Category: Global Mobility

The new Belgian expat regime entered into force and applies to all employments/assignments in Belgium starting from January 1, 2022.

This concerns a new favorable tax regime for employees, directors and researchers who are coming to Belgium to work here. For expatriates benefiting from the old special tax status, transitional measures apply.

Old special tax status – Circular of 8 August 1983

Since many years, Belgium had a special tax regime (the old expat regime) to attract employees and directors to work temporarily in Belgium for a Belgian entity which is part of an international group of companies.

These special tax concessions mainly provided the following benefits:

• The beneficiaries were automatically considered as a non-resident taxpayer. As a consequence, they were only taxable on their Belgian source income and their worldwide professional income.
• They were not taxed on allowances or on reimbursements of expenses caused by the Belgian assignment (within certain limits).
• The beneficiaries were not taxable on the part of their remuneration related to their professional activity outside of Belgium.

The new expat regime

The Program Law of December 27, 2021 introduced a new expat regime applicable to employees, directors and researchers whose assignment to / employment in starts as of 01/01/2022 and who meet the conditions set in the Law.

I. Qualifying conditions

Absence of connection with Belgium

During a period of 60 months prior to the employment in Belgium, the qualifying employee or director should not have been:

• taxed as a resident taxpayer in Belgium;
• living at a distance of less than 150 km from the Belgian borders;
• taxed as a non-resident on Belgian professional income.

Qualifying employees or directors must either be recruited directly from outside Belgium or seconded by a company that is part of a multinational group or non-profit organization.

There is no longer a foreign nationality requirement. Belgian nationals satisfying the above mentioned conditions are now also eligible for the tax concessions of the new expat regime.

Minimum gross compensation threshold: € 75.000

The new expat regime requires a minimum annual gross salary threshold of € 75.000. This threshold includes gross salary, variable compensation as well as benefits in kind, but not the 30% tax free allowance itself (see infra).

Should the employment or director mandate not cover a full calendar year, this threshold should be calculated on a pro rata basis.

Exception for researchers

This annual minimum salary threshold of the new expat regime does not apply for researchers as far as they meet the following conditions:

• They hold a master degree in the following expertise area: agricultural sciences, exact or applied sciences, industrial sciences, medical sciences, pharmaceutical sciences, veterinary sciences and engineering; or
• They have at least 10 years of relevant experience in these areas.

This exception for researchers only applies to employees (and not to directors) and only if the researcher spends at least 80% of his/her professional time on research activities.

II. Benefits of the new expat regime

The employer may reimburse or compensate the expatriate on a tax-free basis for the recurring additional costs resulting from the expatriation in Belgium. This reimbursement is limited to 30% of the gross remuneration and capped at a maximum tax free amount of € 90.000. No proof should be provided for the reimbursement of these costs proper to the employer.

Big uncertainty at this moment in time is whether the Belgian social security authorities will align their qualification to the fiscal qualification ‘cost proper to the employer’ and exempt the ”30%” form Belgian social security.

The reimbursement of school fees and relocation costs can (under certain conditions) still be reimbursed as costs proper to the employer on top of the above mentioned 30% compensation. For these expenses, proof and supporting documents will need to be provided.

III. Maximum duration

The new expat regime is applicable for an initial 5-year period with a possible 3-year extension (by submitting a new application and showing that the qualification requirements are still met).

Unlike the old expat regime, where a change of employer meant losing the expat status, the new expat regime is no longer linked exclusively to the employer. It can therefore continue to apply when there is a change of employer.

IV. Belgian residency

The new expat regime provides that standard residency rules included in the Belgian income tax legislation apply.

This residency status implies that qualifying expatriates will be taxable in Belgium on their worldwide income, but are entitled to invoke the double tax treaties concluded by Belgium.

V. Procedure

The employer and the employee jointly need to apply within 3 months after the start of the Belgian employment/assignment.

In addition to the application, the employer must annually provide the Belgian tax authorities with a list of all eligible employees/directors for the preceding year by January 31.

Transitional measures

I. Employed/assigned after January 1, 2022

Employees, directors or researchers whose employment/assignment in Belgium started after January 1, 2022 and who meet the qualification requirements, are subject to the new expat regime.

II. Employed/assigned before January 1, 2022

The Circular of January 21, 2022 provides some opt-in/opt-out mechanisms for existing situations (to be analyzed on a case-by-case basis):

Opt-in for the new expat regime

Expatriates benefitting from the old expat regime for less than 5 years (and meeting all other qualifying conditions of the new expat regime) may opt for the new expat tax regime. This opt-in demand needs to be filed by July 31, 2022 at the latest.

