that can be considered as legitimate and arm´s length. Expenses that can be taken as deductions are for example royalties, fees, investments, employer-funded pension contributions, some of the employee benefits and in some cases also interest paid on loans.


By selling tangible and intangible fixed assets company generates capital gains that are usually taxed by standard corporate tax rate 33% (33,99% including the 3% surtax). „However, taxation of capital gains on such assets can be deferred if the assets were held for more than five years before the disposal and the entire sale reinvestment, the tax due will be spread over the life of the asset in which the sale proceeds have been reinvested.“ [13] And further: „Capital gains from fixed income securities are taxed as profits. However, gains derived from shareholdings in other companies are exempt if: (i) the shares meet the „subject to tax“ requirement for application of the dividends received deduction; and (ii) the shares have been held in full ownership for an uninterrupted period o fat least one year. “ [13]

Belgium Tax Facts for Companies
Corporate income tax rate 33% (33.99% including the 3% surtax)
Crisis surcharge 3%
Fairness tax 5% (5.15% including the 3% surtax)
Secret commissions tax 50%/100% (51.5%/103% including the 3% surtax)
Branch tax rate 33% (33.99% including the 3% surtax)

Indirect taxes

Value added tax (VAT) is a consumption tax “placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale. The amount of VAT that the user pays is on the cost of the product, less any of the costs of materials used in the product that have already been taxed.” [14] VAT is not levied on exports and the standard VAT rate is 21%. But for certain cases, the rates might be a bit different – 0% rate in case of daily and weekly publications and certain recycled goods, 6% rate applies to most basic goods (water, food,…), 12% rate is associated with social housing and restaurant services. [15] A value added tax return is obliged to be filed monthly or quarterly. As regards the payments, typically, tax due must be paid at the time VAT return is being filed and sometimes advance payments may be required.

Transfer tax - there is no transfer tax in Belgium.

In case of capital tax, there is only a fixed fee 50 EUR.

In Belgium, there are also some environmental taxes associated mainly with energy usage.


References

  1. ^ "EU - Tax Revenue Statistics".
  2. ^ a b c "Belgian tax guide: Understanding taxes in Belgium for foreigners". Expat Guide to Belgium | Expatica. Retrieved 2019-04-28.
  3. ^ a b "Belgium - CountryPedia - Papaya Global".
  4. ^ "Belgium individual taxes on personal income".
  5. ^ "KPMG - Tax Card" (PDF).
  6. ^ "Belgium Social Security" (PDF).
  7. ^ "KPMG - Belgium: VAT essentials".
  8. ^ "VATGlobal".
  9. ^ "PKF - Tax Card" (PDF).
  10. ^ "Decision by the European Commission on Belgian corporate tax scheme". European Commission.
  11. ^ "Belgium's $762 Million Tax Loophole Shut in EU Payback Order". Bloomberg. 11 January 2016.
  12. ^ James Kanter (20 October 2015). "Anheuser-Busch InBev Aims Its Tax-Trimming Skills at SABMiller". The New York Times.
  13. ^ a b c d e Taxation and Investment in Belgium 2017 (PDF).
  14. ^ Kagan, Julia. "Value-Added Tax - VAT Definition". Investopedia. Retrieved 2019-04-28.
  15. ^ "Belgium: Tax system".



This page was last updated at 2019-11-13 08:40, update this pageView original page

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