Just before ending our activities, a quick update on the taxation of real estate for non-resident taxpayers.

The Belgian tax authorities pay significant attention to the inspection of people living abroad who own real estate in Belgium. Many taxpayers have in recent years received an unexpected tax bill in the mail and were unaware of their obligation to file an annual tax return in Belgium.

The owner (or equivalent taxpayer) of a property receives a regional property tax assessment notice during the course of each year, calculated on the cadastral income of the property. This is not always the final tax. There is often an annual income tax filing obligation in Belgium and additional tax must be paid on this basis.

This is certainly the case when the taxpayer also has other taxable income. The income from the property is then added to the other income and included in the annual tax return.

If a person owns a property in Belgium with no other sources of income, there are several possibilities:

– Own use: one uses the property oneself (no renting). No tax return needs to be filed, regardless of the amount of cadastral income.

– Renting out: one rents at least one property to third parties. A tax return is required when the taxable income exceeds EUR 2,500 (limit per individual – for married couples or legal cohabitants, the limit is EUR 5,000 when property is co-owned by both partners).

– When renting to an individual who does not use it for professional purposes, the tax base is not equal to the rent received, but is limited to the cadastral income, increased by an annual index coefficient and multiplied by 1.4. Once this amount exceeds EUR 2,500 (per spouse), a tax return must be filed.

– If the property is let out to a company, an organisation or to an individual, who uses it for professional purposes, the taxable income is equal to the rent and rental benefits. Quite soon the €2,500 limit is exceeded and a tax return is most often required.

– For furnished rentals, the rent can be split between the rent for the premises and the rent for the movable property. Only the rent for the premises constitutes taxable property income.

An example shows that one quickly reaches the limit, especially as the limit amount is not adjusted from year to year while the taxable value is subject to an annual index factor.

                Income year 2024

                Index 2024 = 2.1763

                Cadastral revenue = 850 Euros

                Taxable value = 850 x 1.4 x 2.1763 = 2,589.79 Euros, so just above the limit

A tax return must be filed even if the KI is only 850 Euros

Can one enjoy deductions?

Until income 2024, one could deduct interest for a loan for property taxable in Belgium.

However, the government is drafting legislation to abolish this interest deduction from income year 2025.

Thus, people will even more quickly reach the limit of 2,500 Euros. In case of a loan they also lose a significant tax deduction and will pay more tax.

Calculation of tax

The tax on real estate income is calculated at the standard progressive tax rates, ranging from 25% to 50%, increased by a 7% surcharge (calculated on the tax itself).