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08 August 2018 / article

Belgian expatriate 'special tax regime' - part 1/3

Belgium has an attractive special tax regime for foreign executives and specialised employees temporarily employed in Belgium. 8 August will be its 35th (!) anniversary. Since that day in 1983 the currently applicable regime has been set out in a Tax Letter. Although the tax regime is very attractive, it is not flawless and the reshaping of Belgian income taxes, over the past years, also had its impact.

Why is this tax regime so special?

Contrary to Belgian resident taxpayers, expatriates who benefit from this special tax regime, have part of their income exempted from taxes (and social security). For most expatriates, a so-called “tax free allowance” and ”travel exclusion” will apply.

  • “Tax free allowances” can be compared to a cost proper to the employer, which cover housing and all other costs of living as well as the tax difference between Belgium and the expatriate’s home country on his professional income. The amount is capped at 11.250 EUR per year, or 29.750 EUR in case of a R&D center.
  • The expatriate’s “travel exclusion” implies that income related to business days spent outside Belgium is exempted from Belgian income taxes. Travel exclusion is a percentage determined on the basis of the number of business days spent outside Belgium (which calculation is based on specific rules) divided by the number of working days during the year.

Besides these two main advantages, the expatriate is also tax exempted for, amongst others, school fees, a moving allowance, a settling-in allowance and a home visit allowance paid by his employer.

For whose benefit?

The special tax regime is actually set out to accommodate Belgian employers cost-wise. By applying a number of tax exempted allowances, the employer is able to engage executives and highly skilled employees with international profiles at a lower expense. The employer must be part of an international group of companies (subject to corporate income taxes as a Belgian resident or as a non-resident). Non-profit organisations normally fall outside the scope of application (although exemptions exist).

The employee must be either seconded to a Belgian group company or directly hired outside Belgium by the company. His employment in Belgium must be temporary. During this period he needs to maintain a link with his home country at all time. The employee can live with his family in Belgium and qualify as a “fictitious” non-resident for Belgian income tax purposes, or he can maintain his residency in his home country although that decision would limit the advantages of the special tax status. Self-employed directors with a real activity (e.g. CEO) also fall under the scope of application of the special tax regime.

The special tax regime needs to be approved by the Belgian tax authorities. In order to obtain such approval, both the employer and the employee must file a request within 6 months following the month of arrival in Belgium. A late filing results in the non-application of the special tax regime, although (only) in exceptional circumstances, tax authorities could still allow the application as of the year following the year in which the late filing was made.

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