Important changes to the expat status
As part of the federal budget measures for 2022, the Belgian government has reached an agreement on the introduction of a new legal framework for incoming taxpayers and researchers. This new special tax regime will replace the old tax status for foreign executives (the so-called “expat status”). It will be included in the Belgian “Programme Law” before the end of this year ad should enter into force on 1 January 2022.
CURRENT TAX STATUS OF FOREIGN EXECUTIVES (EXPAT STATUS)
For years, Belgium has had a special tax status for certain foreign employees and company directors who work temporarily in Belgium for a Belgian company that is part of an international group.
This current tax regime is a purely administrative arrangement, introduced by a Circular of 8 August 1983.
The advantage of this status is that foreign executives are fictitiously considered as ‘non-residents’ by the tax authorities. Consequently, they are only taxable in Belgium on their income of Belgian origin. They are not taxable in Belgium on the part of their remuneration that corresponds to services rendered abroad. In addition, expatriates are not taxed on reimbursements of certain extraordinary expenses related to the assignment to Belgium, with a maximum of EUR 11,250 and EUR 29,750.
The new regulation will be included in the Income Tax Code by the Programme Act and will therefore offer more security than the old administrative regulation.
The new regulation applies to “incoming taxpayers”, both employees and company directors, and to “researchers”, the latter only for employees. They will only have access to the expat regime if the following conditions are met:
Entitled employers and companies
For “incoming taxpayers”, the employee or company director concerned must either be directly recruited abroad or posted within a multinational group or non-profit organization.
“Researchers” must also be recruited directly from abroad but for them it is not required that the Belgian employer is part of a multinational group.
Absence of a link with Belgium during the previous period of 60 months
In the course of the 60 months preceding the entry into service in Belgium, the qualifying employee or director of the company is not allowed to have a link with Belgium:
- Not have been a (tax) resident of Belgium;
- Not have lived within a distance of 150 km from the Belgian border;
- Not have been subject to the non-resident tax on professional income in Belgium.
Contrary to the current regulation, there will no longer be a foreign nationality requirement. Employees and company managers with the Belgian nationality (or double nationality) can therefore also benefit from the new regime.
There will be a minimum annual gross salary threshold of EUR 75,000. This threshold will be assessed at the time the application for the regime is submitted and includes the gross salary, holiday pay, end-of-year bonus, benefits of all kinds and variable remuneration, but not the 30% expense allowances themselves (infra).
If the employment of the employee or executive concerned does not cover a full calendar year, the threshold may be calculated pro rata to the actual employment.
This minimum gross salary threshold is not required for “researchers”.
Qualification as “researcher
If an employee wants to access the new scheme as a “researcher”, he will also have to qualify as a researcher. This means that the employee must hold a specific scientific master’s or doctoral degree or demonstrate at least 10 years of relevant professional experience in the same fields.
In addition, the researcher will have to devote at least 80% of his/her working time to research activities.
To benefit from the new tax regime, the employer or company must submit an electronic application to the Administration within three months from the start of employment in Belgium. The employee or director concerned must attach a signed “for approval” certificate to this application.
The Tax Administration will then have to rule on the application within three months. In case of a positive answer, the system will be applicable from the start of employment in Belgium.
Unlike the current regime, the new tax system will provide that the residence rules included in the Belgian income tax legislation will apply. If the employee or director concerned is considered a resident under Belgian tax rules, he will be taxable in Belgium on his worldwide income. If he is considered a non-resident, he will have to present a certificate of fiscal residency from the other country.
Consequently, the tax benefits of the new regime are limited to the tax-free reimbursement of “costs proper to the employer” and are identical for both “incoming taxpayers” and “researchers”.
“30% rule” for recurring expenses resulting from employment in Belgium
The employer or company may reimburse the employee or director tax-free for expenses that are a direct consequence of the employment in Belgium (e.g.: living expenses, housing,…) up to an amount of 30% of the gross salary and a maximum of EUR 90,000 per year. At the moment, it is still unclear whether the reimbursement can also be made free of social security contributions.
This regime can be cumulated with the allocation of the traditional costs proper to the employer, such as the home-work allowance, the Internet allowance,…
Other expenses proper to the employer
In addition to the 30% rule, the following exceptional costs are also accepted as a reimbursement of expenses proper to the employer:
- Costs resulting from the move to Belgium;
- Costs for furnishing the residence in Belgium;
- School fees for children of compulsory school age who attend school in Belgium;
- Costs related to obtaining the expat status (advice, application, …).
MAXIMUM PERIOD OF APPLICATION
The new regime would be valid for an initial period of 5 years, with a possibility of renewal for 3 years (after submitting a new application and demonstrating that the conditions are still met).
The regime is no longer linked to a specific employer and can therefore continue to apply within the 5-year period or 8-year period if there is a change of employer.
ENTRY INTO FORCE AND TRANSITIONAL REGIME
The new regime would apply to “incoming taxpayers” and “researchers” entering into service in Belgium as from 1 January 2022. However, some transitional measures are provided for existing situations which will have to be analyzed on a case-by-case basis.
As your trusted partner, Van Havermaet can assist you in assessing the impact of this new regime on current expats and any new employees and directors within your company.