Belgian Special Expatriate Fiscal Regime

Special Expatriate Fiscal Regime

Belgian personal income taxes are very high and act as a major disincentive for the recruitment of foreign employees. Accordingly the Government has granted a special expatriate fiscal regime for foreign employees with a specialist skill, an academic background and management expertise who are required by a co-ordination center (currently being phased out) or other Belgium corporation. The purpose of these incentives is to encourage multinationals to invest in Belgium by minimizing salary costs for foreign executives. Although in theory the assignment given to the foreign employee must be temporary, in practice the special tax regulations apply for an unlimited time period. The application for non-residential fiscal status should be applied for within 6 months of arrival. The foreign executives must prove that their primary economic interests are maintained outside Belgium.

The special expatriate fiscal regime has the following attractive characteristics, at the time of writing:

NB separate rules apply if the executive is paid on a gross basis

• Activities Conducted outside Belgium: That portion of income that relates to activities conducted outside Belgium is not taxable in Belgium since the applicant qualifies for taxation as a non-resident.
  
• Moving Expenses: Any income which represents the re-imbursement by the employer to the employee of moving expenses is not taxable in Belgium.
  
• Losses Incurred on the Sale of a Car or House: Any income which represents the re-imbursement by the employer to the employee of losses incurred by the employee on the sale of a car or house (where such a loss was necessitated by the employees' move to Belgium) is not taxable in Belgium.
  
• Cost of Living Allowance: Any increase in income received by the employee from the employer so as to compensate for a higher cost of living in Belgium is not taxable in Belgium. This amount is limited to 5% of the gross salary which was paid to the employee in the foreign jurisdiction..
  
• Housing allowance: Any accommodation provided by the employer to the employee is not considered a benefit in kind and will not be taxable in Belgium. The same applies where the employer provides the employee with a housing allowance. The amount must not exceed 12% of the employee's gross salary.
  
• Tax Allowance: Any sum provided by the employer to the employee to compensate for the higher tax rates payable by the employee than would have been payable in the foreign jurisdiction is not taxable in Belgium.
  
• Maximum Value of Allowance: The total deductible fiscal allowance (excluding non-recurring expenses and recurring expenses listed below) is fixed at a maximum amount. The maximum fiscal allowance is:
  
  • EUR11,250: If the employee works for a commercial or industrial company
  • EUR29,750: If the employee works for a co-ordination center or research laboratory.
    
• Children School Fees Allowance: Any income provided by the employer to the employee to cover childrens' school fees whether in Belgium or abroad is not taxable in Belgium. The amount is unlimited and is not included in the 11,250 euro (or 29,750 euro) limit on allowances.
  
• Travel Expenses: Any income provided by the employer to the employee to cover travel expenses incurred by children traveling abroad to school is unlimited and not included in the 11,250 euro (or 29,750 euro) limit on allowances.
  
• One-off relocation expenses: Any income provided by the employer to the employee to compensate for one-off relocation expenses is not taxable in Belgium, is unlimited and is not included in the 11,250 euro (or 29,750 euro) limit on allowances.
  
• Return Visits to Home Country: Any income provided by the employer to the employee to cover return visits to the home country is not taxable in Belgium.
  
• Emergency Trips: Any income provided by the employer to the employee to cover emergency trips is not taxable in Belgium.
  
• Passive Income: Passive income is not taxed (ie investment income).