Belgium

Belgium, the land of waffles, beer and chocolate! Lots of chocolate in fact. Belgium produces more than 220,000 tons of chocolate per annum, making it one of the largest producers of chocolate in the world. Lots of beer too! There are over 1000 different types of beer brewed in Belgium.

Whilst these might all be compelling reasons for wanting to live in Belgium (other than well lit motorways and some of the world’s best music festivals), Belgium has one of the highest tax rates in Europe. High earners can pay as much as 57% in tax, which according to the World Economic Forum, makes it the fourth most tax-bearing country in Europe after France, Italy and Spain. Belgium’s tax revenue is in fact among the highest in Europe representing around 48% of the country’s GDP.

Despite this, Belgium (more specifically Brussels), has a very high level of international presence. Brussels ranks only second to New York in this regard, and this mainly stems from the fact that Brussels is home to around 120 international governmental organisations, 1,400 non-governmental organisations and 181 embassies employing 3,000 diplomats. Brussels is also home to the European headquarters of more than 2,000 multi-national organisations and the headquarters of the European Union and the North Atlantic Treaty Organisation (NATO).

Whether you are a local or foreign national, good financial planning is essential, not only to safeguard your financial future, but also to mitigate the impact of high tax rates in Belgium. Seeking professional, tailored advice is key in helping you achieve these goals.

Our team of advisers will be able to provide you with a tailer-made personalised financial plan targeted at achieving your long-term financial goals. We will help you achieve your dream of becoming financially independent and give you the ability to make the most out your time in Belgium.

You are considered a tax resident in Belgium if:

You spend more than 183 days a year in Belgium
Your main residence or living quarters are located in Belgium
Your seat of wealth is located in Belgium, meaning that Belgium is your centre of economic interests and you carry a professional activity in Belgium

If you are considered a tax resident in Belgium, you are subject to tax on your worldwide income and gains.

If you work in Belgium temporarily, whilst you may be considered resident of Belgium for the reasons outlined above, you may be able to apply for a special tax regime and only pay tax in Belgium on income arising in Belgium (rather than your worldwide income).

Tax rates

Income tax, VAT and corporate tax are subject to federal tax rates in Belgium. Other taxes, such as inheritance tax, vary depending on where you live in Belgium.

Income Tax

In 2022, earnings from worldwide sources are taxed according to progressive rates of up to 50%:

ANNUAL INCOME (Table)

INCOME TAX RATES

Up to €13,870

€13,870 – €24,480

€24,480 – €42,370

€42,370+

25%

40%

45%

50%

You are entitled to a personal tax-free allowance (belastingvrije som, somme exonérée) of €9,050. This will rise to €9,270 in 2023. The tax-free allowance increases if you have children.

Belgian Pensions

If you live and work in Belgium, you may be entitled to a state pension and occupational pensions. You may also set up a private pension. Benefits from state and occupational pensions typically become available to residents aged over 65 (this figure is likely to rise in years to come).

Pension Income

Pension income (both local and foreign) that is paid out periodically is subject to the progressive tax rates for personal income tax purposes. This means that any pension income you receive, whether received in Belgium or abroad, would be added to all other taxable income. This means that income from a pension scheme could be taxed at anything up to 50%.

In certain cases, foreign pensions may be entitled to a tax reduction or a lower rate of tax, or may even be exempted where certain conditions are met on the basis of the double taxation treaty. For example, UK civil service pensions which are taxed at source in the UK are not subject to tax in Belgium.

European Commission Pensions

Brussels is home to the European headquarters of more than 2,000 multi-national organisations and the headquarters of the European Union. One of the main perks of working with the European Commission (EC) is that you are be entitled to an EC pension, subject to how long you have been working for the EC and the value of your basic salary.

If you have been working for the scheme for over 10 years (assuming that you have been a member of the scheme for this amount of time), upon retirement, the scheme will pay you a monthly income for life. If you have been a member for less than 10 years, you are instead provided with a transfer lump sum. The cash value is based on the number of years you have worked for the EC and the salary that you were on at the time.

