New legislation in Belgium that sets up a new special tax regime for inbound taxpayers and inbound researchers mentioned in the Law-Now eAlert of 25 November (Special tax regime for foreign executives: new regime from 1 January 2022) has now become reality.
Inserted in the Belgian Income Tax Code, this regime provides the expected legal certainty, predictability and clarity, as opposed to the former regime for foreign executives (provided for by an administrative circular), which was criticised for its contra legem character.
The new regime contains the following key features:
- Payment by the employer of recurring expenses due to employment in Belgium (i.e. additional expenses compared to the country of origin concerning accommodation, cost of living, travel expenses to the country of origin, etc.) is considered as reimbursement of costs proper to the employer up to an amount not exceeding 30% of the gross annual remuneration, with an annual ceiling of EUR 90,000;
- Specific reimbursements of non-repetitive expenses incurred by the employer are considered as costs proper to the employer (e.g. moving costs, first installation costs during first six months and school fees);
- The "normal" rules for determining tax residency apply. Unless it can be proved that the worker's tax residence has been maintained abroad, supported by a tax certificate from the foreign authority, the worker will be considered a Belgian tax resident.
Clarification of certain points
Workers wishing to benefit from the special tax regime for inbound researchers are not subject to the minimum earnings threshold of EUR 75,000.
Employees (excluding company directors) may benefit from the special tax regime for inbound researchers provided that they carry out scientific, fundamental, industrial or technical research activities on an exclusive or principal basis. Also they should have a specific doctorate or master's degree in the fields of exact or applied sciences, civil engineering, medicine, veterinary medicine, pharmacy, architecture or industrial sciences in agronomy, or can demonstrate a minimum of ten years of relevant professional experience.
Company directors of the first category (i.e. corporate officers or persons performing similar functions) and second category (i.e. persons performing managerial functions in a self-employed capacity) can benefit from the special regime for inbound taxpayers, provided they are involved in the day-to-day management of the company.
The application of the special tax regime is subject to an electronic application to the tax authorities within three months of the worker taking up employment in Belgium. The form of this request should be specified by a Royal Decree. The tax authorities have a period of three months to decide on the request.
The benefits of the scheme are applied for a period of five years, which are extendable for three more years.
In case of a change of employer, a new application must be submitted.
By 31 January of each calendar year at the latest, the employer must provide a list of the names of the workers benefiting from the special tax regime during the previous year.
Transitional regime for foreign executives subject to the old regime
Foreign executives can opt for the new special tax regime, provided they meet the conditions on the date of their first entry into service in Belgium and at the time of the application. The request for changeover must be submitted by 31 July 2022 at the latest. The individual's agreement is required and must be the subject of a signed certificate.
In case of refusal or in the absence of a request for changeover, the special tax regime for foreign executives should continue to apply until 31 December 2023 (the circular letter of 8 August 1983 should be amended in the near future). As soon as the benefit of the foreign executives regime disappears, the normal rules for determining tax residence will apply. It is likely that a large proportion of foreign executives will then be considered Belgian tax residents, taxable in Belgium on their worldwide income.
If the tax authorities agree, the new scheme is applicable to remuneration received from 1 January 2022. The new regime is then applicable for the remainder of the maximum period of five years, possibly extended by three years to account for the individual's first assignment in Belgium.
Workers whose employment in Belgium started no later than 31 December 2021 can still apply for the old special tax regime for foreign executives, provided the conditions are met. The normal application period will remain unchanged, but will end on 31 December 2023 at the latest.
Workers who started working in Belgium from the 1 January 2022 can no longer apply for the old special tax regime for foreign executives in Belgium.
For more details on this tax regime and to assess the impact of this regime on your foreign executives, budget, contractual arrangements, and on future employee missions in Belgium, contact your CMS client partner or local CMS experts: