In a May 20 decision, the Belgian Supreme Court clarified the grounds of taxation for nonresidents.
In Belgian tax law, residence starts when the taxpayer takes up residence and ends when he leaves Belgium to take up residence elsewhere. The tax year starts on the day the taxpayer takes up residence. If he takes up residence in September 2010, he must file a tax return in 2011 for the year 2010, but only for the period September to December 2010. The tax return is to be filed by June 30, 2011. For tax year 2010 (for income earned between September and December), the year of assessment is 2011 (read the full article).
Belgium on May 12 published a royal decree listing the jurisdictions recognized as tax havens in conjunction with the new reporting requirement that entered into force on January 1.
All Belgian companies and permanent establishments of foreign companies must report in their income tax returns all (direct and indirect) payments in excess of €100,000 made to tax havens from January 1, 2010. Payments that are not reported are disallowed, and payments that are reported are only allowed as expenses if the taxpayer can justify that the payment was made in the context of an ‘‘actual and genuine transaction’’ with ‘‘persons other than artificial tax avoidance schemes.’’
Belgium defines tax havens as any countries that during the whole tax period during which the relevant payment has been made, have either been qualified by the OECD Global Forum on Transparency and Exchange of Information as countries not having substantially and effectively implemented the OECD exchange of information standard or are listed in a royal decree (read the full article).
The Belgian Ruling Committee (the authority for advance rulings) issued three rulings in late 2009 relating to the tax treatment of payments made by a trust to a beneficiary during the life of the settlor. Those rulings, which have just been published on the committee’s website, offer insights into the position of tax authorities in a country that does not have a trust concept.
As a typical civil-law country, Belgium does not have the concept of a trust. Moreover, Belgium has not signed the Hague Convention of July 1, 1985, on the Law Applicable to Trusts and on Their Recognition. The Private International Law Code adopted in 2004 dealt with the concept for the first time. (read the full article).
When Belgium and the US signed a new double tax treaty in 2006, one of the major innovations was a provision that when an employee comes to work in Belgium, he and his employer can continue to pay into his US pension plan for a maximum of ten years. His employer’s contributions are not taxable income and the employee’s personal contributions are tax-deductible.
In an Agreement dated January 14, the Competent Authorities of both States have listed the pension plans that qualify for tax relief. In the case of the United States, these plans are
Tax relief for contributions to a U.S. pension plan is limited under the so-called 80% rule. That means that the employer’s pension contributions are only tax-deductible insofar as they allow a build-up of sufficient pension reserves to finance a pension of 80% of the employee’s last annual salary before taxes. The calculation is complex; it takes account of state pension and private benefits and of contributions over a normal professional career. If an employee has made personal contributions to the pension plan, he is entitled to a tax credit limited to 40%.
If the employee has not been contributing to the plan or is not a member of the pension plan, he cannot get the relief for a US pension plan. If he contributes to a Belgian pension plan, he can get tax relief in Belgium but, if he is a US citizen also in the U.S. In Belgium, qualifying contributions are those paid to pension funds and to group insurance schemes set up by insurance companies.
Contributions are tax-deductible, in Belgium, within the same 80% cap. Complementary retirement plans for self employed qualify as well, but the maximum deduction is limited to € 2,781.
If your pension plan is not listed, you can ask the tax authorities of the other state that the plan generally corresponds to a pension plan recognized for tax purposes in that other State.
Until recently, Belgium was one of the few countries that did not participate in the international exchange of bank account data. The Belgian tax authorities took the position that the domestic provisions governing bank secrecy (article 318 of the Income Tax Code (1992)) prevented them from investigating the bank details of non-Belgian nonresidents at the request of another tax administration.
Belgium does not have bank secrecy rules like Austria or Luxembourg; bankers do not face criminal prosecution if they break the rules. Rather, banks have an obligation to be discreet regarding the tax authorities: They cannot answer requests from the tax authorities about their clients’ bank accounts. However, the scope of that bank secrecy is limited. Banks cannot refuse to help the tax authorities if they request information in an investigation regarding the VAT or the inheritance tax. However, such investigations are rare (read the full article).