Upon leaving the EC, especially if you have worked there for less than 10 years (and are therefore not entitled to receive a monthly pension income for life from the scheme), the lump sum needs to be transferred to a suitable pension provider for you to be able to access these funds in retirement.

Reasons for transferring your EC Pension:

You do not plan to work for an EU institution again
You would like your pension capital to potentially accrue a better annual return (capital with the European Commission Paymaster’s office typically accrues 2.9% per annum in interest)
You wish to have control over your pension capital
You wish to avoid the risk of your pension capital being lost if you die before reaching your retirement age

If you have worked for the EC for more than 10 years, you have the option of leaving your pension with the EC. However, the biggest risk in doing so is that, if you happen to die before reaching your pension age, your EC pension will be completely lost.

The challenge is finding an appropriate pension provider that will accept a transfer from an EC pension. Not all pension providers accept transfers from an EC scheme as there are certain terms and conditions which the providers are obliged to meet. These terms and conditions are laid out by the EU and the pension providers must confirm in writing to the EU that their scheme will follow them. One of the conditions is that monthly income must be paid from age 60 at the earliest, and age 66 at the latest.

If you are looking to transfer your EC pension, our team of advisers will be able to help you determine if this is the most appropriate course of action. If so, we will help you choose the pension provider which meets the terms and conditions laid out by the EU and will help guide you along the process by liaising directly with the pension provider. Once transferred, we will review your pension on a regular basis to make sure that the pension is being managed in accordance with your personal circumstances, objectives and attitude to risk.

Life Insurance Policies (“BRANCH 23”)

With such high taxes in Belgium, you might be dreading the day when you have to declare any investment gains, income or dividends. Having said that, with correct planning, Belgium can be one of the most tax efficient countries in Europe when it comes to minimising your taxable gains on your investments.

First, before determining what you need to do to reduce your taxable gains, it is good to understand the different types of taxes that are applied to regular investment accounts.

Investment accounts attract three types of taxes:

Tax (Table)

Rate

Description

Income Tax

30%

Interest and dividends on securities must be reported on an annual basis. These are taxed at a flat rate of 30%.

Transaction tax (also referred to as stock exchange tax)

0.12% – 1.32%

A flat rate of tax that is applied on buying and selling securities and is based on the value of the transaction. This tax charge is applied irrespective of whether the security is being sold at a loss or gain.

The tax is automatically withheld at source in case of transactions made through a Belgian financial institution. This does not apply to investments held with foreign institutions – the onus is on the individual to report the transaction and pay tax. The transaction must be reported in a specific declaration on every second month (not in the annual tax return). Large fines are imposed by the Belgian tax authorities for non-compliance.

Securities account tax (also referred to as net wealth tax)

0.15%

A solidarity tax of 0.15% is applicable on securities accounts that reach or exceed €1,000,000. This is based on an aggregated total across all accounts per individual.

Why set up a Life Insurance Policy?

It is always important to seek advice when looking to set up an investment solution as you want to be sure that you are doing so in the most tax efficient way possible.

What is a Life Insurance Policy?

Life Insurance Policies (sometimes also referred to as Insurance Bonds) are insurance-based investment solutions commonly used in many European countries, including Belgium. They act as tax efficient investment wrappers that contain one or more underlying investments.

Life insurance policies in Belgium come in two forms, Branch 21 and Branch 23. Both carry significant tax benefits.

Branch 21

Branch 21 solutions are typically used for pensions as they provide a guaranteed return (which is usually less than 1%). There may also be bonuses attached to these types of policies, however these are not guaranteed and vary according to the terms and conditions of the provider. Fund choice usually tends to be more restricted with these types of policies.

Branch 23

Branch 23 solutions do not offer a guaranteed return but offer the ability to hold a wider range of assets tailored to your specific risk profile and objectives. These tend to be more commonly used and offer a variety of tax benefits. Below, we have drawn a comparison between a standard investment account and a life insurance policy (Branch 23):

Standard Investment Account (Table)

Life Assurance Policy (Branch 23)

Advantage

Gross roll-up of income, dividends and gains

Income, dividends and gains that arise within the account must be reported on an annual basis and tax must be paid accordingly, even if there have been no withdrawals.

