Your Belgian personal income tax return
As a Belgian resident, you are required to state your overseas income in your Belgian personal income tax return. If you own property overseas, you should look at the double taxation agreement with Belgium (if there is one) to see which country that property is taxable in.
In most cases, real property is taxable in the country in which it is located. You therefore have to pay overseas taxes on your property. However, there is still a declaration requirement in Belgium. You must state the gross rental value of the property under codes 1130/2130 in your personal income tax return, and (in most cases) you can deduct the associated overseas taxes from this amount. This rental value is included in your personal income tax return and is then exempt under the tax progression system. This means that 60% of the rental value of the property will be taken into account when determining the progressive tax rate which will apply to your income that is taxable in Belgium. This may have the effect of moving you into a higher tax bracket.
The concept of “rental value”
In recent years, there has been a lot of confusion around how to determine the rental value of overseas property which is not rented out.
The concept of “rental value” can be defined as follows:
"The rental value represents the average annual gross rent which the owner would receive over the taxable period if the property were rented out, according to the practices of the country and the location of the property, in the form of an actual rent amount, or of the charges paid by the tenant for and on behalf of the landlord, or of goods or services supplied by the tenant for the benefit and on behalf of the landlord.”
In its recent circular of 29 June 2016, the authorities provided some clarification for the long-standing legal uncertainty.
In this new circular, the Belgian tax authorities accepted that the rental value of property located abroad can be determined on the basis of a value established or expressly approved by a foreign government.
This value may be:
- The estimated gross rent for that property which is taken into consideration when establishing the tax rate;
- A fixed estimate gross rent which is taken into consideration when establishing the tax rate (e.g. a gross rent value set on the basis of reference parcels, etc.);
- The taxable income for that property which is taken into consideration in the country in question when calculating income tax.
This value may be applied by the taxpayer when determining his or her overseas property income, but this is simply an option, not a requirement. The provisions of this circular are immediately applicable to all stages of the procedure (so they also apply to any pending disputes in this area).
In practice (France & Spain): What do I now have to include in my Belgian tax return?
Below, we give two practical examples to show precisely what you must state in your personal income tax return if you own real property in France or Spain.
- If you own property in France
If you’re Belgian and you own property in France, henceforth it is sufficient to use the “valeur locative brute” (gross rental value) as the basis for calculating your gross rental value for Belgian purposes. In this respect, we refer to a decision issued by the Antwerp Court of Appeal on 2 June 2015 as well as the recent circular of 29 June 2016. The “valeur locative brute” is a standard value set by the French government. You can find this value on the following assessment notices:
- Avis d’imposition taxe foncière (Property tax assessment notice)
The property tax is calculated on the basis of the cadastral value of the property, minus a fixed amount for expenses of 50% for built property and 20% for unbuilt property. This tax is payable by the owner of the property and can be offset against the “valeur locative brute”. To calculate the “valeur locative brute”, the base amount specified on the assessment notice should be multiplied by a factor of 2 (for built property) or 1.25 (for unbuilt property).
- Avis d’imposition taxe d’habitation (Housing tax assessment notice)
The housing tax is calculated on the basis of the cadastral value of the property, and is payable by the user of the property. Since this tax is payable by the user of the property and not automatically by the owner, it cannot be offset against the “valeur locative brute”.
- Avis d’imposition taxe foncière (Property tax assessment notice)
Payable by the owner
Fixed amount for expenses of 50% or 20%
Base amount multiplied by a factor of 2 or 1.25 to obtain the “valeur locative brute”
Can be offset against the “valeur locative brute”
Payable by the user
No fixed amount for expenses
"Valeur locative brute” specified on the assessment notice
Cannot be offset against the “valeur locative brute”
- If you own property in Spain
Based on the above circular, we have been able to establish that the Belgian tax authorities will accept that the gross rental value of your Spanish real property can be determined according to the Spanish “Valor Cadastrale” (cadastral value). The gross rental value amounts to 2% of the “Valor Cadastrale” or 1.1% if the cadastral value was set after 1994. The following taxes can also be offset against the gross rental value:
- Impuesto sobre bienes immeubles (IBI): municipal land tax; calculated from the cadastral value of your property.
- Impuesto sobre la renta de los no residentes: national tax on real property.
This value should be indicated under codes 1130/2130 in your Belgian personal income tax return and is then exempt under the tax progression system.
Brexit – what will happen to your property in the United Kingdom?
The recent Brexit decision will mean a big shake-up for all of Europe. If as a Belgian resident (or non-resident) you own property in the United Kingdom and have a current loan for that property, there is a chance that that loan will no longer be eligible for a regional or federal tax rebate in your Belgian personal income tax return or non-resident tax return (but you will still be able to claim the ordinary interest deduction). One of the requirements is that the loan must be taken out in order to build and/or renovate a home in the European Economic Area (EEA). If the United Kingdom leaves the EEA, this will most likely have consequences for any property you own there. We can further inform you that, in principle, the double taxation agreement between Belgium and the United Kingdom should remain in place. Your property will therefore still be taxable in the United Kingdom and be exempt from tax in Belgium under the tax progression system. We will await further Brexit developments and keep you informed. Note that you will still be able to claim the ordinary interest deduction for any loans you still have for your overseas property.
Lastly, you should be aware that governments these days gladly exchange information. So we strongly recommend that you meet your declaration requirements to avoid fines and/or increased taxes. You can contact us at any time if you have any questions about the tax treatment of your overseas property.