Flanders reduces inheritance tax

In Belgium, gift tax and inheritance tax are regional taxes. That has not always been the case, some twenty-five years ago, the gift tax and the inheritance tax were a matter for the federal parliament.

The Flemish, Brussels and the Walloon parliaments have gradually changed the rules, starting with small changes to the inheritance tax rates to some more fundamental rules. Flanders took the lead in 2007 to exempt the family home of inheritance tax between husband and wife and between partners. Brussels followed in 2014 and since this year Wallonia gives the same exemption.

Starting from the same federal inheritance tax code, the three regions have made their own inheritance tax codes. Flanders even put the inheritance tax in a completely new Flemish Tax Code.

Last week, the Flemish government finalised its plans to adapt the inheritance tax to enter into force on 1 September together with the new inheritance rules.

For a surviving spouse or partner not much will change. The rates are the same, the family home is exempt but the first €50,000 in movables will be exempt. Practically speaking, this will be a reduction of the inheritance tax with €1,500 (3% of €50,000), but on the €10,000 above €50,000 the inheritance tax will be 9%.

€0

–    €50,000 3%

€50,000

–    €250,000 9% +  €1,500

Over €250,000

27% + €19,500

For children, there are some smallish reductions if they are under 21 and lose both parents. The first €75,000 would be exempt as well as their share in the family home.

What is new is that parents who inherit from a partner, parent or grandparent can pass part of their inheritance on to their children within the first year without any further gift tax or inherit tax. This is a technique called “generation skipping”, which is at present only possible if the parent refuses the inheritance in favour of their children who then pay inheritance tax.

For brothers and sisters, the rates will go down a bit with a lowest rate at 25% on the first €35,000 and a top rate of 55%

Before:

€0

–    €75,000 30%

€75,000

–    €125,000 55% + €22,500

Over €125,000

65% + €50,000
After:

€0

–    €35,000 25%

€35,000

–    €75,000 30% +   €8,750

Over €75,000

55% + €20,750

For all other heirs, the rate is a “group rate” calculated on what the whole group inherits. For them the rates will go down a bit with a lowest rate at 25% on the first €35,000 and a top rate of 55%

Before:

€0

–    €75,000 45%

€75,000

–    €125,000 55% + €33,750

Over €125,000

65% + €61,125
After:

€0

–    €35,000 25%

€35,000

–    €75,000 45% + €8,750

Over €75,000

55% + €26,750

This is not the major tax reform we had been promised, but rather a smallish reduction of the inheritance tax rates that does, however, offer some planning techniques.

 

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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