Thinking Beyond Borders for Belgium
Thinking Beyond Borders for Belgium
A person’s liability to Belgian tax is determined by residence status for taxation purposes and the source of income derived by the individual. Income tax is levied at progressive rates on an individual’s taxable income for the year. In certain cases, separate flat-tax income tax rates apply (such as for termination payments and lump-sum pensions).
A resident of Belgium generally refers to an individual who enters Belgium, as a single person or with family, with the intention of remaining for more than 18 to 24 months (depending on circumstances and other factors).
Under certain circumstances a person may qualify for expatriate tax concessions. A taxpayer qualifying for the expatriate tax concessions is always deemed to be a non-resident taxpayer. A non-resident of Belgium is generally any individual who is not a resident or who is benefiting from expatriate tax concessions.
The general rule is that a person who is a resident of Belgium is assessable on their worldwide income. Non-residents are generally assessable on income derived directly or indirectly from sources in Belgium.
Extended business travelers are likely to be considered non-residents of Belgium for tax purposes, unless they enter Belgium with the intention to remain for more than 18 to 24 months (depending on circumstances and other factors). Many employees who move their tax residence to Belgium may qualify, however, for the expatriate tax concessions.
Employment income is generally treated as Belgian-sourced compensation where the individual performs the services while physically located in Belgium.
Technically, there is no threshold/minimum number of days that exempts the employee from the requirements to file and pay tax in Belgium. To the extent that the individual qualifies for relief in terms of the dependent personal services article of the applicable double tax treaty, there will be no tax liability. The treaty exemption will not apply if the Belgian entity is the individual’s economic employer or if the individual is working for a direct branch of a foreign employer in Belgium. Similar rules apply if the individual cannot rely on a tax treaty.
For extended business travelers, the type of income that is generally taxed is employment income, including non-cash benefits-in-kind (such as housing or a company car).
Depending on the actual facts and circumstances, some payments/allowances may be tax exempt.
Net taxable income is taxed at graduated rates ranging from 25 to 50 percent. Tax rates are the same for both resident and non-resident taxpayers. In addition, local tax is due. Local tax is calculated as a percentage of income tax due. The actual percentage depends on the commune where the taxpayer is living and may vary from 0 percent to 10 percent. For non-resident taxpayers, local tax is always 7 percent.
Resident taxpayers are entitled to personal exemptions, including exemptions for dependents. Non-resident taxpayers (including those benefiting from the expatriate tax concession) are not entitled to any personal exemptions unless if at least 75 percent of the individual’s earned income is subject to income tax in Belgium. Some taxpayers may be able to claim partial or full personal exemptions based on the tax treaty signed between Belgium and their home countries/jurisdictions.
Extended business travelers employed by an entity located in a European Economic Area (EEA) member state or Switzerland can, in most cases, remain subject to their home country/jurisdiction’s social security scheme. They can obtain an exemption from paying social security in Belgium, usually regardless of their citizenship. This exemption is based on the EEA/Swiss rules with respect to postings and/or simultaneous employment.
In some cases, extended business travelers may stay in their home country/jurisdiction’s social security system and obtain an exemption from paying Belgian social security. This arrangement is based on the provisions of a social security treaty signed between their home countries/jurisdictions and Belgium.
If no continued home country/jurisdiction social security coverage and no subsequent exemption from social security contributions are available, an extended business traveler will, in most cases, be subject to Belgian employee social security.
Tax returns are due in the year following the tax year-end, which is 31 December. The actual filing due date is determined annually by the tax authorities but is typically the end of June for residents’ tax returns and the end of September for non-residents’ tax returns.
Resident taxpayers always have to file a tax return. For non-residents who have received Belgian-sourced employment income, there is also a tax return filing obligation in all instances. Belgium does not have a system of final wage withholding taxes for employment income.
Withholdings from employment income apply if the employee is paid via a Belgian payroll or is working for a direct branch of a foreign employer in Belgium. As from 1 January 2019, Belgian companies also have a reporting obligation for remuneration paid or granted by a foreign related company. As from 1 March 2019, a formal wage withholding tax obligation was introduced on the same type of remuneration. The new reporting and wage tax obligations on income attributed by a foreign related company are irrespective of any cost charge to or involvement of the Belgian subsidiary. If wage withholding tax is applicable, or if the employer deducts the remuneration for Belgian corporate tax purposes, the employer has to establish a wage tax reporting card (fiche 281.10). This fiche 281.10 must be filed with the tax authorities, generally in the month of February of the year following the year of payment.
