As already mentioned in our post of 17 April 2018, when free or cheap housing is offered by an employer to an executive or employee, a benefit will be taxed on behalf of the beneficiary of such benefit. This benefit is taxed at the regular progressive tax rates (up to approximately 53,50% – communal tax of 7% included).
For many years, the rules for the valuation of taxable housing benefits were acceptable for Belgian tax payers, but following the significant (and quite unreasonable) increase of the taxable basis from income year 2012 onwards, numerous discussions have arisen. Indeed, after the 2012 increase, the value of the tax benefit most often significantly exceeded the actual cost (i.e. the rent or cost of house ownership) for the employer to provide the housing benefit.
From 2012 onwards, the benefit had to be valued at the cadastral revenue of the premises, increased with an indexation coefficient and multiplied by 100/60 (for furnished premises, the benefit was further increased by a factor of 5/3) and with an additional multiplier of 1,25 or 3,8.
Tax payers pointed out that not everyone was treated in the same way and that the multipliers of 1,25 or 3,8 were unjust. Indeed, there was a distinction between the situation where a housing benefit was granted by a private person (without any multipliers) as compared to housing provided by a company or organization (with a multiplier). The actual multiplier was based on the cadastral value of the premises (depending on whether or not the cadastral value – before indexation – exceeded 745,00 Euro).
Belgian courts of law have on several occasions declared the distinction, made by the tax authorities not to be reasonable and objective. Consequently, they decided that the multipliers of 1,25 and 3,8 could not be applied and that the general formula for the valuation of a housing benefit must be applied (Article 18, §3, 2, first paragraph, RD / ITC 92).
On 7 December 2018 a new Royal Decree was issued. The old multipliers of 1,25 and 3,8 have been replaced by a single multiplier of 2. From 2019 onwards, the housing benefit will thus be calculated on the basis of the following formula:
cadastral revenue of the premises, increased with an annual indexation coefficient, multiplied by 100/60 (for furnished premises, the benefit is further increased by a factor of 5/3) and with the general multiplier of 2.
Example (for income year 2018 – tax year 2019)
Cadastral revenue 900,00 Euro.
Taxable benefit (i.e. the amount on which the tax is calculated at the normal progressive rates) for unfurnished housing: 900,00 x 1,7863 x 100/60 x 2 = 5.358,90 Euro.
If the house is furnished, the taxable basis is further increased by 5/3 to 8.931,50 Euro
We can observe that tax payers (especially those with premises with a cadastral value in excess of 745 Euro) have been riding in a fiscal rollercoaster during the past few years, with taxes on their housing first going sharply up (from 2012 onwards), then plunging down (based on case law) and now again moving upwards from 2019 onwards.
At least many tax payers will be happy with the new legislation, in those cases where the taxable benefit remains below the 2012 level and is below the actual cost of the premises.
Not all tax payers, however, will be happy with the new rules. In the first place those tax payers, who receive free housing from a private individual (not a company or organization) now see their taxes double (a sudden tax increase of 100%).
Also tax payers with premises with a low cadastral value (less than 745,00 Euro) will experience a significant increase (multiplier 1,25 moves up to multiplier 2 so their taxes go up with 62,50%).
Maybe these individuals will now start to challenge the tax rules. Their chances of success are not unreasonable in view of the fact that cadastral values of Belgian homes bear little correlation to the cost for renting or owning the property. Tax specialists question whether the cadastral revenue can ever be used in a way, which excludes discrimination and warn that all discussions may not yet finally be over.