Opt-out – continue old expat regime

Expats benefitting from the old expat regime for less than 5 years and meeting the qualifying conditions of the new expat regime may also opt out and remain subject to the old expat regime until 31 December 2023.

This might be relevant for expatriates with a high travel exclusion under the old expat regime. An specific analysis is recommendable here.

Expatriates not qualifying for the new special tax status

Expats present in Belgium for more than 5 years or not meeting the qualifying conditions of the new expat regime may continue to benefit from the old expat regime concessions until 31 December 2023.

As from January 1, 2024 they will subsequently be considered as ordinary Belgian tax resident.

How can Mint Consult help?

Mint Consult will be glad to assist employers to evaluate the impact of this new expat regime on their current and future population by providing the following services:

• Cost simulations for employers as well as for expatriates;
• Assistance for the possible opt-in/opt out decision on a case-by-case basis;
• Information session to current expatriates;
• Review of existing employment contacts or drafting of addenda if required;
• Amendment of remuneration packages;
• …

Additional questions? Feel free to contact us.

Stay informed and follow our updates via Facebook and LinkedIn.

Tax game rules to do business in Belgium

Entrepreneurs which are actively building on the expansion / growth of their business are often considering setting up activities abroad, also considering increasing mobility and globalization. In this respect, caution is important. Often these activities abroad generate additional tax obligations. This is the case when activities of a foreign company is generating the existence of a permanent establishment in Belgium.

Belgian tax authorities are actively investigating the presence of permanent establishments on the Belgian territory (based on VAT-listings and other leads). The qualification of your activities in Belgium as a permanent establishment may have serious consequences. Your turnover is known (based on invoicing to Belgium), whilst it’s way more difficult to prove the related expenses a couple of years later. This may lead to double taxation.

Whilst a proactive analysis and potential recognition of a permanent establishment in Belgium may also create opportunities.

When exists a ‘permanent establishment’ in Belgium?

Belgium has concluded double tax treaties to avoid double taxation with most other countries. In these treaties, the rules about the existence of a permanent establishment are described.

In general, a ‘permanent establishment’ exists when there is a ‘fixed place of business’ through which the business of an enterprise is wholly or partly carried on. E.g.: a place of management, a branch, an office, a factory, a work place …

In summary, such ‘permanent establishment’ exists when :

• An enterprise has a fixed place / location in Belgium, where employees are executing the main activities of the enterprise; or
• Employees working in Belgium are mandated to act and have the authority to concluded contracts on behalf of the enterprise.

The notion of ‘permanent establishment’ is more and more determined based on the economic concept. Where it is determined in which country is playing a crucial role in the different aspects of the activities of a company.

Which obligations are generated by the permanent establishment in Belgium?

All gain generated by activities through the permanent establishment are in principle taxable in that country. In order to allow foreign, Belgian tax authorities to have insights in the profit realized on its territory, foreign enterprises need to comply with reporting obligations. E.g. proper bookkeeping needs to be complied with in order to determine the result of the permanent establishment, to prepare and file the local corporate tax return. Next to that, also the annual accounts of the headquarter company needs to be provided.

These extra obligations of course generate extra expenses for the company. However this ensures transparency regarding the part of the profit realized in Belgium – taxable in Belgium and the other part of the profit realized outside of Belgium – which may be taxed in the home country. Following this approach, the risk of double taxation may ab initio be mitigated.

Also obligations in the home country

In the home country, the worldwide profit of the company needs to be reported, including the result of the Belgian permanent establishment. Based on the double tax treaties, the home country will provided a tax mechanism to avoid home country taxation on the profit generated and taxed through the Belgian permanent establishment. The home country tax administration will be able to see and verify the profits allocated. Hence, the reason why it’s important to correctly allocate turnover and expenses between the headquarter in the home country and the permanent establishment in Belgium.

Or establish a daughter company in Belgium?

The losses incurred by the Belgian permanent establishment may be used to reduce the profit realized in the home country. This is the reason why in the early years abroad it’s often chosen to recognize a permanent establishment abroad.

Once the Belgian activities become more stable or when the Belgian activities entail more risk which is better separated from the headquarter company, the establishment of a Belgian (daughter)company is a more preferred option. The accounting and tax obligations are similar than these of a permanent establishment.

