Belgium

Belgian tax residents

An individual is considered to be a Belgian resident for tax purposes when their ‘domicile’ or seat of wealth is established in Belgium. ‘Domicile’ refers to a factual situation and is generally based on habitual residence and elements such as family, social or professional ties. An individual is presumed to be a Belgian tax resident when they are registered in the Belgian national register (rebuttable). Individuals are deemed to be Belgian tax residents if their household is located in Belgium (irrefutable).

Personal income tax

Belgian tax residents are subject to individual income tax on their worldwide movable and immovable income.

For individual personal income tax purposes, a distinction is made between four different categories of income:

• real estate income;
• movable property income (including dividends, interest and royalties);
• professional income (including business profits, employment and pension income); and
• miscellaneous income (including capital gains arising from speculative transactions).

Particular rules and tax rates apply to each category:

• Income from real estate is taxed globally together with other earned income, at progressive rates between 25% and 50%. Income from foreign property is also taxable in Belgium, unless an exemption with progression is applicable on the basis of a double tax treaty. The tax base for income from real estate, which is not used professionally by the tenant, is, in practice, low, due to the use of a fictive tax base.
• Income from movable property is, in principle, subject to a final withholding tax if paid in Belgium. If no withholding tax was levied, a tax equal to the withholding tax rate will be levied through a tax assessment. Withholding tax rate on dividends and interest is 30%. Lower rates are applicable if specific conditions are met.
• Professional income is subject to progressive tax rates of between 25% and 50%. Tax will be increased with a communal surcharge (average rate of 7%).
• Miscellaneous income is subject to flat tax rates of between 15% and 33%, depending on the type of income.
• Capital gains on privately held assets are, in principle, not taxable to individuals, provided that the capital gains are realised within the framework of the normal management of the individual’s private estate. Capital gain taxes for individuals are levied only on the sale of a substantial holding in a Belgian company to a foreign company established outside the European Economic Area (EEA) (flat tax rate of 33%), or on the sale of immovable property in certain limited circumstances only (16.5% or 33%).

Individuals who are founders, shareholders or beneficiaries of a foreign company or entity (e.g., trusts, foundations) and who immigrate to Belgium must take into account a possible application of Belgian look-through taxation, nicknamed ‘cayman tax’. With effect from 1 January 2015, a look-through tax was introduced in respect of legal constructs, in order to tax income on a look-through basis directly with the ‘founder’ of the legal construct, as if they received the income themselves. ‘Legal constructs’ include low-taxed or non-taxed entities such as offshore companies, trusts and foundations. Any Belgian tax resident who is considered a ‘founder’ (i.e., the effective founder, settlor, grantor or shareholder) will be subject to cayman tax in Belgium on the income (effectively) received by the legal construct. No effective distribution is required for taxation to occur.

Non-Belgian tax residents (including Belgian-resident expatriates) are taxed only on Belgian source income.

Corporate income tax

Individuals who consider establishing or investing in a Belgian company can benefit from a relatively favourable regime at the corporation level. Belgian companies are subject to mainstream corporate income tax (CIT). The tax base for CIT purposes consists of worldwide income minus certain allowed deductions. It is assumed that all income received by a company is, in principle, professional income/profit. As of the 2021 tax year (i.e., financial years ending 31 December 2020 and later), the general corporate tax rate has been reduced to 25%. Small and medium-sized enterprises can benefit from a decreased rate of 20% over the first EUR 100,000 of profit.

Wealth taxes

Belgium does not levy a general wealth tax on individuals. However, there is an annual tax on securities accounts of 0.15% over the average value of Belgian or foreign securities accounts when a minimum threshold of EUR 1 million is exceeded, irrespective of the tax or legal qualification of the account holder(s), individuals, corporations or foundations.

Recent developments

Negotiations on the new Belgian federal government are still ongoing (January 2025); however, it is likely that certain important changes will emerge from these negotiations. One of these likely changes will be the introduction of a capital gains tax on shares. Although one could argue that the introduction thereof would be less favourable than the current exemption for capital gains which are realised within the framework of the normal management of the individual’s private estate, the new tax may offer more certainty for the taxpayer, certainly if the investment can be regarded as speculative. The proposed tax rate is 10%, accompanied with different deductions depending on the circumstances (overall amount of capital gains, substantial participations, long-term participations, etc.).

