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TAX

Special tax regime for impatriates and impatriate researchers

Samuel Leblanc Samuel Leblanc

The favourable tax regime for foreign executives and researchers temporarily working in Belgium (the so-called 'expat regime') will disappear soon.

In the context of the Belgian budget negotiations, the Belgian federal government announced its intention to modify the expat regime. The changes will result in the reduction of certain benefits and a series of limitations to the well-established regime that was based on an administrative circular letter and therefore lacked a legal base.

The government’s intention now is translating the new regime into a new law. A draft bill has been presented to the Belgian Parliament and the final law is expected to be voted on by the end of the year and to enter into force as of January 2022.

This note is based on the draft bill and its preparatory documents.

Current state of affairs

The expat regime has been applied for more than 35 years.

Initially introduced by an administrative circular letter of 8 August 1983, the main characteristics of the expat regime are the following:

  • Belgian tax non-resident status:

The expatriate, benefiting from the expat regime is deemed to be a Belgian non-resident for income tax purposes and is therefore only taxed on his personal and professional Belgian sourced income.

  • Tax free allowances:

Certain allowances are not taxed as they qualify as costs proper to the employer which are caused by the assignment to Belgium.

These tax-free allowances include certain recurring costs up to a limit of either €11.250 or €29.750 per year. Other recurring and one-time can be regarded as cost proper to the employer without limitation.

  • Travel exclusion

The remuneration which related to professional activities performed outside Belgium is not taxable in Belgium. This foreign travel exemption is usually calculated on the basis of the number of days worked outside Belgium, using a specific method foreseen in the circular letter of 1983. 

Special tax regimes for impatriates and impatriate researchers 

The new regime will be included in the Belgian Income Tax Code of 1992 and therefore provide more legal certainty for the taxpayers than the expat regime.

Even though certain conditions are similar to the conditions and features applicable to the expat regime, substantial differences should result, in most cases, in a reduction of benefits, or even to the end of any special tax concession.

Conditions

  • Recruited from abroad or posted from abroad

Similar to the expat regime, the special tax regime requires that the individual at hand is either recruited directly from abroad or posted from abroad.

However, the new regime offers the possibility to continue the apply the special tax regime after a change of employer under certain conditions. Please note that the duration limit (see further) will be appreciated based on the first arrival or start of activities in Belgium.

  • Bonds with Belgium

The new regime can be applied if - during an uninterrupted period of 60 months preceding the start of activities or arrival in Belgium - the impatriate was not:

    • subject to Belgian income tax or non-resident income tax on his professional income
    • living at a distance of less than 150 km from the Belgian borders.

It should be noted that – contrary to the current regime - the impatriate’s nationality has no impact on the possibility to benefit from the new regime, meaning that a Belgian national who would fulfill the non-taxation and distance conditions described above could in principle possibly benefit from the special tax regime.

  • Employees and directors alike

Similar to the expat regime, the special tax regime for impatriates can be applied by both, employees and company directors. The special tax regime for impatriate researchers however only applies to employees.

Furthermore, the draft bill currently foresees that director of companies of which they are founder or co-founder, or holding at least 30% of the company’s shares should be excluded, implying that directors of personal service companies will not be entitled to benefit from the new regime.

  • Minimum wage threshold

The impatriate must earn a gross remuneration of more than €75.000 per calendar year from his employer or company for services provided in Belgium (this amount may be adjusted every three years as from income year 2024).

In case the impatriate starts working or interrupts his activity in Belgium during the year, the €75,000.00 threshold should be distributed pro rata based on the number of relevant days.

If the impatriate is only partially taxable in Belgium, only the remuneration subject to Belgian taxation will in principle be taken into account for the remuneration threshold.

Benefits in kind and variable remunerations (i.e. bonus) will be taken into account to appreciate this condition, which will have to be fulfilled every year. Failing to meet this condition in any given year will result in the interruption of the special tax regime on behalf of the impatriate.

  • Application request

In order to benefit from the new special tax regime, an application request should be submitted electronically by the employer or the company to the Administration within three months of the expatriate taking up employment in Belgium. The application must be accompanied by a certificate signed by the impatriate, certifying his agreement to the application request.

The tax authorities must decide whether the conditions are met by the expatriate within three months following the filling of the application request. In case of a positive answer, the regime applies to the remuneration received by the impatriate from the date of start of activities or arrival in Belgium.

  • Employer formalities

Before 31 January of each year, the employer will need to confirm in writting to Belgian tax authorities the list of individuals benefitting from the provisions of the new special tax regime.

Features

  • Tax residency

Contrary to expats, impatriates will not be deemed to be Belgian tax non-residents nor will they need to demonstrate the temporary nature of their stay in Belgium.

Impatriates will therefore have the possibility to be regarded as Belgian tax residents but should in that case follow normal rules foreseen in double tax treaties.

The draft bill currently explicitly foresees that, to be regarded as a Belgian tax non-resident, the individual will need to provide the Belgian tax authorities a tax residency certificate issued by another country every year.

  • Duration

The new special tax regime for impatriates and impatriate researchers will only apply for an initial period of 5 years with the possibility of a 3-year extension under certain conditions.

This limited duration will also have an impact on the transition options available to individuals currently benefitting from the expat regime.

  • Costs proper to the employer

On top of the annual gross salary described above, the individual is entitled to receive supplementary reimbursements of costs.

The employer can contractually foresee a lump-sum reimbursement up to 30% of the annual gross salary (with a maximum reimbursement of €90.000) covering e.g. higher costs of housing and living in Belgium and home leave costs.

On top of the lump-sum reimbursement and regardless of the limitation described above, reimbursements of moving costs and costs of setting up a household (capped at €1.500) and school fees can also be treated as tax-free costs to the employer.

  • Travel exclusion

A 'travel exclusion' as intended in the old expat regime is no longer applied.

Entry into force

This new regime should be applicable for all employments/assignments starting as of 1 January 2022.

Transitional measures

The draft bill provides a transitional regime which offers the possibility for taxpayers who currently benefit from the expat regime to switch to the new regime.

  • Opt-in

Expats currently benefitting from the current expat regime for less than 5 years may opt for the new special tax regime if they meet the qualifying conditions of the new special tax regime for impatriates and impatriate researchers since the beginning of their activities in Belgium.

The years benefitting from the current expat regime will be deducted from the 5 years limit of the new regime.

This request to opt-in must be filed by 31 July 2022.

  • Opt-out

Expats benefitting from the current special tax regime for less than 5 years and meeting the qualifying conditions of the new special tax regime may also opt out and remain subject to the current regime until 31 December 2023.

For all the expatriates who do not qualify for the new special tax regime, they will still benefit from the current regime until 31 December 2023 at the latest.

Please bear in mind that this entry is based on a draft bill which is subject to changes before it is finalised.