At Taxes for Expats we have been preparing U.S. tax returns for U.S. Citizens and permanent residents living in Belgium for over 10 years. Our clients hail from all parts of the country - Brussels and Antwerp, Ghent and Liege.
As a U.S. Citizen or green card holder you are legally required to file a U.S. tax return each year regardless of whether you already pay taxes in your residence country. The expatriate Foreign Earned Income Exclusion ($92,900 for 2011 and $95,100 for 2012) can only be claimed if you file your tax return on a timely basis. It is not automatic if you fail to file and can even be lost.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the calendar year as is standard in France for U.S. tax purposes). You must, however, pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these form or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
We have helped hundreds of expats around the world catch up with their past U.S. taxes because they have failed to file U.S. tax returns for many years. This is, in fact, our specialty and we offer a 10% discount to clients to wish to file multiple tax returns at once and get in full compliance with the IRS.
Work with a recognized expert to help you prepare your American tax return. We can also provide tax planning and advice on other expatriate tax; we look forward to working with you.
Below we include information on the Belgian Tax System for the American Expatriates.
Who must pay income tax in Belgium?
Liability for income tax in Belgium depends on whether an individual is for tax purposes a resident or a non-resident.Residents for tax purposes
Tax residence is a question of facts and circumstances:- Individuals who have their principal home in Belgium are residents. This criterion relates to the physical presence of the individual in Belgium
- Individuals whose "seat of fortune" is located in Belgium are also residents. "Seat of fortune" generally means the place from where the assets of an individual are managed. This place of management of the assets does not necessarily coincide with the place where the assets are effectively located
- Individuals who are registered with a Belgian commune, unless proven otherwise
- Individuals whose households are located in Belgium
Non-residents for tax purposes
Non-residents are individuals who do not satisfy the tax residency test. Non-residents may still be liable for various income taxes. These include tax on income that is connected to Belgian real estate such as rents or capital gains, and any earned income relating to work in Belgium.Double Taxation
Double tax treaties exist that may provide tax relief where a Belgian tax resident also pays income tax in another country.Standard Income Tax Rates & Social Security
Employees and self-employed individuals pay progressive income tax. The top rate is approximately 53.5 percent (including communal tax) and starts at a salary level of €32,270 (2007 figures).In addition, social security must be paid on earned income. For employees, part of the social security is paid by the employer, and a smaller part by the employee. The employer's social security contribution amounts in general to 35 percent, while the employee's social security is 13.07 percent, both uncapped.
The social security tax for the self-employed is capped at approximately €13,000 per year.
Benefits in kind
Some benefits in kind are taxed favourably:- The free use of a house or apartment
- The free personal use of a company car
- Incentive stock options on employer's shares
- Incentive stock options are either taxed at grant date on a lump sum basis, or when the option is exercised on the actual profit
Tax treatment of expatriates assigned to Belgium
Expatriates may qualify for a special tax regime. If expatriate status is granted by the tax authorities, the person is considered as a non-resident of Belgium for tax purposes.In addition, an expatriate may receive the following allowances free of income tax, capped at €11,250 (managers) or exceptionally at €29,750 (scientists, managers working in "coordination centres"):
- Cost of living
- Cost of housing
- Tax equalisation
- School fees (uncapped)
The Tax Year and Tax Returns
The tax year runs from 1 January to 31 December.Income tax is deducted from salary by employers at the time of pay. As tax is also deducted on other kinds of income (for example rental income, maintenance payments, pensions, etc.) individuals then have to fill in a tax return. The exact time depends on where they are in the population register and when the tax office sends out the return. Generally, residents must file their tax return before 30 June of the year following the income year. Tax returns filed electronically may be filed later.
Non-residents may usually file their tax return later on in the year.
Note: An identity card number is necessary in order to declare taxes online. Those who do not have a Belgian identity card may request an access code at the following address:
- FPS Information and Communication Technology
- At: Rue Marie-Thérèse 1-3 1000 Brussels
- Tel: 02 212 96 00
- Fax: 02 212 96 99
- Website
Belgium Income Tax Rates
Belgium personal income tax rates for income year 2009 (payable in 2010) are progressively between 25% - 50%.| Taxable Income (EUR) | Tax Rate % |
| EUR 0 - 7,900 | 25% |
| EUR 7,900 - 11,240 | 30% |
| EUR 11,240 - 18,730 | 40% |
| EUR 18,730 - 34,330 | 45% |
| Above EUR 34,330 | 50% |
Zero-bracket Amount: EUR 6,430 for each taxpayer
Additional tax-free allowance for dependant children:
- 1 child: EUR 1,370
- 2 children: EUR 3,520
- 3 children: EUR 7,880
Municipal taxes must be added to the tax rates above.
