From income
year 2021 onwards, new rules apply for Belgian resident taxpayers, who own real
estate outside Belgium (law of 17.02.2021). The new legislation is the result
of European case law, condemning Belgium for the unequal treatment of taxpayers,
who own properties outside Belgium as compared to taxpayers with Belgian
properties.
Belgian
resident taxpayers have the obligation to report world-wide earnings in their
annual resident income tax return. This includes the actual or deemed income
from real estate, owned in any location in the world.
Depending
on the situation, real estate must be declared in Belgium based on actual rent
received or based on a deemed taxable value (the cadastral income (CI) of the
property). The new rules only apply to the second situation. This only concerns
properties:
a) that are
not let out
b) that are
let out to
The fact
that foreign real estate must be reported in the Belgian income tax return does
not necessarily mean that tax is also due. If the property is located in a
country with a tax treaty with Belgium, the tax is in most cases only to be
paid in the country where the property is located. Belgium then exempts the
income, but does so with application of the progression reserve rule (the
income does play a role in determining the Belgian tax rate on other income).
For goods
in countries without a treaty, Belgium will levy tax, although in a number of
cases a tax reduction of 50% can be claimed in the annual tax return.
The good
thing in the new law is the fact that the discriminatory clauses in the old
legislation have been abolished. Taxpayers should nevertheless be aware of new
reporting obligations that are imposed on them. Immigrants into Belgium should
be extremely cautious with this matter and ensure that they are not faced with
severe penalties, as will be explained further.
Cadastral
value
The taxable
base for the above-mentioned properties is determined on the basis of their
cadastral value. This is a deemed net rental value (after deduction of all
possible costs except interest) for a period of one year. The Belgian tax
authorities will therefore determine an equivalent CI for the foreign real
estate to be declared, by analogy with Belgian properties.
In order to
determine this CI, the Administration needs information to be provided by the
owners or other holders of certain related rights on the real estate. This must
be done through a specific reporting, to be done before the end of 2021.
The net
rental value of the property will be determined by the authorities, based on
the current normal market value of the property. This is the market value, obtained
under normal market conditions (between independent parties), excluding
additional costs such as taxes and notary fees. A correction factor is applied
to the market value in order to recalculate a cadastral value back to the
reference year 1975, as is the case with Belgian properties.
The system
is much simpler for land. The CI of foreign land is set at 2,00 Euro per
hectare.
New tax reporting
obligation
In order to
allow the Administration to determine an equivalent CI for a foreign property,
the taxpayers themselves must spontaneously submit data to the tax authorities.
An obligation to declare the properties applies to owners, co-owners,
usufructuaries or holders of a comparable foreign right. Real estate, owned by
a legal structure, must also be declared if the founder of the structure is
subject to personal income tax as a Belgian tax resident.
For goods acquired
before 2021, there is time to file the reporting until the end of 2021. The tax
authorities have announced that they will take the initiative to inform
taxpayers about their obligation to report their foreign properties in due time.
Anyone who has included a foreign property in the personal income tax return in
previous years should receive a request from the Administration in the course
of 2021 to provide information.
Anyone who acquires
a property abroad from 2021 onwards or who
sells a foreign property, must file a declaration within 4 months. It is then
up to the taxpayer to take action and penalties are imposed if the reporting
obligation is not properly met.
The tax
authorities intend to make the CI for the foreign properties available by
March 1, 2022, so that it can be used from the tax return for tax year 2022.
Information
to be provided
The reporting
covers the following:
The tax
authorities always have the option to request additional information if the
information provided is considered incomplete or contradictory (such as a more
detailed description of the good or a copy of the purchase deed).
In the
absence of a recent expert valuation or other objective reference point, the
price of the good at the time of purchase can be used as a reference (this may
have been determined many years in the past). The tax authorities want to look
at the price, as would have been agreed between independent parties (without
personal or family ties between the parties). The value of a property resulting
from an inheritance or donation can also be used as proof.
We have important
concerns about the nature and language of the documents that will have to be submitted.
After all, it is our experience that the Belgian tax authorities simply assume
that documents in the Belgian national languages can be presented without any
problems and that official or non-official foreign documents can easily be used
for Belgian tax purposes.
Inevitably,
there will be many surprises (and translation costs) for the taxpayer and the
tax authorities in this area. Our experience with documents in foreign
languages, to be presented with Belgian tax officials is not very encouraging.
We can only hope that the Administration will significantly change its attitude
and style of communication towards these taxpayers.
As is the
case in Belgium, not only the acquisition, but also the substantial change to a
property must be declared. Any new construction and all changes, renovations,
enlargements and other changes that are considered significant will lead to a
re-estimation of the CI. The new cadastral income then exits from the first day
of the month following the fact that justified the reassessment.
We wonder
how the tax authorities will be able to properly follow up on this obligation in
the absence of Belgian verifiable data (such as building applications and
declarations of commissioning of goods).
In order to
be complete, we note that it is possible to request a change of the CI of a property
even in case no ownership change has occurred. This can happen when new and
permanent circumstances caused by force majeure, by measures ordered by the
public authorities or by the actions of third parties, affect the rental value
of the property by at least 15% as compared to the rental value in 1975.
