Important changes to the Belgian special taxation regime for foreign executives

The Belgian government agreed in the recent budgetary agreement on important changes for foreign executives falling under the special taxation regime.

The current special taxation regime is based on an administrative circular letter of 08/08/1983. Under the current regime, an expat is considered as a ‘non-resident’ for Belgian tax purposes, even if he/she is living in Belgium with his/her family for several years. As a non-resident, one is only taxable in Belgium on Belgian source income. The other main benefits of the tax regime are the non-taxation of the salary relating to activities performed outside Belgium (“travel exclusion”) and the non-taxation of the “expatriation allowances”. The ratio of this specific regime is to make Belgium more competitive and attractive for international companies.

The envisaged changes would be the following. Kindly note that the below overview is provisional and that adjustments are possible since no official legal texts have been adopted by parliament yet and are currently reviewed by the Council of State:

• The tax residency status would be determined in line with the general rules of the Belgian Income Tax Code. Hence, based upon the factual circumstances of the expat’s situation, his/her tax residency will be determined. This implies for instance that persons who live in Belgium with their family will be presumed to be tax residents of Belgium. As a Belgian tax resident, one is in principle taxed on his worldwide income.
• The new regime would be open to individuals who have the Belgian nationality. On the other hand, three categories of taxpayers would be excluded: in particular, individuals who, during the 60 months prior to the commencement of the employment, 1) were a Belgian tax resident, or 2) were living within 150 km of the Belgian border, or 3) were subject to the Belgian non-resident income taxation in view of any professional income that was taxable in Belgium.
• In order to be eligible, the individual would have to earn a yearly remuneration above a certain threshold (currently a minimum gross remuneration of 75k per year, excl. cost allowances, is envisaged). Researchers would not be subject to a remuneration threshold, but to certain diploma requirements.
• The benefits of the special tax regime would be limited to the non-taxation of the “expatriation allowances”. The cost allowance would be calculated as a certain percentage of the salary, however with a cap (currently, a portion of 30% of the salary, capped at 90.000 EUR per year, is foreseen). Certain specific costs, such as relocation costs or school fees, could still be reimbursed tax-free on top. The travel exclusion would disappear under the new regime;
• The special taxation regime would only apply for a limited period of time (the envisaged duration is 5 years, with the possibility of an extension for 3 years);
• The new regime would be inserted in law, instead of in an administrative circular letter.
• A number of changes are also foreseen for the employer. For instance, the new regime would also be open to non-profit organisations. We will discuss this aspect further in a separate newsletter.  

These new rules would in principle be effective as of 1 January 2022 for executives starting their activities in Belgium on 1 January 2022. A transitional period of two years would be provided for expatriates currently subject to the (old) special taxation regime. A deliberate choice to ‘opt-in’ for the new regime will have to be made in due time (currently June 2022 is envisaged).