Constitutional Court gives foreign (inheritance) tax credit

In a decision of 3 June 2021, the Constitutional Court ordered a major change of the Belgian inheritance tax code, or rather the three regional inheritance tax codes.

The Court ruled that the inheritance tax legislation in all three regions, is discriminatory, where it grants a credit for overseas inheritance tax on foreign real property, but not for overseas inheritance tax levied on movable assets situated in another country.

Inheritance tax in Belgium

Belgian inheritance tax is due on the worldwide estate of a Belgian resident, i.e. a deceased person who had his tax domicile in Belgium. When a non-resident dies, Belgium also charges inheritance tax but only on the real property he had in Belgium, and so do most other countries.

Many countries like Sweden, Canada, Australia, Portugal have abolished inheritance tax or have large exemptions (like Italy, Spain, …).

When a deceased Belgian resident leaves real property in another country that charges inheritance tax, the other state will charge inheritance tax on that property.

However, some countries, like Spain, the UK and the US charge inheritance tax on movables held by non-domiciled individuals and that results in double inheritance tax.

… and foreign tax credit

To mitigate double inheritance tax, Belgian law, as it is currently applied by the three regions, will grant a foreign tax credit but only for inheritance tax paid on overseas real property. The heirs can then credit the inheritance tax they have paid in the other state against the inheritance tax due in Belgium.

E.g. If the deceased owned a house in the other state, the inheritance tax there may be €30,000. If the Belgian inheritance tax on that property is €50,000, the heirs can deduct (“credit”) the €30,000. They pay €50,000 in total: €30,000 abroad and €20,000 in Belgium.

They must have paid the foreign inheritance tax; they have to provide proof of payment of the foreign tax with a certified copy of the inheritance tax return and the calculation of the inheritance tax.

This foreign tax credit does not exist for overseas inheritance tax on movables, such as shares and bonds. Not many countries charge inheritance tax but Spain, the UK and the US charge on assets that are located or deemed – by law – to be located in the country. This is the situs.

E.g. if the deceased had been working for a US company and had acquired stocks of the company, these are deemed to be US situs and liable to the Federal Estate Tax at a rate of 40% over $60,000 ($120,000 for a couple).

Until now, the Federal Estate Tax could not be set off against the Belgian inheritance tax. Nevertheless, the tax administration allowed a deduction of the foreign tax from the taxable base (the value of the shares) but only if the overseas inheritance tax was levied on the estate as a whole (an estate tax) rather than on the heirs personally (an inheritance tax). The UK inheritance tax, the Canadian Estate Tax and the US Federal Estate Tax are all estate taxes, the Belgian inheritance tax is an inheritance tax. It is calculated per heir.

E.g. if the stocks are worth €500,000, and the Federal Estate Tax is 40%, the Belgian inheritance tax is (was) calculated on €300,000 so that the total inheritance tax in the US and in Belgium could be as high as 58%.

Belgium has concluded two inheritance tax treaties, one with Sweden, dating back to 1956 and one with France from 1959. An estate tax treaty with the US has been signed in 1954, but it was never ratified by Belgium. The treaty with Sweden has become irrelevant as Sweden has abolished inheritance and gift tax with effect from 1 January 2005. In the treaty with France, the foreign tax credit has been extended to certain categories of movables. Furthermore, each state (even the state of situs of the assets) keeps the right to tax with reservation of progression, but the state of residence must give a tax credit for the inheritance tax paid in the state of the situs.

Background

The plaintiffs are the widow and the children of Mr Boer, a Belgian resident who died in Spain in 2007 at a time when the inheritance tax there was much higher than now. Most autonomous communities nowadays grant large tax exemptions and tax reductions of up to 99% for spouses and descendants.

The heirs reported the whole of his estate, with Belgian and Spanish assets, in his Belgian inheritance tax return. They also filed an inheritance tax return in Spain for his Spanish estate. Under Spanish law, inheritance tax is due on all assets that are physically or legally located on the Spanish territory, in this case, a house and the Spanish bank accounts.

