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Wednesday, 09 February 2022

New Belgian special expat tax regime – who’s in?

A new expat tax regime for incoming executives and researchers entered into force in Belgium on 1 January 2022.

Considering the change in the special tax regime’s scope, conditions and benefits, it certainly offers opportunities for some companies and individuals: for instance, it is no longer required to be part of a multinational group and a specific category of ‘researchers’ is now in scope. Important is also the recent confirmation of NSSO that they follow the position of the tax authorities. On the other hand, for others, the new special tax regime has created several challenges.

Scope of application

  • Employees and (certain) directors that execute an activity in Belgium are eligible for the regime.

  • The person concerned must be recruited abroad by a Belgian company, establishment or non-profit organisation. The regime also applies to individuals who are posted within a multinational group by a foreign company to a Belgian company, establishment or non-profit organisation. 

  • In the 60 months preceding the individual’s entry into service in Belgium, he or she must not have been a Belgian resident, nor have lived within 150 kilometres of the Belgian border and must not have earned professional income that was taxable in the Belgian non-resident income tax.

  • There is no nationality requirement under the new regime, which means it can also apply to Belgian nationals taking up professional activities in Belgium after a (minimum) stay abroad.

  • The individual (except for researchers) must earn a minimum gross remuneration of 75,000 EUR per year.  The minimum salary threshold condition must be fulfilled throughout the duration of the special tax regime.

  • Specific conditions apply to researchers. There is no minimum salary requirement for researchers, but they must hold a qualifying degree or have 10 years of relevant professional experience.

Benefits

The company /organisation may bear recurring expenses arising from the posting or employment in Belgium, on top of the individual’s remuneration. These ‘expatriation allowances’ are exempt from taxation. However, the tax-exempted allowance is capped at 30% of the gross salary, with an absolute maximum of EUR 90,000 per year. Certain specific costs, such as relocation costs, furnishing costs made in the first 6 months after arriving in Belgium and school fees, can be reimbursed tax-free on top.

The old regime’s travel exclusion no longer exists under the new regime.

The special tax regime only applies for a period of 5 years, with the option of a 3-year extension.

Tax residency

The tax residency is determined in line with the Belgian Income Tax Code’s rules. Hence, the expat’s tax residency is determined based upon the factual circumstances of his/her situation. This implies, for instance, that individuals who live in Belgium with their family are presumed to be tax residents of Belgium. As a Belgian tax resident, such a person is in principle taxed on his/her worldwide income. Non-residency should be demonstrated towards the Belgian tax authorities through an annual certificate of residency, issued by the state of residence.

Procedure

To benefit from the special tax regime, the company must submit an application within a period of 3 months from the start of the activity. The extension of the regime after 5 years must also be requested, at the latest 3 months after the expiry of the 5-year term.

The company must also provide the tax administration with a list of names of all the employees, directors and researchers who benefited from the special tax regime during the previous year.

Opt-in

For the executives who currently are under the ‘old’ expat tax regime, there is an option to opt-in to the new regime, on the condition that the individual met the conditions for the new regime at the moment of his/her first employment in Belgium and the individual has been in Belgium for less than 5 years. The following scenarios should be distinguished:

  1. The opt-in application is approved by the tax administration: the new expat regime will apply (as from 1 January 2022); or

  2. The administration denies the opt-in application, or a possible applicant decides it is not opportune to file an opt-in application: the old expat regime will continue to apply until 31 December 2023.

Requests for an opt-in should be filed by 31 July 2022 at the latest.

Social security

The social security authorities confirmed their point of view in which they follow the position of the tax authorities. This means that NSSO accepts that expense allowances granted under the new regime are exempted from employer and employee social security contributions. At this moment, the applicable Royal Decree still has to be adjusted, which means that the point of view is subject to final legislative approval.

Call to action

Both for expats under the ‘old’ expat tax regime as well as for new hires, it is important to assess the new special tax regime’s impact and to take the appropriate action, such as assessing whether an opt-in is opportune, reviewing contractual clauses in old and new contracts, evaluating remuneration packages, etc.

We are available to provide you with more information that is specifically relevant to your situation. 

 

Katrien Bollen – Senior Associate (Katrien.Bollen@tiberghien.com)

Liana Willemse – Associate (Liana.Willemse@tiberghien.com)

Tiberghien Brussels

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