Real estate transfer tax

Purchases and transfers of real estate located in Belgium are, in principle, subject to real estate transfer tax, which is payable by the purchaser. The general tax rate is 12.5% in the Brussels-Capital and Walloon regions, and 12% in the Flemish region, calculated on the fair value market of the real estate. Considerably reduced rates can apply in specific circumstances, as well as certain fixed reductions.

Recent developments

With the installation of new regional governments in 2024, certain amendments have been made to the reduced rates and deductions to the regional real estate transfer regimes, applicable as of 1 January 2025. In Flanders the reduced rate for the purchase of the single and own residence has been lowered from 3% to 2%, and the reduced rate applicable to professional merchants of immovable property has been increased from 4% to 6%. In the Walloon region, a reduced rate of 3% for the purchase of the single and own residence has been introduced.

Belgian controlled foreign company (CFC) regime

Recently, circular 2024/C/82 was issued by the federal tax authority. This circular expresses the point of view of the federal tax authority with regards to the renewed CFC regime, also taking into account the implications of the Pillar 2 initiative, whereby the circular concludes, inter alia, that the ‘qualifying domestic minimum top-up tax’ (QDMTT) will not be regarded as an income tax where the prerequisite of taxation for the application of CFC rules is concerned. Therefore, entities located in countries without (corporate) income tax, but which apply the QDMTT, can still fall under the Belgian CFC regime. The circular does not exclude (nor explicitly allow) the qualification of the QDMTT as a foreign deductible tax. Case law on the application of this renewed CFC regime does not exist yet.

Annual tax to compensate inheritance taxes

Legal entities such as foundations or non-profit organisations are subject to a wealth tax introduced in 1921 by which these entities are annually taxed on their assets. This tax rate amounted to a flat rate of 0.17% only but has been increased as of 2024 to a progressive rate of up to 0.45% (a 165% increase). This increase was neutralised for certain specific sectors (such as health care, schools, etc.) and certain very specific entities. Since it is highly likely that the beneficial measures for these specific sectors and entities are not in accordance with the constitutional equality and non-discrimination rights, a couple of procedures are now pending before the constitutional court.

Constitutional court on administrative practice relating to tax increases

The Belgian tax authority applied an automatic tax increase of 10% when a taxpayer had made a minor mistake in their tax return. The constitutional court recently stated a taxpayer who makes a first mistake, and in the absence of bad faith, cannot be subject to an automatic 10% tax increase. The court confirmed that the possibility to sanction the taxpayer’s faulty tax return exists to sanction fraud and not mere administrative mistakes.

Not applicable, primarily national competence.

The aforementioned ‘cayman tax’ has undergone some major updates as of 2024 onwards. These updates have: (i) massively extended the scope of this regime; and (ii) introduced certain key moments on which income of the legal construct is to be taxed as a deemed (fictitious) dividend like the transfer of the seat of the legal construct or the transfer of all the assets, or more importantly the relocation abroad of the founder of the legal construct (exit tax). It is therefore vital that tax advice is sought prior to migration into Belgium, in all cases but specifically when migrating from an Anglo-Saxon jurisdiction.

During the COVID-19 pandemic, many tax-related measures were taken in order to protect Belgian corporations during these turbulent times (e.g., related to wage withholding tax exemptions in certain cases, tax reduction on the acquisition of new shares in corporations which had revenue losses due to COVID-19, lowered VAT tariffs in certain cases, etc.). Other measures were put in place to avoid the consequences with regards to tax residency and double tax treaties of home confinement, teleworking and measures limiting frontier work. In general, the measures meant that double taxation conventions would prevail as intended, given that the pandemic was a case of force majeure which was not to have a negative impact with regards to taxation.

Belgium has an inheritance taxation system rather than an estate taxation system. The tax is imposed personally and individually on the beneficiaries, rather than on the estate in its entirety (versus UK Inheritance Tax, Canadian Estate Tax, US Federal Estate Tax and Australian Estate Duty and Death duty).

As stated in the introduction, above, inheritance taxes, which are high, have become predominantly a regional competence in Belgium.

Inheritance taxes

Domicile and residency. For inheritance tax purposes, an individual who has established their domicile or their seat of wealth at the time of death (the de cuius) in Belgium, is deemed a “national (Belgian) resident”. The concept of “domicile” is a factual concept. It refers to the “actual residence”/centre of interests characterised by a certain permanence or continuity and to be distinguished from a person’s civil domicile and nationality. The fact that the de cuius has a Belgian nationality obviously may have an influence in the likely determination of their tax residency in Belgium, but it is not the decisive factor. The same applies for the place of death, which is, in principle, irrelevant.

