1. HR and tax alert
Belgium
Executive summary
On 22 April 2014, the Belgian Parliament passed a
law passing greater fiscal autonomy to the Regions,
with specific implications for individual income tax.
This is part of a wider reform generally referred to as
the ‘Sixth Belgian State Reform’.
The impact in the field of personal income taxes can
be summarized as follows:
Levy of a regional additional tax under the
jurisdiction of the Brussels, Flemish or Walloon
Region for resident tax payers.
Shift of specific tax reductions, currently under
the Federal authority, towards the Regions.
Application of the Regional tax system to
specific groups of non-resident taxpayers.
This law, together with the Special law of January 6,
2014, enables the tax
Bullet points components of the Sixth Belgian State
Reform to enter into force for 2014.
Key developments
Levy of a regional additional tax under the
jurisdiction of the Brussels, Flemish and Walloon
Region.
Under the current tax system, personal income taxes
are imposed solely at the Federal and Municipal
levels. Now an additional Regional tax will be installed
as of income year 2014 for resident (and under
certain conditions non-resident) tax payers. Unlike
the Federal taxes, which are calculated on taxable
income, the Regional taxes are calculated on a
‘preliminary’ tax liability. This system is comparable
to the current calculation method for Municipal
taxes.
Under the current conditions, such an additional tax
should however, not result in an increase of the
New Regional tax system impacting both resident and non-
resident tax payers
overall tax liability.
To realize this, the Regions will initially impose a tax
equal to the amount of taxes relieved at the Federal
level. Going forward, the Regions can decide
individually and autonomously to adjust, within
certain limits, the regional additional tax percentage
and differentiate as such their fiscal policy compared
to the other Regions.
Critical under the new methodology is the localization
of a tax payer in one of the three Regions. For
resident tax payers, the law foresees in a localization
criteria based on their ‘fiscal residence’ on January
1st of the tax year (i.e. year following the year in
which the liability arises). This principle confirms the
current approach towards residency as applied by the
Belgian tax authorities and mainly focuses on the
location of a resident’s abode.
Shift of specific tax reductions from the Federal
level towards the Regions.
Following the transfer of competences, the Regions
will receive full authority on a specific number of “tax
incentives”. Regional Authorities may grant tax
reductions for the following types of item:
Loans for a taxpayer’s own dwelling
Expenses for energy saving
Service vouchers and local employment agency
vouchers (PWA – ALE)
Expenses for protection of a private home
against fire and burglary
Contributions to the maintenance and
renovation of protected monuments and
buildings
The scope and conditions to benefit from the above
tax reductions as currently defined remain unchanged
May 2014