Reformed preferential tax regime for foreign executives

In this article, you will find an overview of the main changes on the basis of the draft text.

Background

An administrative circular letter was issued on 8 August 1983, with the aim of making Belgium more attractive for foreign investors, and to attract qualified personnel to come to Belgium. The circular offers a favourable tax regime to foreign executives who are temporary employed in Belgium.

The tax regime, which had not been amended since 1983, has come under pressure due to its lack of a legal basis and its complexity, among other things. The aim is to replace the regime by a new regime that is in line with today’s legal and fiscal needs.

Main amendments

Conditions

In order to be eligible for the new expat regime, any incoming researchers (employees only) or taxpayers (employees or managers/directors) must meet the following conditions:

• The individual must be directly recruited from abroad, or be seconded or transferred from a foreign company within an international group. [Researchers can be recruited directly from abroad without the requirement that the employer must be an international group (non-profit or otherwise).]
• The following cumulative conditions must be met for a period of 60 months prior to the employment in Belgium:
  • the individual must live at least 150 kilometres away from the Belgian border;
  • the individual must not already be regarded as a Belgian resident. This condition already exists under the current regime;
  • the individual must not already be subject to Belgian taxes on a professional income in Belgium.
• In order to qualify for the new scheme, a gross salary exceeding EUR 75,000 is required. This amount is prorated if there was no employment for a full year. No minimum salary is required under the current scheme, but the tax authorities are internally applying a minimum of +/- EUR 43,000 gross remuneration on an annual basis. No minimum remuneration is required for researchers, but they must be able to present a qualifying Master’s degree, or the equivalent of 10 years of professional experience (exhaustive list of knowledge fields).

From now on, people with the Belgian nationality (but who are not Belgian residents for tax purposes) will also be eligible for the preferential tax regime, where this was not possible previously. This discrimination has now been eliminated.

Benefits

• The employer/company has the possibility of paying up to 30% of the annual taxable gross income as a tax-free reimbursement of recurring expenses (a payment on top of the gross salary). This 30% is limited to a maximum amount of EUR 90,000. This means that no tax benefits will apply for a salary of more than EUR 300,000 (30% of 300,000 = 90,000). Under the current scheme, a tax-free amount of up to EUR 11,250 or EUR 29,750 can be paid, and, on top of this, an exemption is granted for all the days worked abroad;
• In addition, under certain conditions, the expenses for moving to Belgium, the furnishing of the accommodation and the school costs of the children can still be reimbursed by the employer free of tax;
• The social security position is also expected to be in line with this tax exemption;
• These benefits can be granted for a period of up to 5 years, with a potential extension of 3 years. There was previously no maximum period;
• It is possible to continue the tax regime if there is a change of employer.

Belgian residency

Under the new regime, the individual will be considered as a Belgian resident, whereas, under the current regime, the individual is considered as a non-resident, resulting in different obligations and formalities. In any case, the individual may still qualify as a non-resident if he/she remains tax-resident in the country of origin, provided that he/she can present a certificate of residence.

The purpose of this is to avoid “tax statelessness”, as most expats are no longer tax-resident in their country when they come to Belgium with their family. In addition, as Belgian tax residents, they can appeal to the double taxation treaties Belgium has entered into, in order to avoid potential double taxation.

Procedure

• The application procedure for the new regime will be shortened from 6 months following the month of employment to 3 months from the date of employment;
• Employers are obliged to provide an annual list of their employees who benefit from the new regime by 31 January of the following year at the latest.

Transitional measures

The transitional measures are rather complex, and opt-in/opt-out mechanisms are provided; we therefore recommend reviewing these on a case-by-case basis for each individual.

• In principle, the new regime applies to expats who move to Belgium as from 1 January 2022.
• Individuals who have currently already been benefiting from the special status for more than 5 years, and individuals who have been benefiting from the status for less than 5 years but who would not meet the conditions of the new regime will not, in principle, immediately lose the benefits of the current (‘old’) regime from 1 January 2022. A transition period of 2 years applies to them, which means that they will continue to enjoy the benefits of the old regime until 31 December 2023. From 1 January 2024, however, they will be considered as Belgian tax residents, unless they are still tax-resident in another country.
• Individuals who have enjoyed the special status for less than 5 years have the choice of (1) opting for the new regime for the remaining period of the 5 years (plus 3 years), or (2) not opting for the new regime and thereby remaining subject to the current regime until 31 December 2023 (provided that they continue to meet all the current conditions).

Please note that the employer must apply for these transitional measures for each individual, informing the Belgian tax administration whether the opt-in or the opt-out regulation was selected, by no later than 31 July 2022. This decision is final.