Employment abroad: also consequences for your employees

The secondment of foreign employees to Belgium to set up or maintain a local activity in Belgium may also have consequences for the taxation of these employees. These will not only become taxable in Belgium as soon as they exceed 183 days in Belgium. In case of having a permanent establishment in Belgium, these employees will become taxable in Belgium as of day 1. Their remuneration related to Belgian activities will become taxable in Belgium.
Considering the Belgian tax rates and a number of beneficial tax regimes, this Belgian taxation is not necessary disadvantageous. Further, the simultaneous employment of these employees in different countries may lead to salary splits for certain employees. In this respect, it’s crucial to upfront verify the social and other formalities.

Conclusion

Often foreign enterprises are active on the Belgian territory without realizing they (might) have a permanent establishment in Belgium. During the last months, we noticed a significant increase in the number of investigations of the Belgian tax authorities regarding the existence of permanent establishments in Belgium. These tax audits may lead to de facto double taxation in the hands of the foreign entity.

Therefore, being well-informed before or at the start of setting up activities in Belgium is crucial. Because it may reduce the risk of being exposed to a permanent establishment abroad and the related (double) taxes. Sufficient reasons to take a wise decision and consult a tax consultant before starting a project abroad.

Interested or additional questions? Feel free to contact us.

Stay informed and follow our updates via Facebook and LinkedIn.

Since March 2020, the Corona virus has changed the world drastically. Also organizations have taken measures to reduce/limit the spread of the virus. The most obvious measures were reducing international travel and obligate home working for all employees. This impacted the work pattern of everybody and in particular the international working employees. In international employment situations, this could have an impact on the applicable social security regime. As well as the tax treatment of employment income of these employees.

Applicable social security regime

Belgian government decided that periods of home work on the Belgian territory as a result of the Corona virus, should, by way of exception, not be considered for the determination of the applicable social security legislation in an international context. As a result, these ‘home office working days’ will not have an impact on the determination of the competent social security regime.

In other words, the Corona measures will normally not impact foreign employees in Belgium. Yhey may remain under their home country social security. Same goes for employees seconded to Belgium who spent their time in their home country during the lock-down period.

Last week Belgian government extended the exceptional measures till the end of the year, i.e. December 31, 2020. The increased use of teleworking will not be considered for the determination of the applicable social security regime.

Taxation of employment income – place where the employment should have been executed

Early April 2020, the OECD published their position regarding international employment that the professional income of employees (also where government has stepped in to subsidize the keeping of an employee on a company’s payroll) should be attributable to the country where the employment used to the exercised.

Based on this recommendation, Belgium concluded bilateral agreements with the Netherlands, Luxembourg, France and Germany. Employees who worked from home during the Corona measures can remain taxable in the country where they worked prior to the outbreak of the COVID-19. This of course only applies for home working days due the pandemic. In addition, these agreements were initially concluded till June 30 and Augustus 31, 2020. Meanwhile, they have been extended a third time till December 31, 2020. If required, further extension may be expected.

These bilateral agreement are extremely important for all employees working cross border and / or in a salary split situation. For example, for the period that Belgian employees working in a Belgian-Dutch split situation were not able to work / be physically present in the Netherlands – due to the Corona measures –, Belgium will respect that the Netherlands are entitled to tax the employee’s remuneration related to working days who should have been executed in Belgium. Of course, this assumes that the physical presence requirement before and after the COIVD-19 measures is met.

Important remark: At this moment in time, this type of COVID-19 agreements are only concluded with the 4 above mentioned countries. For other countries, the general principle of taxation in the home country applies.

Application COVID-19 agreements

In order to benefit these COVID19 agreements, the following documentation may need to be provided towards the Belgian tax authorities:

• An employer’s attestation mentioning the number of home working days, exclusively linked to the COVID-19 measures;
• The proof of effective taxation of the remuneration related to these home working days in the country where these activities should have been performed.

The employer’s attestation (in the framework of the COVID-19 agreements) need – for each individual employee – to mention the following:

• All relevant information to fully identify the employee (name, first name , address, birth date);
• The nature of the function executed by the employee;
• An overview of the number of home working days exclusively linked to the COVID-19 measures;
• If applicable, an overview of the number of home working days as foreseen in the employment agreement;
• An overview of potential sickness, vacation and/or recuperation days;
• A declaration on honor that the attestation is “true and sincere”;
• Date and signature of the employer, as well as the co-signature of the employee concerned.

In conclusion, a thorough analysis for your tax situation and tax residency is important before starting to file your tax return in Belgium, as well as in your home country. An adequate qualification is crucial to complete the right tax return form (resident of non-resident), apply the correct tax rules and anticipate the different tax consequences.

However, if you would have questions/remarks as regards the applicable social security regime, the application Belgian tax treaties, as well as the application of the COVIS-19 agreements, feel free to contact us.

Stay informed and follow our updates via Facebook and LinkedIn.