A new interpretation of article 232 of the CIR/92 by the tax office results in an extended tax filing obligation for non-residents. As a result of the new interpretation, a much larger group of non-residents with Belgian real estate, suddenly must file a tax return in Belgium.

Belgian real estate income had to be declared even in the past, but only if there was a rental or if there was also other income taxable in Belgium (income mentioned in art. 228, §2, 3°, a and e, 4°, 5°, 6°, 7°, 7°bis and 9° a/1 and h ITC/92). It could be, for example, remuneration, income as a director of a company or a pension.

New is the deletion of the word “taxable” in the above paragraph. According to the tax authorities, there is no requirement at all that the other income (for example, the pension or remuneration) be taxable in Belgium. This is often not the case in application of a tax treaty or if the income is not of Belgian source. The tax authorities now argue that the requirement, that Belgium has taxing jurisdiction over the other income, based on double taxation treaties, is not specifically stated in the law and therefore believe this allows them to start taxing all Belgian   real estate, leased or not, as soon as any form of professional income can be detected anywhere in the world.

The first target group of the new interpretation are pensioners with Belgian-sourced pensions, which can be exempted from tax in Belgium in application of a tax treaty. From now on, they must always declare their Belgian property as non-residen taxpayers, regardless of whether the property it is rented or not and regardless of the taxable basis. Because these are Belgian-sourced pensions, it is easy for the tax authorities to target these people because the Belgian pension information automatically enters the tax databases. Their property income (at least equal to the indexed cadastral income, multiplied by 1.4 and reduced by loan interest) is then taxed immediately from the first euro at the normal rates, starting at 26.75% (including the municipal tax).

The new interpretation has important consequences for all non-residents owning real estate located in Belgium.

The new interpretation also completely erodes the old 2,500 Euro (per owner) exemption. This exemption applied when only immovable property was held in Belgium, of which at least one unit was rented out. Only when the total taxable income of all real estate taken together exceeded 2,500 Euro a tax return up to now had to be filed. Because the forementioned limit amount is not indexed from year to year, this exemption has anyhow already eroded over the years anyway, which only further questions the usefulness of the recent new interpretation.

Moreover, the tax authorities want to apply the new interpretation already for income year 2023. The filing period for this expires in a good month. The question can therefore be raised whether it is useful or reasonable to come up with this new obligation so late in the year, merely based on  a reinterpretation of a legal text, which has remained unchanged for years. That numerous taxpayers will not be compliant for income year 2023 is already certain.

Some further comments can be added related to the new interpretation.

• The 2,500 euro rule was created precisely to avoid the administrative hassle and paperwork involved in requesting, preparing, filing and processing a tax return. If the result of all that work is only a limited amount of tax, one can legitimately ask whether it makes sense to run the entire tax return machinery with all the effort involved, both for the administration and for the taxpayer. In times, when the call for administrative simplification is greater than ever before, this unexpected maneuver by the tax authorities can count as a good example in terms of farming backwards. It is yet another step in the administrative merry-go-round, which only seems to have gained speed in recent years.

• What to do with Belgian property, held by multiple owners-non-residents? The tax authorities will now have to check each individual’s income situation in Belgium and abroad and issue a tax assessment if it appears that some owner is receiving professional income somewhere in the world. This will undoubtedly be an interesting and extremely time-consuming administrative activity.

• The new interpretation of the law is curious in that one is going to infer from the absence of the word “taxable” of certain income in Article 228 CIR/92 that other income suddenly does become taxable. In essence, the interpretation goes against the basic idea of the taxation of non-residents, which is precisely based on the taxation of income, for which Belgium is competent to levy tax, because it is of Belgian source or is subject to tax here under a tax treaty. What to do with persons, who earn professional income, which is not of Belgian source, and which is not taxed here because Belgium has absolutely nothing to do with it? The new interpretation is undoubtedly a challenging topic for lawyers, who can write analyses and start litigations on this matter.

• The new interpretation will certainly generate some revenue for Belgium in the short term. However, the efforts required to collect all these taxes around the globe may easily outweigh the modest extra income. After all, Belgium will now have to hound all foreign-based property owners to get often rather limited amounts of tax settled and collected.

• Knowing that the tax administration’s address records are currently highly deficient when it comes to non-residents, and taking into account the major difficulties that come up year after year in the process of issuing and processing non-resident returns, the tax administration may be creating more challenges with this new position than it first expected.

• In light of this, we also note that there is still no efficient method for many non-residents to access the digital Myminfin and Tax-on-Web applications, that are crucial for efficient tax filing. This is the result of the absence of a Belgian digital ID card with PIN code or an Itsme banking application. Consequently, many foreign taxpayers will have to go through an arduous process to even be able to file a tax return in Belgium.