The heirs requested a tax credit for the Spanish inheritance tax on the house and for the Spanish inheritance tax on the bank accounts.

For lack of a law granting the foreign tax credit, the Belgian and later the Flemish tax authorities refused.

After years of litigation, the Supreme Court was finally persuaded to refer to the Constitutional Court.

Is it not against the principles of equality and non-discrimination to give a foreign tax credit for overseas real property, but to refuse it for overseas movables, such as bank accounts?

The Constitutional Court

In its decision of 3 June 2021, the Constitutional Court said that it was. There is no reason to discriminate between the inheritance tax on overseas real estate assets and the inheritance tax on movable assets in another country.

The Court went one step further and as good as ordered the judge to give the heirs the foreign tax credit for the inheritance tax on the bank accounts, without waiting for the regional legislators to change the law and to give a foreign tax credit for the inheritance tax on movable property paid abroad.

The Flemish government had anticipated the setback and asked the Court to limit the effect of its decision to the future, but the court refused.

(the legislation concerned was the Flemish inheritance tax) to be allowed to maintain the effects of Article 17 of the Inheritance Tax Code for the past.

And now?

The good news is that the Finance Minister of the Flemish Region has already said that he is not in favour of solving the discrimination by completely cancelling all foreign tax credit both for overseas movables and for overseas real property. 

This means that heirs who have paid too much inheritance tax because they were refused or did not request the foreign tax credit on overseas bank accounts and other assets, can claim the tax back but they must do that within two years after the tax has been paid.

The minister has given his administration instructions to examine all the consequences of the decision, but he expects that the impact will be rather limited. He thinks that it is unusual for countries to charge inheritance tax on movables owned by non-residents (like Spain) and he assumes that the value of movables held abroad is usually less than the value of real property.

Pending the intervention of the regional legislators in order to bring their legal provisions into line with the ruling of the Constitutional Court (by providing for a reduction of the inheritance tax also for movable property subject to inheritance tax abroad), taxpayers who have been confronted with a case of double taxation on movable property held abroad are invited to apply for a reduction of the Belgian inheritance tax to the competent tax collector (knowing that the text of article 17 of the Code of inheritance tax limits the refund of inheritance tax to a period of two years from the date of payment of the tax).

How do you tax overseas real property …

… without infringing European law?

After the European Court of Justice ordered Belgium to change its rules on the taxation of overseas properties and to pay a penalty of €2 million and a daily payment of €7,500 (for prior coverage see here). Finance Minister Vincent Van Peteghem rolled out an ambitious plan to set up register of all properties held by Belgian residents all over the world and give them a ‘cadastral value’.

That allows him to tax all overseas properties in exactly the same way as Belgian properties, but without a cadastral revenue equivalent to the Belgian cadastral revenue, that would be hard to implement.

Each property in Belgium is registered with the land register (‘cadastre’), where it gets a value for tax purposes, the `cadastral revenue’. Historically, the cadastral revenue is the theoretical rental value for the property, but (generally speaking) it is the theoretical annual rent the property could have been let for on the open market on 1 January 1975. The idea was that this would be reviewed every ten years, property by property. In the nineties, the legislator decided that it was easier to link the cadastral revenue to the consumer price index.

But how do you determine a cadastral revenue for overseas properties?

The tax authorities have sent out 170,000 forms last week to determine the cadastral revenue of overseas real estate.

The new tax regime comes after Belgium has been condemned several times by the European Court of Justice. The problem was the unequal tax treatment of properties in Belgium (based on the cadastral revenue) and properties abroad (based on the rent or the rental value). To eliminate the discrimination, overseas real property will also be taxed based on the cadastral revenue. (see “New Tax Rules for Overseas Properties”).

I own a property abroad

If you already own overseas real property, you must report the rent or rental value in your annual tax return. With that information, the tax authorities sent out 170,000 forms. If you bought a property abroad in 2020, you will declare it for the first time in this year’s tax return. You will then receive the form in September or October.

