In March 2014, Belgium introduced new laws which will have an effect on the tax position of some Belgian non-residents.
Previously, non-resident taxpayers were not entitled to personal tax allowances unless they were:
- Non-residents who have an abode in Belgium for the whole taxable period (i.e. non-residents who reside in Belgium with their family the whole calendar year);
- Non-residents whose Belgian-source income is at least 75% of their total income;
- Non-residents who can invoke an ‘extended non-discrimination clause’ included in a tax treaty signed by Belgium (i.e. with the Netherlands, France and Luxembourg).
With effect from 2014, a Belgian abode is no longer a relevant factor. This will have an effect on individuals eligible for the special tax status for foreign executives temporarily employed in Belgium who previously qualified for personal tax allowances solely by virtue of having an abode in Belgium.
In practice, with effect from 2014, any non-resident who cannot benefit from the treaty provision mentioned above and who has foreign source income of more than 25% of his total income for will no longer be entitled to personal allowances.
Personal tax allowances are determined by reference to a person’s family situation (e.g. spouse, dependent children) .For a couple with 2 children, the loss of personal tax allowances will result in an additional income tax burden of approximately 7,600 EUR .
The rules also require that joint income of both spouses or partners is taken into account when applying the 75% income test.
The new law also introduced a partial regionalisation of Belgian income taxes transferring some tax reduction entitlements to the Belgian regions. Tax reductions are applied with respect to expenses incurred for amongst others home insurance against fire and theft, energy saving initiatives, roof isolation and mortgage loans.
For non-residents to benefit from regional tax reductions, they are required to be tax resident in another EEA member state. Non-residents coming from a non-EEA member state will not have any tax reduction entitlement.
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