An individual resident in Belgium is liable to personal income tax on his worldwide income and on certain capital gains. Special rules apply to foreign employees temporarily resident in Belgium. An individual is regarded as resident only if he spends a certain period of time in Belgium and has his main home or his centre of economic interest in Belgium. A nonresident individual is liable to tax on his Belgian-sourced income only.
Total taxable income is the aggregate of net income or profits arising from an occupation or business, real estate, personal property, and miscellaneous sources, reduced by deductions that may be set against total income.
In Belgium there is no wealth tax, or as such. Capital gains tax is only levied on private individuals in certain circumstances such as transactions which go beyond the normal management of a private estate, certain sales of property and sales to a company resident outside the European Economic Area of substantial holdings in a Belgian company.
Belgium residents are subject to personal income tax on their total income from all sources. Taxation on a sliding scale is applied to successive portions of net taxable income. Rates in 2009 vary between 25% and 50%. Belgium residents also pay additional municipal taxes at rates that vary between 0% and 9,5% of the total income tax payable.
Nonresidents are subject to personal income tax on Belgian source income only, notably on Belgian source professional income, on property income located in Belgium and on Belgian source investment income (i.e. interest and dividends paid by a Belgium company). Nonresidents have to pay additional taxes at a rate of 7% of the total income tax payable.
Belgium personal income tax is calculated by determining the taxable base and by assessing the tax due on that base.
In determining the taxable base, compulsory social security contributions paid either in Belgium or abroad are fully tax deductible. Professional expenses can be claimed either on an actual basis. Belgium personal income tax is calculated on the taxable base after allowing for part of that base to be exempt from tax by applying a number of reductions related to marital status, the number of dependent family members and other matters.
Belgium Tax Year: Tax year in Belgium is the calendar year.
Special Social Security Contributions
| Taxable Family Income (EUR) | Rates |
| EUR 0 - 18,592.02 | 0 |
| EUR 18,592.03 - 21,070.96 | 9% in excess of > EUR 18,592.02 |
| EUR 21,070.97 - 60,161.85 | EUR 223.10 + 1.3% on excess of EUR 21,070.96 |
| Above EUR 60,161.86 | EUR 731.28 |
Belgium Corporate Tax Rates
The standard corporate income tax rate in Belgium for 2009 (assessment year 2010) is 33.99%, including a surcharge of 3%.A resident company in Belgium is liable to corporation tax on its worldwide profits. A company is resident in Belgium if its registered office or centre of management is situated in Belgium. The place of incorporation is irrelevant.
Small and medium-sized companies in Belgium benefit from a reduced progressive tax rate, provided certain conditions are met (e.g. taxable income does not exceed EUR 322,500 and no more than 50% of the shares in the Belgian company are held by another company).
Reduced tax rates apply only if the following conditions are met:
- the company does not distribute dividends during the year that exceed 13% of the paid-up capital at the start of the year
- the profits of the company do not exceed EUR 322,500
- the company pays an annual taxable income of at least EUR 36,000 (tax year 2009) to at least one director
- the company does not belong to a group of companies with an approved Belgian co-ordination centre
- the company is not a holding company
- the company is not 50% or more owned by one or more companies.
These reduced tax rates are as follows:
| Taxable Profit (EUR) | Tax Rate % |
| EUR 0 - 25,000 | 24.98% (24.25% + 3% surcharge) |
| EUR 25,001 - 90,000 | 31.93% (31.00% + 3% surcharge) |
| EUR 90,001 - 322,500 | 35.54% (34.50% + 3% surcharge) |
Tax rates above include 3% crisis contribution.
Secret Commissions Tax
A secret commissions tax of 309% (300% tax rate + 3% surcharge) applies to certain fees and commissions in Belgium, if payments are not documented.Risk Capital Deduction
Ass. year 2008: 3.781% (small companies: 4.281%)Ass. year 2009: 4.307% (small companies: 4.807%)
Ass. year 2010: 4.473% (small companies: 4.973%)
Excess carry-forward during seven years
Belgium Capital Gains Tax: Capital gains are normally treated as ordinary business income and are taxable at the normal corporation tax rates. However, there are exceptions such as gains on shares qualifying for the participation exemption.
Belgium Branch Profits Tax: There is no separate branch profits tax in Belgium. Trading profits and capital gains of the Belgian branch of a foreign company are calculated and taxed on the same basis as those of a Belgian resident company.
Local Taxes in Belgium: Several local taxes of varying rates apply for advertising, machinery, unimproved real estate, office furniture, producing copies and enterprises that pollute the environment. Unlike the individual income tax, there is no additional local tax as a surcharge on company income taxes.