If you have activated your eBox, the government’s electronic mailbox, you will receive the digital form there. Otherwise, you will receive a paper form in the mail. The return can be submitted online via MyMinfin or on paper (Dutch/French). You can scan and send it to foreigncad@minfin.fed.be or you can send it by mail to the address on the form.   This must be done by 31 December 2021 at the latest. If you do not receive a form, you will have to file a declaration spontaneously.

Who should file a return?

Everyone who owns real property outside Belgium must file the return, as well as anyone who has usufruct, a long lease (‘emphythéose’), a building lease (‘droit de superficie’). What is remarkable is that owners of bare ownership also have to fill in the form. There is no legal basis for this and it is not relevant because they do not have to declare any income in their tax return.

The declaration is individual. Partners who are joint owners must each file their own return. And if you have several properties abroad, you have to submit a separate return for each of them.

What information does the taxman want?

The form first asks for the type of property (villa, flat, land…) and the address. Then you have to provide information about your share in the property. If you and your partner own a foreign property and you both have to fill in ‘1/2’. Other ownership relations are also possible. If you have half in full ownership and a quarter in usufruct, you write ‘3/4’.

In the same box, you must tick whether you have acquired the property before or after 1 January 2021. This is not required by law, and it can cause problems for taxpayers who have not correctly declared their overseas real estate in the past.

On what value is the cadastral revenue calculated?

The cadastral revenue is not an actual but a theoretical income: the average normal rental income at a reference date, which is still 1 January 1975.

If you cannot provide the average rental income on 1 January 1975, the tax authorities reconstruct the 1975 sales value based on the current sales value. This is the price that can be obtained under normal market conditions for a voluntary sale, excluding additional costs such as taxes. You can estimate the current normal sales value, but for complex properties, it is advisable to call in an expert. There are no rules regarding the criteria that the expert must meet, and there is no list of recognised surveyors per country or region.

The tax authorities will then calculate the normal sales value on 1 January 1975 by dividing the value today by a correction factor of 15.018. A house worth €450,000 now would have been €450,000 / 15.018 = €29,964 in 1975; the cadastral revenue is 5.3% or €1,588.

If there is no recent expert valuation, you can use the purchase price and the costs of any renovation or construction.  For a property bought for €200.000 in 2009, the cadastral revenue is calculated as 5.3% of 200,000 / 12.212 = €434. The coefficient for 1975-2021 can be found in the practice note (at 2.2.1).

For land, the new scheme assumes a standard value of 2 euros per hectare.

I am building or renovating, but the work is not yet finished. What do I have to declare?

At present, you report the value of the property today, before the work is carried out. The cadastral revenue is then determined by the Belgian tax authorities. When the works are completed, you must fill in a specific return and a new cadastral revenue will be determined.

Refurbishments and renovations can lead to a revaluation of the cadastral revenue. This goes up after the installation of an extra bathroom, the conversion of an attic into a bedroom or the addition of a swimming pool. Traditional renovations that increase the living area, such as adding a veranda, also increase the cadastral revenue.

What if I do not agree?

As soon as the cadastral revenue has been determined, you will be informed by registered letter. If you do not agree, you have two months to file an objection.

What if I bought or am buying foreign real estate in 2021?

If you bought an overseas property or if you are in the process of buying one, you must submit a return declaration within four months after the purchase. If you bought a property in the first half of 2021, you could already report the purchase by e-mail or by mail. If you did, you will receive a form to report the property.

Now, you can report a new purchase online via MyMinfin or with the form above.. You must also report when you sell or inherit an overseas property.

Tax regime

The cadastral revenue will be used to determine the taxable base of all properties abroad, whether they are a second residence (and not let out) or let out to private individuals.

The taxpayer reports the cadastral revenue. The tax is calculated on the cadastral revenue x 1.4 c 1.863 (for 2021, 1.8492 for 2020, …).

