With the Act of 15 July 2026, the federal government introduced a major reform of personal income tax. The reform primarily aims to reduce the tax burden on labour, make work more attractive and counter the trend towards operating through a company. At the same time, a number of existing tax benefits are being phased out or reformed.
The Good: measures benefiting taxpayers
Higher tax-free allowance (from assessment year 2027)
The tax-free allowance will gradually increase from approximately €10,910 to €15,600 by income year 2030. The principle behind this is simple: a larger portion of professional income will be fully exempt from personal income tax, allowing taxpayers to retain a higher net salary.
Strengthening of the tax work bonus (from assessment year 2027)
The tax work bonus will be strengthened, with a higher percentage and a higher maximum amount, for employees on low wages. The government aims to further reduce the so-called ‘unemployment trap’. For employees at the lower end of the wage scale, this will increase the difference between working and not working.
More favourable treatment of overtime (applicable to overtime worked from April 2026)
The number of overtime hours benefiting from favourable tax treatment will increase significantly. Voluntary overtime without overtime pay will also qualify for a tax exemption more often. Employees who regularly work additional hours will benefit directly from this measure.
New entrepreneur deduction (from assessment year 2028)
Self-employed individuals operating as sole proprietors will receive a new entrepreneur deduction of 10% of their taxable profit, albeit subject to very limited caps. The government’s aim is to make entrepreneurship outside a company structure more attractive from a tax perspective.
Copyright regime for software (on income from 1 January 2026)
Computer programs will once again fall within the scope of the copyright regime. For IT professionals and software developers, this could potentially mean the return of a favourable tax regime. For other professional groups, the previously reformed regime will continue to apply.
Abolition of advance tax payments (from income year 2026)
Self-employed individuals will no longer be required to make advance tax payments and will no longer be penalised if they do not do so: there will no longer be a tax increase. Those who do make advance payments will be entitled to a tax credit. Company directors will, however, still be required to make advance tax payments.
Favourable additional earnings for pensioners (from income year 2027)
This measure applies to taxpayers who wish to remain active as employees and who have either completed a full 45-year career or reached the statutory retirement age. Their salary will be taxed as miscellaneous income at a rate of 33%. This favourable measure can therefore apply when a flexi-job is not possible.
The Bad: measures to the disadvantage of taxpayers
Gradual abolition of the marital quotient (from assessment year 2027)
The marital quotient is among the biggest losers of this reform. For active taxpayers, the benefit will be approximately halved over the course of a few years. For pensioners, the benefit will be phased out over a period of twenty years.
Abolition or limitation of tax reductions for replacement income (from assessment year 2027)
The increase in the tax-free allowance will be partly financed by phasing out various tax reductions. Unemployment benefits will be affected the most. The specific tax reduction will be gradually reduced and will eventually disappear entirely. Certain benefits for pension income will also be reduced.
Limitation of lump-sum benefits in kind (from assessment year 2027)
Perhaps the most significant measure for employers is the introduction of a 20% limit on benefits in kind valued on a lump-sum basis. If companies structure too large a proportion of the remuneration package through benefits in kind rather than cash salary, sanctions may apply. This could have a significant impact on cafeteria plans and alternative forms of remuneration.
Recent measures from previous legislation
The measures below are not part of the current reform but nevertheless have a significant impact on the tax situation of many individual taxpayers:
- The federal interest deduction and federal housing bonus for loans taken out for a property other than the taxpayer’s own home, such as a second home or investment property, have been completely abolished for both new and existing loans (from assessment year 2027).
- Service vouchers no longer provide a personal income tax benefit for taxpayers residing in Brussels (purchases from 2026) and Flanders (purchases from 2025).
- The tax deductibility of maintenance payments decreased from 80% to 70% and will be further reduced to 50% (from assessment year 2026).
- The tax benefit for donations to recognised charities decreased from 45% to 30% (from assessment year 2026).
- The tax reductions for the remuneration of domestic staff and for legal expenses insurance have been abolished (from assessment year 2026).
- The additional flat-rate expense allowance for long-distance commuting has been abolished (from assessment year 2026).
- The much-discussed new capital gains tax on financial assets entered into force retroactively on 1 January 2026.
The Ugly: measures whose impact depends on the specific situation
Reform of the increased tax-free allowance for dependent children (from assessment year 2027)
The allowances for dependent children will be reformed with the aim of treating each child more equally for tax purposes. Families with one or two children will generally benefit. Larger families, on the other hand, may face a less favourable outcome because certain existing allowances will be frozen or will increase at a slower rate. The ultimate impact will therefore depend heavily on the composition of the household.
Reduction of the special social security contribution (on income from 1 January 2028)
In political debates, this contribution has often been announced as ‘abolished’, but today the special social security contribution (SSSC) is still very much in place.
From income year 2028, the special social security contribution will no longer be calculated at household level but on an individual basis. The maximum amount will be halved from approximately €731 per household to €365.64 per person, meaning that single people with higher incomes in particular may benefit. For many dual-income households, there will be no impact. There does not appear to be a disadvantage, but the benefit, or lack of impact, will depend heavily on each specific situation.
New ‘de minimis rule’ for the normal management of private assets (from assessment year 2027)
The law introduces a statutory safe harbour for occasional income from private assets, up to an indexed amount of €2,000 for assessment year 2027. For some taxpayers, this provides legal certainty. At the same time, it remains unclear exactly where the boundary lies between the normal management of private assets and a taxable activity. For some taxpayers, the measure will therefore provide protection. For others with income above the threshold, there may be discussions with the tax authorities.
Conclusion
The personal income tax reform shifts tax benefits from inactive to active income, from household-based to individual tax benefits and from alternative forms of remuneration to traditional salary. For employees on low or middle incomes, the outcome is generally positive. For others, the picture is not always as favourable.
In short: behind the political slogan ‘work should pay more’ lies a reform that can be good, bad and ugly at the same time, depending on who is affected.
How can Moore help you?
Our Global Mobility specialists within Tax & Legal closely monitor the personal income tax reform. We are happy to help you assess the impact of these measures on your personal situation, your remuneration policy or your existing tax optimisation strategies.
Together, we will examine the key considerations and opportunities this new legislation may bring for you.