Registration Duty: Certain legal transactions are subject to registration duties. Transactions that are subject to proportional duties include sales of real estate situated in Belgium. A registration duty of 12.5% (10% in the Flemish Region) applies to the price or market value of the real estate.
Real Estate Tax: Owners of real estate located in Belgium pay real estate taxes on the deemed rental value of their property. The applicable rate depends on the location and use of the property.
Losses: Losses can be carried forward indefinitely. However, this rule will no longer apply if there is a change in the control of a company which cannot be justified by financial or economic reasons other than the recapture of losses. Losses cannot be carried back.
Previous and current losses may not be set off against income from abnormal or gratuitous advantages granted by enterprises that are related to the company receiving the benefit.
Foreign Source Income: There are no provisions similar to the UK's controlled foreign company rules. Foreign-sourced income and capital gains are normally subject to Belgian corporate income tax, unless exempt by treaty provisions.
Belgium Tax Incentives: There are special tax regimes in Belgium for foreign sales corporations, distribution centres, co-ordination centres and service centres. There are also exemptions from real property tax and accelerated depreciation.
Foreign Tax Relief: For foreign dividends received by a Belgian company, a 95% exemption system is available under certain conditions. For foreign interest and royalties on which foreign tax has been levied, there is a fixed foreign tax credit. In the case of interest, however, the tax credit is variable but subject to a maximum rate (15%). The tax credit is not refundable. The 'fixed' foreign tax credit will be limited to the amount of Belgian tax related to the net foreign income. In case of royalties, the tax credit is 15/85 of the royalties net of foreign tax.
Corporate Groups: Belgium tax law contains no special provisions for groups of companies. A Belgium company is always treated as an independent unit. Consolidated tax returns are not allowed.
Capital Gains and Losses: Capital gains are treated as ordinary business income taxable at normal corporation tax rates of Belgium. However, there are a few exceptions:
- under certain conditions, rollover relief is granted for gains on fixed assets held for business purposes for more than five years
- unrealised gains are exempt provided they are credited to a specific non-distributable reserve
- realised capital gains on shares are exempt from tax if dividends on the shares qualify for the participation exemption.
Capital losses are tax-deductible if they relate to fixed assets used for business purposes. Unrealised capital losses on shares (booked devaluations) are not tax-deductible.
Realised capital losses on shares are generally not deductible. Capital losses realised on the liquidation of a company are deductible up to the value of the capital actually paid-up.
Taxation of Dividends: Dividends received by a company with a participation of at least 10% or an investment of at least EUR 1.2 million in the distributing company, are 95% deductible from the fiscal profits of the recipient if the shares have been held for an uninterrupted period of at least one year. For example, all dividends are first included in taxable income and then 95% of eligible dividends are deducted out again (subject to a maximum of the net taxable profits of the company for the period). The remaining 5% is taxable at normal corporation tax rates as part of the overall taxable profits of the company.
The 95% deduction is not available where the profits of the payer are subject to a tax regime which is substantially more advantageous than the Belgian tax regime. This will be deemed to be the case if the effective tax rate suffered by the company making the distribution is less than 15%. However, this criterion does not apply to companies established in the European Union.
Withholding Tax: Belgium withholding tax on dividends is normally 25% or 15%. Full withholding tax exemption can be obtained for dividends paid by a Belgian resident company to a parent company resident in another EU Member State, subject to certain minimum holding requirements, in accordance with the Parent-Subsidiary Directive. Furthermore, an exemption from withholding tax is granted on dividend distributions on substantial participations held by foreign companies that reside in a country which has concluded a bilateral tax treaty with Belgium.
Interest payments are subject to a withholding tax, although there are several exemptions. The tax rate is also generally 25% or 15% depending on whether or not the loan is contracted before or after 1 March 1990). Under certain conditions, the tax does not apply to interest payments distributed to EU-resident companies after 1 January 2004.
Payments of royalties are normally subject to a withholding tax at the rate of 15%. Tax treaties negotiated by Belgium generally exempt royalty payments from withholding tax or reduce the withholding tax rate. In accordance with the EU Interest and Royalty Directive, royalty payments by a Belgian resident company to a related company in another EU Member State are, under certain conditions, exempt from withholding tax.
A 15% withholding tax applies to income from the granting of cessions or licences on copyrights and similar rights. If the income constitutes business income or professional income, the 15% withholding tax only applies if the income does not exceed EUR 37,500. Otherwise, the income is taxed at the corporate income tax rate of 33.99% or the progressive individual income tax rate.
The income received from the granting of cessions or licences on copyrights is reduced by a lump-sum cost deduction of:
- 50% on income up to EUR 10,000
- 25% on income between EUR 10,000 and EUR 20,000.