For inheritance tax purposes — unlike for income tax purposes — there exists no legal presumption of an individual qualifying as a Belgian tax resident when legally being domiciled in Belgium.

In general, tax residency is essentially determined by a set of facts and circumstances, as the centre of one’s family, affective, professional and/or economic interests, without any one of these indications being decisive.

As mentioned in the introduction, above, inheritance taxes are regional matters. The applicable tax regime is determined by the region where the de cuius was predominantly residing during the last five years before their death. The registration in the Belgian national register is an indicative factor but is again not decisive. Concrete circumstances must further prove whether the de cuius lived in the particular region.

In case of the de cuius not qualifying as a Belgian tax resident, inheritance taxes (technically referred to as a ‘transfer duty’ or, in Dutch, recht van overgang) apply on the value of their Belgian real estate at the time of their death. The applicable tax regime is determined by the region where the real estate is located.

Taxation on worldwide assets or income. If the de cuius is deemed a Belgian resident, inheritance tax is payable on their worldwide assets upon death, i.e., on the net value of their assets, wherever they are located (in Belgium or abroad) and whatever they contain (movable or immovable assets). If the de cuius is not deemed a Belgian resident, transfer duty is payable on their real estate located in Belgium only, in principle, on a gross-value basis. Do note that real estate companies are not perceived as ‘real estate’ but as movable assets.

In order to avoid double taxation or to reduce the overall tax burden, a tax credit is granted by each of the three regions for foreign inheritance tax provided that certain conditions are met. A tax credit for foreign-paid “inheritance taxes” (to be interpreted in the broad sense, including estate tax) is allowed for all foreign assets, both movable and immovable, albeit that for movable assets, this rule has not been codified yet by the Walloon region. Moreover, Belgium has entered into only two inheritance tax treaties, one with France and one with Sweden, which may lead to double taxation.

The marginal tax rates are set as follows:

* Depending on the category of heirs, the tax rates are applied: (i) per heir or on the combined inheritance for this category; and (ii) separately on the movable and immovable assets or without making such a division.

** The tax rates are applied in progressive brackets, whereby depending on the proximity of the kinship the brackets are more or less advantageous.

Recent developments. Both the new Flemish and the new Walloon governments have expressed their intent to lower the tariff rates and abolish certain deductions and reductions on inheritances. The Walloon government has adopted its new tariffs recently. The new tariffs will apply on inheritances which occur as of 1 January 2028.

• The maximum rate applicable between spouses and cohabiting persons, as well as in direct line, has been lowered from 30% to 15%.
• The maximum rate applicable between brothers and sisters has been lowered from 65% to 33%.
• The maximum rate applicable between uncles, aunts and nieces or nephews has been lowered from 70% to 35%.
• The maximum rate applicable between other persons has been lowered from 80% to 40%.

The Flemish government is still debating on their new reduced tariffs.

Gift tax

General. As a general principle, direct lifetime gifts must, in order to be valid under Belgian law, be carried out by way of a notarial deed. A deed carrying a lifetime gift signed and executed before a Belgian notary, will need to be registered, which means that Belgian gift tax becomes due.

Until 15 December 2020, it was, however, common practice to make lifetime gifts of movable assets before a foreign (in practice a Dutch or Swiss) notary without paying Belgian gift tax. As from 15 December 2020, the law was modified to enact an obligation to also register foreign notarial deeds in Belgium and, henceforth, Belgian gift tax also applies where a Belgian resident makes a direct lifetime gift of movables. It is, however, still possible to gift (tangible) movable assets by way of manual gifts (by physically transferring the asset) or by mere bank transfers, and so-called indirect (non-notarial) gifts. These gifts are in fact not subject to any obligation to register and hence not subject to Belgian gift tax. Such gifts can, however, always be registered voluntarily, in which case gift tax becomes due.

Gifts that have not been registered in Belgium and thus have not been subject to Belgian gift tax are subject to Belgian inheritance tax when the donor dies within a period of five years from the date of the gift, for gifts as from 1 January 2025. For older gifts, the period is three years.

