Where are we now?
It has been almost 2 years since the implementation of the “new” Special Tax Regime for Incoming Taxpayers and Incoming Researchers in Belgium. After almost 40 years, it was definitely time to fully reshape the old regime for expats.
The benefits, limitations and conditions offered by this new regime have been reiterated multiple times in various articles and sources. If you want to refresh your memory, just read this article: New special tax regime for expatriates - BDO
The application of this new regime in practice during this period made clear that it still gives rise to several questions and uncertainties.
More specifically, applying the new regime has manifested in the following struggles based on our experience:
Approval process
When applying for the new Special Tax Regime, the Belgian tax authorities principally have 3 months to decide whether or not the new regime is granted to the taxpayer. However, in practice it often takes much longer than 3 months to make a decision.
On top of this, it remains unclear how the taxpayer can challenge any potential rejection of the request for this application by the Belgian tax authorities.
Payroll processing
The new Special Tax Regime provides a maximum lump-sum tax-free amount of 30% of the gross remuneration. Considering the processing time to receive approval to benefit from the application of the Special Tax Regime, the question can be raised whether or not this 30% tax-free amount can already be implemented in the payroll before the Belgian tax authorities’ positive decision.
In the situation where the employment starts at the end of the calendar year (e.g. 1 December), not implementing the Special Tax Regime before the official approval, might result in the situation where the employee/employer is not able to benefit from this regime due to the fact that the payroll has already been closed for that particular income year.
Furthermore, the payroll of employees benefitting from the new special tax status has to be processed by taking into account the applicable withholding tax scales which again leads to several administrative difficulties. For example, if you’re dealing with assignees having net guaranteed salaries.
Finally, what about applying these tax-free allowances on certain benefits in kind? If so, is it okay that the gross salary fluctuates on a monthly basis to fully apply the tax benefit?
Amendment of the salary package
Considering the possibility of “opt-in” (i.e. transitional measurements for employees who were working under the old expatriate tax regime) for the new Special Tax Regime, it has been confirmed that the amendment of the salary package, and more specifically decreasing the gross package in order to keep the total net salary the same, does not constitute abuse under article 344 of the Belgian income tax code. What about the amendment (i.e. decreasing) of the salary package by means of an appendix for new secondments or intra-group transfers?
Salary threshold of 75.000 EUR
To be eligible for the new Special Tax Regime, a minimum gross salary of 75.000 EUR per year has to be received by the respective taxpayer in case they are not considered as researchers. This might be a problem in the first year of Belgian employment under the new Special Tax regime given the fact that the taxpayer might not be entitled to the full amount of the year-end premium and the holiday pay. Moreover, any future bonus can only be considered in light of this threshold in case they would be certain and fixed at the moment of filing the request for application.
Resident certificate
Taxpayers benefitting from the Special Tax Regime who are considered Belgian non-residents are obliged to submit a resident certificate, not only on a yearly basis but also already at the moment of applying for the new regime. But what about non-residents who are not considered resident taxpayers outside Belgium due to the internal foreign legislation or countries unfamiliar with granting such tax residency certificate? Can this affect the application of the new Special Tax Regime?
Nominative list
The employer is obliged to file a yearly nominative list stipulating all employees who have been benefitting from the Special Tax Status during the previous year. Given the fact that this list has to be filed by January 31st at the latest, and the fact that the Belgian tax authorities have three months to decide whether or not the Special Tax Status is granted, taxpayers for whom the Belgian employment started at the end of the previous year might therefore (incorrectly) not be included in the list.
As quite some things are still unclear, we are really looking forward reading the earlier announced Frequently Asked Questions (FAQ) of the Belgian tax authorities. Unfortunately, it seems to be rather silent in this respect. We strongly believe that more clarity on the above could really help Belgium to attract talented individuals from abroad to Belgium.
Do you, as an employer, also encounter these loopholes? Do you want an experienced partner to discuss possible solutions? Do not hesitate to contact our International Mobility Services colleagues!
Lien Maerevoet – lien.maerevoet@bdo.be
Ben Peeters – ben.peeters@bdo.be
Andries De Prijcker – andries.deprijcker@bdo.be