Taxation in Belgium

In Belgium, taxes are collected on both state and local level. The most important taxes are collected on federal level, these taxes include an income tax, social security, corporate taxes and value added tax. At the local level, property taxes as well as various fees are collected. Tax revenue stood at 48% GDP in 2012.[1]

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The amount of taxes a person in Belgium has to pay depends on whether you are or you are not a resident of the country. For a resident (a person whose work or family home is in Belgium) it is clear. But in the case of non-resident, there are two scenarios. If you are non-resident who lives in Belgium for at least six months of the year (183 days) and you are registered with your local commune, you are classified as resident. It means you are taxed by Belgium income tax on your worldwide income. But if you are a non-resident who lives in Belgium for fewer than 6 months (183 days) during the year, you have to pay Belgium income tax only on income you earned in Belgium (including rents and capital gains). [2]

The effective taxation rate in Belgium is commonly cited as among the highest in the world; see list of countries by tax rates.

The Belgian tax year for personal income runs from 1 January to 31 December.[2] Both, residents of Belgium as well as non-residents who pay tax on their income (as mentioned above), have to file an annual Belgian tax return. A tax return associated with your income in previous year is generally delivered in May or June. Typically, it has to be returned by the end of June (exact date can be found on the particular tax return). In case you don't submit your return by the deadline, you will receive a fine. Moreover, tax authorities can determine the amount of tax you have to pay.

As regards regular income tax payments, it is quite simple. If you are employed, your employer will regularly (every month) deduct your income tax payment from your salary. With self-employed workers or paid company directors, the process is similar – tax is paid in advance on monthly basis through collecting agency or bank. In Belgium, it is also possible to pay taxes via post or online (using Belgian government's tax portal). For non-residents with Belgian-earned income, it is a bit more complicated. A tax return is delivered as soon as they inform competent tax collectors office. On the other hand, they can also pay with the use of post or online.[2]

Income tax is calculated by applying a progressive tax rate schedule to taxable income, with rates that go from 25% to a maximum rate 50%. The rates, as of 2015, were as follows:[3]

Whereas in 2019 the income tax rates are a bit different [4]:

Furthermore, a long list of tax allowances can be deducted from both the employer and the employee, including a general deduction, benefits deduction, and a deduction for dependents. Tax deductions are granted according to the following table:[3]

• Child benefits:
  • Employer - 7%
  • Employee - 0%
• Unemployment:
  • Employer - 1.46%
  • Employee - 0.87%
• Medical care in the case of sickness:
  • Employer - 2.35%
  • Employee - 1.15%
• Occupational illnesses:
  • Employer - 1%
  • Employee - 0%
• Industrial accidents:
  • Employer - 0.30%
  • Employee - 0%

Employment income is also subject to social security contributions. Employee contributions are 13.07% and are deducted by the employer. In addition, the employer contributes about 35% of employees wage.[5] No ceiling for contributions apply on contributions for either employee and employer.[6]

Value-Added Tax (VAT) applies to most sales of goods and services. The standard rate of value-added tax is 21%.[7] A lower rate of 12% applies to social housing, meals and margarine. Another reduced rate of 6%[8] applies to foods, drinks, hotels and medicine. Certain goods and services are exempted from VAT by law, this includes exports, and financial services. The Belgian VAT is part of the European Union value added tax system. Smaller businesses with a turnover lower than €25000 are exempt as of 01/01/2016.

Corporate tax applies at a standard rate of 33.99%.[9]

The effective corporate tax rate in Belgium can be lowered through the use of various tax schemes. In 2016 the European Commission ruled that a Belgian corporate tax scheme, which had provided tax breaks to 35 multinational companies was illegal.[10][11] Anheuser-Busch InBev is known to benefit from a very low effective corporate tax rate in Belgium, where the company has its headquarters.[12]