Tax rates. All three regions (Flanders, Walloon and Brussels-Capital region) apply different categories of gift tax rates depending on the degree of kinship between the donor and the beneficiary, the amount and the nature (i.e., movable or immovable property) of the lifetime gift.

In the Flemish and Brussels-Capital region, a (reduced) flat rate, irrespective of the value of the asset, applies to registered donations of movable assets:

• 3% for donations between spouses and cohabiting persons, as well as in direct line;
• 7% for donations to other individuals; and
• 5% for donations to Belgian private foundations (Flanders) (7% for Brussels).

In the Walloon region, registered donations of movables are taxed at the following flat rates:

• 3% for donations between spouses and cohabiting persons, and in direct line;
• 5% for donations to other individuals; and
• 7% for donations to Belgian private foundations.

If, however, a lifetime gift was not registered and the donor of the gift dies within five years after the gift was made, the gift will, by fiction of the law, be added to the estate of the donor and, henceforth, subject to inheritance tax. Certain gifts, irrespective of the date they were made, can qualify as fictitious bequests and be subject to inheritance taxes (e.g., donations of movable assets made by the de cuius under the condition precedent or term fulfilled following the death of the donor).

Gifts of family businesses or company shares are, under certain conditions, exempt from gift tax in all three regions.

A gift of Belgian real estate is subject to progressive gift tax rates, depending on the market value of the property:

The “progression method” applies, which entails that to determine the applicable gift tax rate, one takes into account the gifts of immovable property that took place ‘between the same parties’ in the three years preceding the new gift. The taxable basis of the donations made earlier is then added to the taxable basis of the new donation to determine the applicable gift tax rate. This measure aims to avoid making small consecutive donations that remain within the lowest progression brackets each time.

In general, reduced (flat) rates apply to donations made to, inter alia, the regions, the communities, the municipalities of the respective region, approved housing corporations, (international) non-profit organisations, private foundations, foundations of public interest and analogous European legal entities, etc.

Recent developments. Both the new Flemish and the new Walloon governments have expressed their intent to lower their tax rates for gifts.

The Walloon government has adopted its new tariffs for gifts of immovable property recently. The maximum rate applicable between spouses and cohabiting persons, as well as in direct line has been lowered from 27% to 14%. The maximum rate applicable between other persons has been lowered from 40% to 20%. These new tax rates will apply on gifts which occur as of 1 January 2028. The Flemish government is still debating on their gift tax rates.

Not applicable, primarily a regional competence.

Deemed bequests — contracts with a clause in the benefit of a third party

Heavily discussed in recent years has been the issue of whether distributions made by a foundation or a trust after the death of the founder (or in the three years leading up to their death) can be regarded as deemed bequests and therefore can be taxable as part of the estate of the founder. Although the Flemish tax authority, in principle, does not consider the assets of such entities as part of the estate of the founder, the Flemish tax authority gives a broad interpretation to one of the ‘deemed bequest’ provisions in the (Flemish) tax code. This provision states that sums that transfer to a person free of charge, due to a contract made by the testator (or a third party) which contains a clause in the benefit of said person, is to be regarded as a deemed bequest. The Flemish tax authority erroneously qualifies the establishment of a (foreign) foundation or trust as a contract, rather than as a unilateral act. The Flemish tax authority also erroneously qualifies a letter of wishes as a document which would bind a trustee or foundation board. Although these cases must always be reviewed on an individual basis, case law exists from the Belgian Cour de Cassation that confirms that the aforementioned ‘deemed bequest’ provision has to be interpreted very restrictively. In recent years, the Ghent court has issued certain very well-reasoned judgments meticulously outlining why both the establishment and the issuance of byelaws of, for instance, a Liechtenstein foundation are to be regarded as unilateral acts, therefore making the application of the aforementioned ‘deemed bequest’ provision impossible. The Belgian Cour de Cassation also confirmed (with regards to Liechtenstein foundations), that this deemed bequest provision cannot be applicable on distributions by (Liechtenstein) foundations, whereby it is the competent body of the foundation that has discretionary competence to decide on the timing and the amount of the distributions. The Ghent Court of Appeal also ruled in two recent cases that this deemed bequest provision cannot apply in cases where distributions were granted by an entity when the beneficiary clauses were altered after the death of the economic founder of the entity.

