Tax: The winds of change in Belgium


Belgium finally has new governments, both federal and regional, and it also has a sixth State Reform.

Many changes are on the way. What are the key ones?

The Federal government claims to have the intention to reduce the tax on labour, both for employees and for companies. There are plans for a reduction in the taxation on wages to be compensated by an increase in VAT and taxes on diesel. Companies should see their tax and social security charges streamlined with the aim of reducing them.

On the pension side, those of you under 55 this calendar year will typically have to work longer, up to the age of 66 or 67. A working life of 42 years will now be required for the right to early retirement. For people with a Master’s diploma this often will mean no early retirement before they are 65. It will no longer be possible to retire before the age of 60 even when your company is in restructuring, although this measure will only come into in a few years’ time, and there are exceptions foreseen for hard manual labour.

The conditions for employees wanting to take a career pause whilst keeping on building up their social and pension rights will become more stringent. To take care of a sick child or an ailing parent will still be ok, but not if you just keen on travelling the world for a year at a young age.

For the second pillar pension the disadvantage of taking up that pension in annuities should disappear as compared to taking it up in a lump sum; and people should be allowed to add money to that pension scheme, on top of what their employer puts in.

Concerning the third pillar pension, the so-called ‘fiscally facilitated private pension’, things will become slightly more fiscally friendly too.

For people enjoying their pension after 65 years of age today, they will be allowed to earn as much money extra as they want without taxation.

Disadvantages due to a mixed ‘employee – self-employed’ career should disappear. And in case of a divorce the pension rights will be more fairly distributed between the parting parties.

For those rightfully on social security income today nothing much will change except that it will become more attractive for them to take on a job when they find one. The ‘unemployment trap’, the difference between the net income when working and when on social security income, will ‘disappear’ without decreasing the social security income itself though.

In general, fraud on the fiscal and social side will be better controlled and punished. We still need to see how that will happen and how successful the administration involved will be at carrying it out.

On the mobility side companies will maintain an incentive to give a ‘mobility budget’ to their employees, and there will be an extra incentive for ‘green mobility’ because of the abolishment of the minimum taxable advantage on cars.

What about the taxation of financial income and wealth?

Belgium will still not have a wealth tax, but the tax shelters sometimes used by the very wealthy people will be attacked based on the ‘look through’ principle. Furthermore, a financial transaction tax may be coming our way, just like in some 10 other countries. The €1,900 tax free budget per person per year on interest from savings accounts should now allow for other financial income too.

There are more measures planned than the above, but most of them still need to be written in law and that will take some more time.

Not only does Belgium have new governments, and with it plans for new legislation including new taxes, it also has a sixth State Reform. From 2015, responsibility for the tax advantages on mortgage loans, for example, will no longer be a federal matter, but a regional one. And the regions have already hinted at changes that they would want to implement, leading to less generous tax advantages. After all, the regions are having issues with balancing their budgets. In Flanders there is already a rush to buy property now because of the fear that as from 2015 fiscal advantages on new mortgage loans will decrease.

For the happy few among the expats in Belgium who have the Special Tax Status of Foreign Executives, this matter has also been regionalized. The scheme will stay in place but control over the application of conditions will be, and has already been, sharpened. It has become more difficult to keep on benefitting from the scheme after living more than eight years in Belgium, and it is ever more important to keep the balance in favour of the links with one’s country of origin as compared to Belgium. So, pay attention for example when buying property here.

All in all, there are many changes, but not in a dramatic way, and the aim is to reduce the cost of labour and the cost of doing business in Belgium. There are areas where Belgium had lost competitive advantage compared to neighbouring countries in recent years. Yes, we will have to work longer before retiring, but doesn’t one always need an interesting occupation whatever one’s age? And in Belgium you still have many days of holiday to compensate, plus various options for part-time work. Work is indeed also a kind of therapy as long as it is adapted to one’s capabilities and when there is room to learn. Furthermore, I have rarely seen a person happy with just sitting on his or her money. Spend it wisely on added value to you.