Clarity on the new Belgian expatriate tax regime
Expats, or as we should call them today, ‘inbound taxpayers‘ and ‘inbound researchers‘, were presented with new tax rules last year.
As the new law did not always provide the necessary clarity, the tax authorities issued two more Circular Letters to explain the new special tax systems in more detail. We take a brief look at some legal novelties and administrative clarifications.
Conditions
Both employees and company directors can qualify as ‘inbound taxpayers’, while an ‘inbound researcher’ can only be an employee. They qualify for the new status under the following conditions:
- Recruitment is linked to a foreign country (direct recruitment abroad or recruitment through a foreign company);
- The recruited taxpayer or researcher had no link with Belgium during 60 months prior to taking up employment;
- The incoming taxpayer will receive a minimum annual gross remuneration of EUR 75,000;
- The incoming researcher holds a specific scientific master’s or doctoral degree or at least 10 years of relevant professional experience in the same fields and must devote at least 80% of his/her working time to research activities.
We already knew those terms. What is new then? On the one hand, the scope was slightly expanded through a new law, so that foundations are now also eligible for the new tax regime and, on the other hand, the tax authorities formally state that the pro-rata calculation regarding minimum remuneration does not apply when switching to part-time employment.
Application and formalities
The employer must submit an electronic application to the tax administration within three months from the effective start of employment in Belgium. If the tax administration responds positively, the expat status will apply from the start of the Belgian employment.
A late submission of the application has severe consequences. The application has an ‘expiration period’. The tax authorities underlined this again in their latest Circular Letter: late or incomplete applications are definitively and irreversibly inadmissible. Moreover, this expiration period already starts to run from the day the professional activities are commenced in Belgium. Thus, the application for an expat who started working in Belgium on November 14th 2022 must be submitted by February 13th 2023 at the latest.
Normally considered as tax resident of Belgium
Under the old regime, the tax authorities considered expats as so-called “non-residents of Belgium”. From now on, however, the ordinary residence rules will apply. Most incoming taxpayers and researchers will therefore be subject to the regular Belgian personal income tax.
To still remain a ‘non-resident’, you will have to submit a certificate of tax residency from another country. The relevant minister has already let it be known that they will be lenient on foreign residency certificates that are not submitted within the application deadline.
Tax advantages
All well and good, but what benefits does such an expat status bring?
The employer can grant a tax-free flat-rate expense allowance up to an amount of 30% of gross remuneration with a maximum of EUR 90,000 per year. Any surplus will be taxed as a normal remuneration.
In addition, some exceptional tax-exempt expense allowances may be granted. For example: moving expenses, furnishing costs and school expenses. For these exceptional expense allowances, however, actual documentary evidence must be submitted.
Given the recent restriction of the tax copyright regime that essentially excludes software developers, the expat system may be a worthy tax-friendly alternative for future researchers attracted from abroad.
And what else do the recent legislative changes and tax authority circulars teach us?
- The tax authorities explicitly confirm that the employer must pay the 30% allowance on top of the gross salary. Thus it cannot be part of the salary;
- Qualifying gross remuneration is broadened by referring to income taxable in Belgium.
Duration and transitional regulation
The new expat scheme is valid for a period of five years commencing from the beginning of the expat’s assignment in Belgium. A one-off three-year extension is possible under certain conditions.
Unlike the old scheme, it is no longer linked to a specific employer. The new tax regimes can simply continue to apply within a five-year or eight-year period, provided the new employer files a new application.
Those currently benefiting from the old expat status and who have not submitted a legally valid application or who received a negative response can continue to apply the status until 31 December 2023.
Do you still have questions about the new expat regime or would you like to grant expat status to new employees within your company? Then be sure to contact us for more info.
Jan Torsin
Kristiaan Haagen