Gifts of movable assets whereby a large degree of control over the assets is retained by the grantor subject to inheritance taxes

Another deemed bequest provision relates to the gift of movable assets under the condition precedent of the demise of the grantor. Such bequests are subject to inheritance taxes. A couple of recent decisions of the Flemish advanced tax ruling body with the Flemish tax authority have stated that this provision is applicable to the presented cases, which all concerned the gift of shares of a corporation whereby control over the entity whose shares were gifted was largely retained by the grantors. These three advanced tax rulings can be heavily criticised. The primary argument being that although control over the entities was, to a certain extent, retained by the grantors, the transfer of ownership was immediate and definitive, the gifts themselves were not subject to any condition precedent. Clearly, these decisions are remarkable, but also specific to the cases at hand and cannot be given an ad omnes gravitas. Many positive advanced tax rulings (also recent ones) exist on this matter.

The Belgian private foundation was introduced in 2002 and modified by the (renewed) code on companies and associations of 2019. The private foundation provides a legal framework for certain philanthropic or altruistic purposes. It can also be used as part of estate and inheritance planning, for which it can have rather favourable tax consequences. As far as the distributions of the foundation are part of its charitable purpose, they are, in principle, not taxable in Belgium, nor subject to a withholding tax. The statutory charitable purpose can be broad and can provide, for instance, a wide variety of benefactions for family members. The private foundation is subject to the legal entities tax, grossly comparable to individual income tax. However, only certain specific categories of income are subject to income tax, although capital gains are generally exempt. Transfer of assets to a Belgian private foundation is not subject to an estate transfer tax, although a gift tax may be due when the gift is registered (see above). The private foundation is subject to an annual wealth tax of 0.45% as from EUR 500,000 (progressive rates of 0.15%, 0.30% and 0.45%) on the value of all of its assets as per 1 January, unless the value of these assets does not exceed EUR 50,000). Assets invested in a private foundation are not subject to a transfer tax, unless the transfer is made as a gift via a notarial deed, in which case a 5.5% (Flemish region) or 7% (Brussels and Walloon region) gift tax will apply. Private foundations may benefit from a beneficial inheritance tax of only 7% (Walloon region), 8.5% (Flemish region) or 25% (Brussels region). Therefore, the Belgian private foundation can be an appropriate vehicle for estate and inheritance planning.

Not applicable.

Belgian law does not recognise the concept of “trusts” in its legal system.

Certain gifts, irrespective of the date they were made, can qualify as a fictitious bequest and be subject to inheritance taxes (e.g., donations of movable assets made by the de cuius under the condition precedent or term fulfilled following the death of the donor). One of these fictitious bequests relates to funds that transfer to a person (free of charge) upon the death of the testator, based on a contract the testator (or a third person) made containing a clause to benefit said person.

The Flemish tax authority has issued a highly controversial ruling, whereby the byelaws issued by the board of directors of a Liechtenstein foundation are regarded as such a contract, thereby making it possible to apply the aforementioned fictitious bequest provision on the distributions made by the foundation after the death of the founder of the foundation.

Although this ruling is detrimental for Belgian tax residents who have planned their estates using structures such as foreign foundations, the importance of the ruling must not be overrated. The ruling was set regarding a very specific case, which cannot be given an ad omnes gravitas. Also, and more importantly, highly motivated case law exists which leads to the conclusion that the establishment of a foundation and the issuance of byelaws for such a foundation are not to be regarded as a contract, but rather as unilateral legal acts.

Not applicable, primarily a regional competence.

The Flemish region offers an exemption on gift taxes and a substantially lowered tariff in inheritance taxes (flat fee of 3% or 7% depending on the proximity of kinship) where family businesses and companies are concerned. Although the application of these regimes is limited to qualifying family businesses and companies, the requirements mainly concern a minimum participation by the family in the entity and a genuine economic activity of the entity. The value of the family business or company is not a limiting factor. A recent judgment by the Ghent Court of Appeal has clarified that leasing real estate (to third parties) can constitute an economic activity. This regime remains extremely attractive for qualifying entities. Given the recent judgment of the Ghent court, it is clear that the economic activity criterium can be stretched and that many entities can qualify. Proper planning is, however, crucial as complex group structures might need restructuring in order to fulfil the minimum family participation requirements.

Belgian law allows for many different planning techniques and opportunities regarding one’s estate. The reduced rates relating to registered gifts, the possibilities under civil law (usufruct, indirect gifts, etc.) and the existence of vehicles such as the private foundation make Belgian inheritance planning a tailored affair.

Not applicable.