In Belgium, the land of chocolate, waffles and exorbitant tax rates, dreams of foreigner taxes are over.
This month ended the country’s special expatriate tax system, introduced in 1983 and available to people hired from abroad.
From now on, only those with an annual gross income of more than 75,000 euros (with the exception of researchers, to whom the threshold does not apply) will be able to benefit from the special tax system, which is a figure that many foreigners cannot afford. This is a number that cannot be reached. Belgians can now apply for this tax regime.
This means a significant reduction in pay for many people. The previous system allowed certain deductions against taxable income, but this has now been abolished and replaced with a flat 30% deduction for work-related expenses up to a maximum of €90,000.
KPMG’s Carolian van Eckerpoel said the number of people who benefit from the new system is now much lower, with around 10 per cent still receiving the foreigner tax rate. .
According to a question in the Belgian parliament, approximately 27,251 people benefited from the old tax system in 2023.
In contrast to non-residents living and working in Belgium, expatriates with an income of less than €75,000 are tax residents of Belgium. “The main consequence of being non-resident is that you will only be taxed on Belgian source income…from now on, your foreign investment income and worldwide professional income will be taxed,” says Consulting. said Peter Weitz, a tax expert at advisory firm BDO.
The government decided to introduce the new system to close a loophole in the law that allowed long-term residents to benefit from a reduction that was only intended to apply to temporary expatriates. Under the new system, those who qualify will only benefit from a reduction from five to eight years. Another reason the Belgian government made this move was to inject more money into the national budget.
Additionally, the Luxembourg-based EU court ruled in 2023 that the tax exemptions Belgium granted to multinational companies under the former regime amounted to illegal state aid, and that Belgium owed unpaid taxes from 35 years ago. It confirmed the European Commission’s decision in 2016 to recover €1 billion. Large companies.
Goodbye Belgium
One effect of the tax changes is that Belgian companies may struggle to hire talent from abroad, but the exact impact of the government’s measures remains to be assessed, according to experts POLITICO spoke to. It’s too early to say so. However, experts agree that the old regime was an effective means of attracting foreign talent to the country.
“Currently, the chances of Belgian companies attracting foreign talent are decreasing. And certainly that will have a negative impact on the attractiveness of Belgium and Belgian employers in the market,” says BDO’s Weitz. said, adding that Belgium still has “very high taxes and wage security burdens”.
Lisbeth Deknewt, chief human resources officer at Imec, a research and development organization in the field of nanoelectronics and digital technologies, said the new tax regime “could serve as a further constraint on recruitment.”
Expats may choose another country to work, said Sophie Verhoeven, an international employment expert at Agoria, a Belgian federation of technology companies.
“Foreigners can easily go to the Netherlands or France, where they can earn a net salary that is much higher than in Belgium,” she said, adding that currently foreigners are being forced to leave because their employers refuse to increase their salaries. added that there is a tendency for employees to retire. Gross salary to cover tax liability.
Despite the potential negative impact on attracting foreign talent, companies working with Agoria largely welcome the new tax system as it is easier (and cheaper). ing. “Previously, every employer had to hire a consultant to calculate benefits and tax amounts. Now this is no longer necessary,” Verhoeven said. According to her, the amount of work related to foreign taxation for her and her colleagues has decreased by almost 85%.
Foreigners working in EU institutions will continue to be exempt from Belgian income tax.