Belgian income tax is due by residents and by non-residents.
Residents are liable to income tax on their worldwide income, while non-residents are only liable to tax on certain types of income from Belgian sources.
Foreign nationals qualifying for the special expatriate tax regime are treated as non-residents for income tax purposes.
Individuals are resident in Belgium if they have their residence or the centre of their economic interests in Belgium. That is the place from where they manage their personal wealth.
An individual registered in the population register of a Belgian commune is deemed to be a resident until proven otherwise. The tax residence of married couples and registered partners is determined by the place where the where their family is established.
Foreign diplomats accredited to Belgium are treated as non-residents. The same applies to the members of their family who live with them.
Officials of one of the institutions of the European Union are deemed to have maintained their residence in the country from which they joined the institution.
Most officials of other international institutions are resident if they live in Belgium, but the remuneration they receive from the institution is tax exempt in Belgium.
It is a principle of international law that, if an international institution is established in a country, its officials cannot be subjected to the local legislation in respect of their work and of their remuneration.
To formalise this, the institution signs a convention with the State where it establishes its seat and in that convention they agree on the privileges and the immunity granted to the institution and its officers. One or two of the provisions of that convention deal with the tax situation of the officers.
Usually these provisions grant a tax exemption for income received from the institution. However, they also provide that Belgium can take account of the tax exempt remuneration and wages to calculate the tax due on any income received that is liable to tax in Belgium. This is a so-called 'exemption with progression' provision. It means that if the official has other income that is taxable in Belgium, this can be taxed at the hypothetical tax rate that would apply on his total income, including the income that is tax exempt.
Until recently, officials could (and did) claim that, even if Belgium had reserved itself the right to tax the other income at the higher rates, there was no legal basis for doing so in the Belgian law. The principle of the exemption with progression is laid down in article 155 of the Income Tax Code, but this article stated that income exempted under an international double tax treaty, must be taken into account to calculate the tax rate on any taxable income.
The Cour de Cassation, Belgium’s Supreme Court, confirmed that article 155 must be read correctly. It only applied to an exemption with progression under double tax treaties. Even if it contains a tax provision, the treaty signed with the international organisation is not a double tax treaty.
However, Parliament has changed the text of Article 155 and with effect from 1 January 2005, Belgium can take account of official's exempt income to calculate the tax due on any other income that is liable to tax in Belgium.
The articles 12 and 13 of Protocol (No 7) on the privileges and immunities of the European Union lay down the tax regime for officials of the European Institutions.
Officials of the European Institutions living in Belgium are deemed to have kept their residence in the EU Member State where they had their tax residence before coming to Belgium. That is not necessary their country of nationality. This rule applies to income tax and inheritance tax. And if they are a national of a country that has a wealth tax, they are liable to that wealth tax. They can also invoke the double tax treaties concluded by that country.
This means that
An official who earns income from an activity outside the European Institiutions may be liable to income tax in Belgium as a non-resident.
This provision also applies to the spouse of an official (unless that spouse has earnings in Belgium), and to the dependent children that are in the care of the official.
For a full guide on the taxation of EU officials in Belgium, click here.