Expats in Belgium Adjust to New Tax Rules

Belgium, known for its indulgent chocolates and waffles, and high tax rates, has revised its taxation system for expatriates. The previous tax incentives that favored foreigners hired from abroad, introduced in 1983, are no longer in effect.

Starting this month, only expatriates with an annual gross income exceeding €75,000, except researchers, are eligible for the special tax benefits. This threshold is beyond the reach of many expatriates, as well as locals who can now take advantage of the tax relief.

The policy change has led to significant salary reductions for numerous expatriates as previously allowed tax deductions have been removed, replaced by a 30% fixed-rate deduction for work-related expenses, capped at €90,000.

"The newly eligible group for this regime is much smaller," states Carolien Van Echelpoel of KPMG, estimating that only 10% of individuals will now receive the favorable tax rate. In 2023, 27,251 people took advantage of the former tax system, according to a query in Belgian parliament.

Expatriates earning less than €75k are now classified as Belgian tax residents. They must now pay taxes on global professional and investment income, which was previously limited to Belgian sources, explains tax professional Peter Wuyts from BDO.

The tax reform aims to eliminate a legal loophole and increase state revenue. Duration of the tax benefits is also now curtailed to five to eight years for qualifying individuals.

Moreover, an EU court in Luxembourg ruled Belgium's prior tax exemptions, as illegal state aid in 2023, reflecting a 2016 decision that ordered Belgium to reclaim €700 million from multiple corporations.

The revised tax system could hinder Belgian employers' ability to recruit international workers. However, the policy's full impact is still unclear. BDO's Wuyts and Imec's HR chief, Lisbeth Decneut, acknowledge the possibility of diminished appeal for Belgian positions among prospective foreign professionals.

Sophie Verhoeven of Agoria notes that expatriates might now prefer employment in countries like the Netherlands or France due to better take-home pay. There have also been instances of expatriates resigning after employers declined to compensate for the increased tax burden.

Nevertheless, Agoria-affiliated companies favor the new, simpler tax structure, which has also significantly reduced administrative workload by approximately 85%, Verhoeven adds.

EU institution employees will retain their exemption from Belgian income tax.