Belgium adapts legislation to take account of personal and family circumstances

On 11 September 2015, the tax authorities published an addendum to Practice Note Ci.RH.331/575.420 (AOIF 8/2008) with respect to the granting of benefits linked to a taxpayer’s personal or family situation.

The addendum is issued in response to a reasoned opinion issued by the European Commission on 16 July. The Commission asked Belgium to adapt its rules on tax benefits connected to the personal or family situation of a taxpayer who receives income originating in Belgium and in another Member State.

Belgium had two months to notify the Commission how it will comply with EU law. The practice note came just in time.

The problem is that Belgium grants tax benefits linked to the personal or family situation of a taxpayer solely for income received in Belgium. If the taxpayer also receives income originating in another EU Member State, Belgium applies a tax rate corresponding to the percentage of the taxpayer’s total income accounted for by the domestic income. An additional tax reduction is only granted if the taxpayer’s personal or family situation has not been considered by the tax authorities of the other state.

The Commission found that the Belgian rules might constitute an obstacle to the free movement of persons and capital guaranteed under the Treaty on the Functioning of the European Union and the Agreement on the European Economic Area if Belgium does not grant the additional reduction if the other country in which the income originates offers the taxpayer the option of receiving the benefits, even if the taxpayer has not exercised that option.

Practice Note Ci.RH.331/575.420 (AOIF 8/2008) was issued following the decision of the Court of Justice of the European Union in re De Groot  (case C-385/00) dated December 12, 2002 with respect to the granting of benefits linked to the personal or family situation of a taxpayer.  The Commission objected to the fact that the practice note provided that the additional reduction cannot be granted “when the taxpayer could opt for a system which gave him the right to the same allowances as those granted to residents of the State in which the income arises, but has chosen a regime which did not involve the grant of these. In this respect, it was not relevant that the regime which he has chosen is not more advantageous for him. “

It is this exception that is now being dropped.

Author: Marc Quaghebeur

Marc Quaghebeur is a Belgian tax lawyer with Cabinet DAVID specialising in international tax issues and cross border estate planning. He is a member of the Brussels Bar and the Society of Trust and Estate Practitioners. He

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