Simple Tax Guide for Americans in Belgium
At TFX we have been preparing taxes for Americans in Belgium since 1995.
Many expats from the United States come to Belgium. Many of our clients work in Brussels or have settled in the country many years ago. But, Belgium also has a tax rate that is among the highest in all of Europe. It is vital that US expats understand the tax laws in Belgium and how they will affect their expat taxes.
US Expat Taxes - Belgium
US citizens, as well as permanent residents, are required to file expatriate tax returns with the federal government every year regardless of where they reside. Along with the typical tax return for income, many people are also required to submit a return disclosing assets which are held in bank accounts in foreign countries by using FinCEN Form 114 (FBAR).
The United States is among only a few governments who tax international income earned by their citizens, as well as permanent residents, residing overseas. There are, however, some provisions that help protect from possible double taxation. These include:
- The Foreign Earned Income Exclusion. This exclusion allows one to exclude USD 101,300 (this amount is for 2016 taxes) in earned income from foreign sources.
- A tax credit allowing tax on remaining income to be reduced based on the taxes paid to foreign governments.
- An exclusion on foreign housing that allows additional exclusions from their income for some amounts paid to cover household expenses due to living abroad.
Preparing a quality tax return following proper tax planning should allow one to use these, as well as other strategies, in minimizing or possibly eliminating tax liability. Note that in most cases the filing of a tax return is required, even if taxes are not owed.
Who Qualifies as a Belgian Resident?
A person becomes a resident of Belgium when they move their domicile to the country, or when their primary financial interests become located in Belgium. Immediately upon getting a permit to work, or a residence permit, the taxing authorities in Belgium will assume a person is a resident of Belgium until that person proves otherwise. People must get a permit for residency if they anticipate staying in Belgium over 2 months. Every person working within Belgium is required to get a permit to work.
Does Belgium Tax Foreign Income?
Residents of Belgium are required to pay tax on their income worldwide. Non-residents are taxed just on any income they receive from Belgian income sources. American executives working temporarily in Belgium may qualify for a special regime for expat taxes that might be applicable to their Belgian income sources.
Tax Rates for Belgium
People living in Belgium will submit annual declarations of income tax to the Belgian tax authorities. The tax authorities will determine which tax regime is applicable and calculate the income tax that is due to Belgium.
|25%||On||€ 0 - € 8,590|
|30%||€ 8,590 - € 12,220|
|40%||€ 12,220 - € 20,370|
|45%||€ 20,370 - € 37,330|
|50%||Over € 37,330|
US-Belgium Tax Treaty
There are several tax treaties that Belgium has with other nations, and those include the United States. The latest tax treaty between Belgium and the US was signed during 2006. The primary purpose of the majority of treaty provisions is to help taxpayers in both countries avoid paying taxes on the same income in both locations. The provisions make clear which country gets the taxes on each particular kind of income situation. There are additionally many different provisions that give guidance to companies conducting business in other countries as to the taxation they are subject to.
When Are Belgian Taxes Due?
The Belgian tax year is simply the calendar year. Each year, the Belgian tax authorities will mail tax declarations. These are sent to residents, as well as non-residents, of Belgium. These tax declarations must be completed, then returned, before the due dates on the tax declaration form - usually the 30th of June for residents and the 30th of September for non-residents. People working in Belgium who do not get their tax declaration form before the 1st of June should contact one of the Belgian tax offices. Note that this is a different date than when United States expatriate taxes must be submitted to the US Internal Revenue Service.
Belgian Social Security
All Belgian workers pay into the social security scheme in Belgium at tax rates between 0.05% and 13.07%. But, United States expats who work in Belgium are subject to the bilateral agreement between the countries that governs social security. US expats will pay into either the United States or the Belgian social security program while they work in Belgium.
Each of the municipalities in Belgium is allowed to charge a local tax on income. The rates vary between 5% and 9%, with some municipalities choosing not to charge any local tax on income.
Sales taxes and value added taxes are charged on many services and goods. The normal rate is set at 21%, but there are reduced rates for some things of 0%, 6%, or 12%.
There is also a report required to be submitted annually that documents Belgian residents’ accounts held with foreign institutions.