Published in the last hours of 2021, the program law of December 27, 2021 abolished, as from Jan, 1, 2022, the special tax regime for foreign executives (dated 1983) and implemented a new tax regime, applicable to employees and directors working in Belgium. Researchers benefit from some specific measures under the new regime.
During this transitional period, foreign individuals working in Belgium should carefully monitor the effects of this reform and avoid missing the due dates.
Major Changes Summarized
Globally, the new “impatriates” regime introduces some major changes from the previous expatriate regime.
- The benefit of the new regime is limited in duration, up to maximum of eight years (versus no formal time limit previously).
- The benefit resulting from the new regime is simplified. On top of the ordinary remuneration, the employer may grant a recurrent tax-free (and Belgian social security-free) allowance, up to a maximum of 30% of the remuneration and capped at 90,000 euros ($101,000) per year (amount subject to indexation in the future). There is no longer a complex computation relating to activities performed abroad and to the expatriate allowances covering housing/living/tax equalization.
- A minimum remuneration is required with the new ordinary regime (this minimum remuneration condition does not apply to researchers, who have to comply with another condition of qualifications, discussed below).
- The beneficiary is no longer systematically considered a nonresident of Belgium (tax residency will be determined based on the ordinary rules combining internal law and tax treaties).
- The benefit is open to any citizen complying with tax and territorial conditions for the previous 60 months, including Belgian citizens (the former regime was more restrictive and not open to Belgian citizens).
- A point to note is the shortened time period to apply for the new regime: the employer has only three months to file the application (compared to the six-month period for the former regime).
A transitional period of two years is provided for expatriates willing to maintain the former regime. For expatriates active in Belgium by the end of 2021 to switch to the new regime—when meeting the conditions—their application must be filed before July 31, 2022.
Which Enterprises can Apply for the New Regime?
The following are eligible for the new regime:
- any Belgian resident company, any Belgian establishment of a foreign company, any Belgian non-profit associations (ASBL/VZW) and international non-profit associations (AISBL/IVZM) that directly recruit employees or managers from abroad;
- foreign enterprises, part of a multinational group, that make employees or managers available to one or more Belgian resident companies, to one or more Belgian establishments of a foreign company belonging to the same multinational group, or to an A(I)SBL/(I)VZW.
Conditions for the Ordinary Regime at Taxpayer Level
Access to the new regime is aimed at company directors and employees, without any nationality requirement, for a period of five years—extendable by three years—under the following conditions:
- functions: the taxpayer must be a director or an employee. Directors that are founders, and directors holding a stake of at least 30% in the company’s capital, are however excluded;
- tax and territoriality conditions, to be continuously fulfilled during the 60 months prior to the individual taking up their functions in Belgium: (i) not having been a Belgian tax resident; (ii) not having been liable to Belgian nonresident income tax on Belgian-sourced professional income; (iii) not being domiciled at a distance of less than 150 km from the Belgian border;
- minimum remuneration: on an annual basis, the gross remuneration for the Belgian activity must exceed 75,000 euros (remuneration on a yearly basis, before deduction of social security contributions, excluding impatriate allowances and reimbursement of expenses). In the case of a salary split, the minimum remuneration relates to the Belgian source income. In case of a partial year, the threshold is prorated.
Conditions for Researchers to Apply
The impatriate regime provides for special conditions for salaried researchers (excluding directors), which diverge from the conditions of the ordinary regime by not requiring a minimum remuneration, but requiring a qualification and certain level of scientific activity:
- functions: the taxpayer must be an employee. The activity must be, for at least 80% of the working time, a scientific, fundamental, industrial or technical research activity, within a laboratory or a company engaged in one or more research and development programs;
- tax and territorial conditions, to be continuously fulfilled during the 60 months prior to taking up their employment in Belgium: (i) not having been a Belgian tax resident; (ii) not having been liable to Belgian nonresident income tax on Belgian-source professional income; (iii) not being domiciled at a distance of less than 150 km from the Belgian border;
- degree requirement: a doctorate or master’s degree in a scientific field (exact sciences, applied sciences, civil engineering sciences, medical sciences, veterinary sciences, pharmaceutical sciences, architecture or industrial sciences in agronomy), or at least 10 years of relevant experience.
Procedure for Application
The application for the impatriate regime—ordinary regime or researcher regime—must be formally requested, using specific forms, by the company or permanent establishment or association within three months of the impatriate taking up their post in Belgium.
The tax authorities have three months from the application date to issue their decision on it.
Main Benefits of New Regime
The impatriate can benefit from the following advantages:
- Tax exemption for a recurrent allowance granted to them: this allowance may amount up to 30% of the gross remuneration without exceeding the yearly cap of 90,000 euros per year (subject to indexation in the future). The employment agreement, or director’s appointment, will specify the amount of the allowance. No other supporting documents are required to justify the amount of the allowance, which is a significant simplification compared to the former regime.
- Tax exemption for the reimbursement of specific expenses incurred in connection with the move, as well as to a limited extent for the fitting out of their home. The same applies to school fees for children of the impatriate—or his/her spouse—who move with their parents.
- Exemption of social security contributions applicable to the tax exempted allowances. These amounts should not be reported in the employer’s quarterly DmfA return, as officially confirmed by the Belgian Social Security Office on February 9, 2022.
- Benefit of double taxation treaties: this will be available if the impatriate meets the conditions of the relevant tax treaty to be considered as a resident of the Kingdom of Belgium.
- Possibility to maintain a tax residence abroad: the impatriate can maintain a tax residence outside Belgium while benefiting from the new impatriate regime, provided that they supply a tax certificate issued by their state of residence.
Limited Duration
Impatriates may benefit from this special regime for a maximum of eight years—five years initially, with the possibility to apply for an extension of three additional years. In the case of an occupation in Belgium exceeding eight consecutive years, the impatriate will no longer benefit from the special tax regime at the end of this period and will then be taxed in Belgium according to the ordinary rules.
Transitional Regime for Foreign Executives Working in Belgium
Taxpayers and researchers who on Jan. 1, 2022 satisfied the conditions to benefit from the new impatriate special tax regime and who have been active in Belgium for less than five years, have two options:
- opting for the new regime if the conditions for access to the new regime have been met since their first assignment in Belgium—to be assessed retroactively. An application for the new regime has to be filed by July 31, 2022 at the latest. The tax administration has three months to respond to this request. In the case of a positive response from the tax administration, the new regime applies from January 1, 2022 for the remaining time of the maximum period—five years with potential extension to eight years—from the first assignment in Belgium.
- not opting for the new regime—or, if the application to switch to the new regime has been rejected by the tax administration, the old scheme for foreign executives will be maintained on a transitional basis for two years, ending automatically on December 31, 2023. After that date, no changeover to the new regime will be possible for the foreign executive.
Not opting for the new regime could result for example from a long-term benefit—longer than five years—of the former regime, or because, based on an individual assessment, it appears that the former regime generates much larger benefit than the new one.
The Belgian tax authorities issued a Circular (2022/C/9) commenting on the transitional period on Jan. 21, 2022.
Action Points Checklist
Faced with this significant change, within the specific deadlines:
- every group should examine the current status of their employees sent to Belgium, to assess the situation;
- an individual considering working in Belgium should examine whether the necessary conditions may be satisfied to benefit from this special tax regime.
This article does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.
Laurent Donnay de Casteau is a tax lawyer and partner at Advisius (Brussels).
The author may be contacted at: donn@advisius.law