If the tenant is a company or an individual who uses it for a business, the owner must declare the rent he receives. He cannot deduct any expenses for repairs or maintenance, but 40% is deducted automatically to cover such expense (however, that 40% deduction is limited to 3.05 times the cadastral revenue).

Until this year, one could still deduct overseas taxes, but that is not possible anymore. 

In practice, the rental income from the overseas property is not taxed, as Belgium must exempt that rental income under the double tax treaties Belgium has signed with more than 90 countries. However, the Belgian tax authorities can take account of that income to determine the tax rate on other taxable income.

Belgium gives treaty relief by way of “exemption with progression”. This means that Belgium adds the income from the property to the taxpayer’s other taxable income to calculate the average tax rate. Belgium applies the tax rate that applies to the income that is taxable in Belgium but exempts the overseas income. 

This pushes the Belgian remuneration or pension in the higher tax brackets. The impact is not the same for all taxpayers, as it depends on the amount of other income; taxpayers without taxable income will not feel the effect.

Confused UK retirees …

The Belgian tax authorities are emphasising that it has nothing to do with Brexit, but this year, they have suddenly decided to tax Belgian state pensions paid to British retirees living in the UK.

The problem is the double tax treaty between Belgium and the United Kingdom and the transitional rule for older retirees.

What is it all about?

If you live in one country and receive income from another, like a pension, you risk being taxed in both countries, by your own tax administration at home and by the tax administration of the country that pays out the pension.  At home they want to tax your worldwide income (that is any income irrespective of where it comes from) and over there they want to tax the income that is paid out.

This means that pensions can be taxed twice, a double tax treaty is important. A Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital determines which country can tax the income and what the other must do to avoid double taxation (refrain from taxing it, or give a tax credit).

For pensions, most double tax treaties say that the tax is due only in the country where you live; the country that pays the pension must not tax it.

That used to be the general rule in the 1987 treaty between Belgium and the United Kingdom.

Belgium is one of the increasing number of countries that want to tax pensions when they have allowed tax relief on contributions from which the pensions are paid. There is a logic in that. The Belgian taxman lost money when the retiree was working here and built up pension rights with money after tax. And when the pension is paid out, it is taxed in the United Kingdom. That works both ways for pensions built up in the UK.

When the two governments signed a protocol in 2009 to change certain rules in the 1987 double tax treaty, they agreed to invert the rule. This is the rule in article 18 (a).

Subject to the provisions of Article 19,
(a) pensions and other similar remuneration arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in the first-mentioned State;

Nevertheless, this rule has an exception in Article 18 (b) :

(b) however, where pensions and other similar remuneration under a pension scheme were first credited or paid before 1 January in the calendar year next following that in which the first Protocol to this Convention entered into force, all payments under that scheme shall be taxable only in the other State.

The rule is taxation in the country where the pension is paid, the exception is that pensions paid before 1 January 2013 continue to be taxed in the state of the retirees’ residence. British pensioners pay British income tax on Belgian pensions, Belgian retirees pay Belgian income tax on UK pensions.

What is the reason for this exception?

That is obvious. The negotiators did not want to inconvenience older retirees for whom this new rule would be an upheaval.

They were used to the old rules :

  • UK resident retirees declared their Belgian pensions in the UK only;
  • Belgian resident retirees declared their UK pensions in Belgium only.

Under the new rules, retirees would have to take account of the tax rules in both countries ;

  • for UK resident retirees, the Belgian Federal Pensions Office withholds tax at source on the state pension, but they have to file an income tax return in Belgian as a non-resident, and they may have to pay some more tax.
    At home, they would have to self-assess the pension and claim a credit for the Belgian tax against the tax due to HMRC.
  • for Belgian resident retirees, DWP (the Department for Work and Pensions) does not deduct tax under PAYE when making payments of the state pension. If HMRC believe that there is tax payable then they should issue you with a Self Assessment tax return or, for the 2016/17 tax year onwards, they should issue a Simple Assessment of your tax bill.
    At home, they would have to report their British state pension but they have to claim exemption in their tax return. Belgian gives treaty relief by way of “exemption with progression”. This means that Belgium exempts the overseas income but that the Belgian tax authorities will take account of this exempted income to determine the tax rate that applies to any income that is taxable in Belgium. In effect, this pushes the Belgian income in the higher tax brackets.