A work permit (in case of an employment in Belgium of maximum 90 days, unless exceptions are applicable) or a Single Permit (in case of an employment in Belgium for more than 90 days) and a Belgian visa (type C or D depending on the situation) must be applied for before the individual enters Belgium. The type of work permit or Single Permit required will depend on the purpose of the individual’s entry into Belgium.
EEA and Swiss nationals do not require work permits and/or visas.
Other immigration considerations:
Employees temporarily or partially performing work in Belgium, who (i) either habitually work in a country other than Belgium and/or (ii) have been recruited in a country other than Belgium, have to be registered with the international migration information system.
Landenoverschrijdend Informatiesysteem Migratie Onderzoek Sociaal Administratief (LIMOSA). This registration has to be made in principle by the employer sending the employee. In certain cases, an exemption may be available.
The Belgian immigration compliance process is quite specific as, in many cases, business travelers will need to obtain two separate documents in order to be compliant.
As a first step, extended business travelers, generally, will need to obtain a Belgian work permit type B (for employment < 90 days) or a Single Permit (for employment > 90 days) before they enter Belgium (principle). The foreign employer is required to file the application for the work permit or Single Permit with the Belgian competent regional authorities where the individual will perform the activities. A Work permit type B or Single Permit can be obtained for individuals who are highly skilled and earn a minimum yearly gross salary of 43,524 euros (EUR) for the Flemish Region or EUR 43,395 for the Brussels or Walloon Region. Alternatively, work permits type B or Single Permits are available for individuals in a management position who earn a minimum yearly gross salary of EUR 69,638 for the Flemish Region or EUR 72,399 in the Brussels and Walloon Region.
The work permit B or Single Permit allows the individual to perform professional activities on the Belgian territory.
In some cases, a specific Belgian work permit or Single Permit exemption might be available for business travelers depending on the duration and the purpose of the stay in Belgium.
As a general remark, it is recommended to start well in advance with the process of the Belgian work permit or Single Permit as the treatment of the applications can take 1 to 2 months for the Belgian work permit B or 3 to 4.5 months for the Single Permit.
As a second step, depending on the nationality of the individual, duration and purpose of the stay in Belgium, the individual might also need to obtain a visa allowing entry to the Belgian territory.
The application for the visa needs to be made at the Belgian competent Embassy or Consulate in the home country/jurisdiction of the individual.
In addition to Belgium’s domestic arrangements that provide relief from international double taxation, Belgium has entered into double taxation treaties with more than 100 countries/jurisdictions to prevent double taxation and allow cooperation between Belgium and overseas tax authorities in enforcing their respective tax laws.
There is the potential that a permanent establishment in Belgium could be created as a result of extended business travel, but this would be dependent on the type of services performed.
Value-added tax (VAT) is applicable to taxable supplies of goods and services. The standard VAT rate is 21 percent, but certain supplies are subject to reduced 6 percent or 12 percent rates or, in some cases, a zero rate. VAT registration, in some circumstances, is required. The European Union (EU) reversed charge rules may be applicable.
Belgium has a transfer pricing regime. A transfer pricing implication could arise to the extent that the employee is being paid by an entity in one jurisdiction but performing services for the benefit of the entity in another jurisdiction, in other words, a cross-border benefit is being provided. This would also be dependent on the nature and complexity of the services performed.
Belgium has data privacy laws based on EU GDPR rules.
Belgium does not restrict the flow of euros (EUR) or foreign currency into or out of the country/jurisdiction, although Belgium has money-laundering legislation. This legislation provides for a series of preventive measures carrying administrative sanctions and imposing a duty on certain specified institutions and individuals to cooperate in detecting suspicious transactions and report them to the Financial Intelligence Processing Unit, an authority created for this purpose.
The provisions of the law are applicable to a broad range of mostly financial institutions and professions (including lawyers, tax advisors, certified accountants, company auditors, notaries and bailiffs). The law contains, among other things, specific provisions concerning client identification and due diligence, transfer of funds, due diligence with regard to unusual transactions, restriction of cash payments for real estate transactions and for transactions by a merchant (namely the prohibition of cash payments over EUR3,000 and the disclosure of suspicious transactions).
Non-deductible costs for assignees include contributions to non-qualifying company pension schemes. Most non-Belgian company pension schemes are considered as non-qualifying schemes.
All information contained in this publication is summarized by KPMG Tax and Legal Advisers, the Belgian member firm affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity, based on legislation and regulations applicable on 1 January 2021.