We draw the attention of taxpayers to the obligation that has been established for them to take initiative if no CI is notified to them after a declaration was made or if the property does not appear on their information page in the application www.myminfin.be. In such case, one must take the initiative to contact the Administration with a request to rectify the situation. One cannot just passively wait and see. It is of the utmost importance to properly respond to the upcoming request for information for existing properties and to contact the tax authorities if no question is received or for properties acquired or sold from 2021 onwards.
We note that access to the electronic application ‘MyMinFin’ is often very difficult or even impossible for a while for new arrivals into Belgium. The website is based on the national number of the taxpayer, provided by the public authorities and the usual method of access to the information required a Belgian electronic identity document and a 4-digit PIN code (provided by the commune). We experience numerous problems with this access for people, moving into Belgium. This may in turn lead to difficulties for them to properly comply with the new rules.
Deductible
items
Contrary to
the past, it will no longer be possible to deduct foreign taxes from the amount
to be declared in the Belgian tax return for foreign real estate. This is
because a CI corresponds to a deemed net rental net income for a period of one
year. This is the same for real estate located in Belgium.
This does
not mean that costs are not taken into account. The Belgian tax calculation
automatically includes a standard cost deduction of 40% for buildings and of
10% for land. This includes any foreign taxes. This is an absolute lump sum and
cannot be replaced by proof of actual expenses.
Interest on
loans to acquire, improve or maintain the property, however, is tax deductible (usually only against income
of the same type). It does not matter whether the loan is from a Belgian or
foreign source (whether or not located in the EEA). All possible forms of loan
are eligible (subject to sufficient evidence to be provided) for the deduction
of interest.
A large
pitfall – fiscal immigration
A dangerous
matter appears for people, who move to Belgium from abroad and who become a tax
resident of Belgium in the course of current year. They too must take the initiative
declare the market value of their foreign real estate. They will receive no in invitation
to do so and in addition, they are given an extremely limited deadline of 30 days
from the day, they become resident.
We do not
understand why such a short deadline has been set in this situation. In the
first few months after the move to a new country, most people have numerous
other concerns than submitting a valuation report of their real estate to the
Belgian tax authorities. Furthermore, most often they are completely unfamiliar
with Belgian tax law, let alone with the concept of a cadastral value of a
property. The language barrier, already mentioned earlier in this text, will
also be a problem for many of them. In addition, we do not expect them to be
able to obtain the required necessary official documents and translations within
the limited period of 30 days.
It is not
difficult to predict that this group of taxpayers will run a significant risk
of getting into serious trouble as soon as they set foot on Belgian territory.
We fear that the quite unreasonable deadline is an open invitation for tax
troubles. Immigrant taxpayers are highly likely to run into an unintended tax
office soon after their arrival in Belgium. We wonder whether discrimination
can be invoked by them, given the different treatment in comparison with other
taxpayers, who are offered much longer reporting periods. Tax migrants have a
high chance of falling victim to tax penalties.
Penalties
Anyone who
does not comply with the obligation to properly report their foreign properties
are at risk for high fines, which can even get as high as 3,000 euros. The
reasonableness of such a high fine can be questioned, especially in those (very
common) cases where real estate is located in countries with a tax treaty,
whereby the real estate in Belgium is exempt from tax, and where only the progression
reserve for calculating the taxes is relevant.
We also expect
numerous discussions about the valuation of properties and the evidence to be
provided by means of documents, made up according to foreign law and in all
languages that this world has to offer. As already mentioned, tax immigrants are
highly vulnerable to the new fines (as a
form of tax welcome gift for their arrival in Belgium).
A more
reasonable scheme of tax penalties is highly desirable. Because the fines for
foreign real estate are much higher than the fines for Belgian real estate, the
tax authorities have unfortunately again returned to the slippery path of tax discrimination.
Contrary to
Belgian real estate, the controls, available to the Belgian tax authorities are
rather limited for those properties, located abroad. According to the Minister
of Finance, sufficient checks are possible, for example on the basis of an
international exchange of data between authorities or also via internet sites
about real estate, from which the sales value of properties can be deduced. We
are afraid that the Minister has overestimated the controls, available to the
Belgian officials. The value as official evidence for many data (for example picked
from all kinds of websites) is questionable. The Minister is counting on the
dissuasive effect of the sky-high fines, but it is not certain that this will
be effective.
Fiscaal kluwen van de gemeubelde verhuur
+32 (0)476 49 09 01
Rijsenbergstraat 150
9000 Gent
Belgium
New tax rules for real estate, owned outside Belgium – a serious headache for people, moving into Belgium. Beware of the new pittfalls.
New tax rules for real estate, owned outside Belgium – a serious headache for people, moving into Belgium. Beware of the new pittfalls.
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- either
individuals, who do not use the property for their profession, - or
to legal persons, other than companies, and which provide the property to
individuals for use as their home.
- a
(short) description of the property - the
address or place and the country where the property is located - the
surface area if it concerns land - the
current market value (to be estimated by an expert if necessary). If this is
not known, the taxpayer must state the price and date of acquisition, along
with the cost of any improvements performed after the date of acquisition.
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