What is more, they would pay some communal tax (around 6-8%) on the theoretical income tax on their UK state pensions.

It is to avoid upsetting older retirees, in their 70ies, 80ies and 90ies that the Belgian and British negotiators introduced a transitory rule. This is the exception in Article 18 (b).  Pensioners who had already been drawing their pension before the Protocol entered into force, that is 1 January 2013, will continue to be taxed at home only. They are not treated better or worse than before, and it is a transitional measure, every year there are less and less of them.

For State Pensions?

That this exception covered state pensions made sense because there are far more British retirees who receive state pensions than private pensions. State pensions are generally smaller than private pensions, in particular if they are paid out for a stint of a couple of years in Belgium.  Private pensions paid from Belgium can be substantial after a long career in the low countries. Moreover, there are not that many Belgian private pensions that pay annuities, as pension schemes are geared to be redeemed upon retirement with a favourable tax regime of 10%.

In Belgium, the government explained that this was the case for state pensions and private pensions paid in respect of previous employment. It was not the case, however, for pensions paid to public servants, for pensions that were not paid in respect of previous employment (e.g. pensions for self-employed pensions) or for life annuities built up directly from capital accumulated outside an employment-related pension scheme.

The treaty was explained in the same way in the Legislation Committee in the Commons.  

Both countries have consequently applied this rule. The Belgian Federal Pension Office did not withhold social security or tax on Belgian pre 2013 state pensions and the taxman merrily collected the tax on British pre-2013 state pensions. HMRC did the same; they taxed Belgian pre-2013 state pensions received by British residents and they did not tax British pre 2013 state pensions paid to Belgians at source.

Unfortunately, the officials who negotiated the Protocol in 2009 have retired and their successors have no memory of this agreement. 

A new interpretation in Brussels

Then came 2020, when an official on the Belgian side, suddenly wondered if they had not read the text of Article 18 (b) wrong from the start.

They had always read “pensions and other similar remuneration under a pension scheme” as meaning (1) “pensions” as in state pensions and (2) “other similar remuneration under a pension scheme” as in private pensions for employees.

Now, if they read the text of Article 18(b) quickly and lobbed the two together as “pensions and other similar remuneration under a pension scheme”, only private pensions would benefit from the transitory rule, be they (i) “pensions under a pension scheme” or (ii) “other similar remuneration under a pension scheme”.Thatwould mean that state pensions should always have been liable to tax in the state that paid the state pension.

The Federal Pensions Office was alerted and told that they had to deduct tax at source from state pensions paid to British retirees. Instructions were given to tax officials dealing with British retirees. These retirees had already wondered why they suddenly received tax returns. At the same time the Pensions Office told them wrongly that they would have to start paying Belgian social security on their state pensions.

Panic and confusion all over.

The tax office went after retirees who had not filed tax returns for their Belgian state pensions and when asked if their pensions were liable to tax in Belgium, they initially even told them that pre-2013 state pensions were not liable to tax in Belgium. However, when the new instructions trickled down, they had to change their tune and request payment of the tax.

The UK retirees could not understand what triggered the change of the rule and they expressed their discontent on HMRC’s community forum where HMRC told them that pre-2013 pensions were liable to tax in the UK only.

The Belgian tax authorities maintained their position and sent out letters to distressed retirees telling them that they would be receiving a tax bill and that they would have to pay the Belgian tax. Apart from that, there was no problem, HMRC would just pay back the taxes they paid in the United Kingdom. All they had to do was start the Mutual Agreement Procedure of Article 25 of the double tax treaty.

Unfortunately, the answer is not that straightforward.

There is indeed a Mutual Agreement Procedure in Article 25 : when a taxpayer finds that he will pay tax that he should not pay under the double tax treaty, he may present his case the to competent authority of his own state of residence. British retirees must contact the department in HMRC that deals with MAP procedures (within three years).