Income, dividends and gains that arise within the policy do not have to be reported. These can be rolled-up within the policy free of tax.

Gross roll-up
Simplification of policyholder’s tax return

Income Tax on income, dividends and gains

Whether rolled-up in the account or withdrawn, income, dividends and gains are liable to Income Tax at a rate of 30%.

Income, dividends and gains rolled-up within the policy or withdrawn are exempt from Income Tax.

Exemption from Income Tax
Tax-free withdrawals

Transaction Tax on purchase and sale of securities

A tax charge of 0.12% to 1.32% is applied on the value of a purchase and/or sale of an assets within the account. This tax charge is applied irrespective of whether the security is being sold at a gain or loss.

Securities can be purchased and sold freely with no liability to Transaction Tax.

Exemption from Transaction Tax

Securities Account Tax on investments in excess of €1m.

A 0.15% tax charge is applied to investments with a value of €1m+ per individual. This is based on an aggregated amount across all investments.

Life assurance policies fall outside the scope of Securities Account Tax i.e. no tax is applied on any access above €1m held in a life assurance policy.

Exemption from Securities Account Tax

With both Brach 21 and 23, a 2% tax charge is deducted from your premium. Most providers will deduct the amount automatically from your premium and will settle the tax payment directly with the Belgian tax authorities. Other than this, there is no other tax to pay on any gains, dividends or withdrawals.

Our team of advisers will help you determine what solution is most appropriate for you and recommend a suitable provider and investment strategy based on your circumstances, objectives, risk profile and investment time horizon.

Inheritance Tax

Inheritance tax applies to the total value of an individual’s total estate. The rate of inheritance tax depends on the relationship between the deceased and the beneficiary with a minimum tax rate of 30% for spouse and children, and a maximum tax rate of 80% for unrelated beneficiaries.

Inheritance tax in Belgium is a regional tax and is paid to the region (Brussels, Flanders or Wallonia) in which the deceased was tax resident for the majority of the last five years of their life. Each region has different tax rates and different tax-free allowances.

Inheritance tax allowances worth noting (for 2021):

Brussels

€15,000 to spouses and direct descendants/ascendants (with an extra €2,500 per year for children under 21).
€1,250 per person for all other individuals.

Flanders

€500 for inheritances of less than €50,000

Wallonia

€25,000 to spouses and direct descendants/ascendants for inheritances less than €125,000, and €12,500 for inheritances more than €125,000 (with an extra €2,500 per year for children under 21).
€620 per person for all other individuals.

If inheritance tax is a concern for you, speak to us as we may be able to help guide you on how to mitigate the inheritance tax liability for your heirs. It is simpler than you might think…

Gifting assets to eliminate inheritance tax

Typically, when a gift is made, no gift/donation tax is deducted in Belgium. However, if you die within three years from when the gift is made, your beneficiaries would need to pay inheritance tax on the value of the gift.

To eliminate this risk, when the gift is made, you can opt to register the gift with a notary and pay some tax upon making the gift. For moveable property, tax of 3% for direct heirs and 7% for other beneficiaries would be due on the value of the gift (the rate for immoveable assets varies depending on the relationship between the deceased and the beneficiary and the region in which the deceased was tax resident). The benefit of doing so is that no inheritance tax would be due even if you die within three years from when the gift is made.

It is possible to gift your main residence to your child but maintain the right to use the property for the rest of your life. In this instance, you would be subject to gift tax, but your beneficiaries would receive the property free of inheritance tax.

Disclaimer:

The content of this guide is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing in this guide constitutes a solicitation, recommendation, endorsement, or offer by MWC Group or any third party service provider to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the laws of such jurisdiction. Please contact your own lawyer, accountant, or tax professional with any specific questions you have related to the information provided that are of legal, accounting or tax nature. The content of this guide is of a general nature and does not address the circumstances of any particular individual or entity. All information of this guide is provided in good faith, however we make no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability, or completeness of any information. By reading this guide, you agree not to hold MWC Group, its affiliates or any third party service provider liable for any possible claim for damages arising from any decision you make based on information or other content made available to you by this guide.