HMRC will then contact the international department of the Belgian tax authorities and they will “endeavour to resolve the case by mutual agreement” “with a view to the avoidance of the taxation that is not in accordance with the Convention”. If they reach an agreement, both tax administrations will implement it “notwithstanding any time limits in the domestic law of the Contracting States”.

In other words, they have to find an agreement as to which tax administration can tax, and the other will have to reimburse the taxes.

That sounds fair, but as long as there is no agreement, the Belgian tax authorities will continue to send out tax bills. They have no alternative. If they don’t send out the tax bills in time, the tax is not due, and retirees may end up paying tax in neither country. And the MAP procedure can take years.

What are your options?

You can pay the Belgian tax, and wait for HMRC to pay the UK tax back, but it is unlikely that that will happen at the same time.

The best course of action is :

  1. Tell the Belgian tax authorities that you do not agree with them, that tax is due in the UK only, and that you start the MAP procedure with HMRC.
  2. Contact HMRC to start the Mutual Agreement Procedure egging HMRC to talk to the Belgian tax administration.
  3. Wait for the tax bill and appeal it (file a reclamation). That will be explained on the tax bill : you six months. It is important that you ask the Conseiller Général to instruct the tax collection office not to collect the tax. If you have not agreed with the tax, the entire tax is contested, and it cannot be collected.
    If you file an income tax return or if you agree with their figures, the tax or part of the tax is not contested and it can be collected, e.g. by withholding it from your Belgian State pension.
  4. Repeat every year.

In the best outcome, you will not pay tax in Belgium but in the United Kingdom, no harm done. In the worst case, tax will be due in Belgium and you can pay that off with the tax HMRC will pay you back.

You just have to keep in mind that Belgium charges 4% interest per year for late payment, even upon appeal. If you have the money to pay the tax, you will receive interest at a paltry 2%. One rule for the taxman, another for the taxpayer …

Taxes in Corona Times

Covid-19 has changed certain rules and habits.

You cannot visit the tax office to get help to complete your tax return, that has to be done over the phone (see Help!?).

You may have been forced to work from home and your employer could pay you a tax-free allowance of €126.94 for working at home, plus €20 (for the use of your own pc) and €20 for the use of your internet connection at home.

If you have been furloughed, you risk having a bad surprise. The tax authorities have withheld tax at source on your unemployment benefit at 15%; you risk having a big tax bill.

Self-employed workers could request a one-year deferral of the payment of their social security contributions for the first two quarters of 2020. They could also request a reduction of the quarterly social security contributions if they think that they will be earning substantially less.  However, deferral does not mean waiver; the social security contributions will have to be paid.

Self-employed will have less expenses, no restaurants means no restaurant bills and a deferral of social security contributions means that they cannot be deducted.

Your Tax Return :

2021 Tax Return: Appeal the Tax Bill

How and where you do that is explained on page 2 of your tax bill. You have to send a letter to the address in the middle of the page within six months after you receive the tax bill. That means the letter must arrive with the tax authorities within six months plus three working days from the date the tax assessment was sent out. That is the date on the tax bill.

The tax authorities say they accept an appeal by fax or by email, but for the moment, I suggest you stick to pen and paper, scan it and send it by email and by ordinary mail. Preferably send the letter by registered mail so that you can prove the date. If you have waited until the last day, you can always bring it to the tax office and ask for a stamp confirming the date of receipt on a copy of the letter. Don’t forget that, for the taxman, close of business is 4 pm. If you find the door closed, you can try and send it by fax; you never know, if there is paper in the fax machine, the taxman may accept it.

Do I need an accountant or a lawyer to file an appeal?

No, you can do it yourself.

Make sure that you have the correct address and that you mention all the relevant references on the top of the letter, just under your address (your N.N. or national number and the numéro d’article de rôle).

Why not just attach a copy of the tax bill?

Explain in detail why you don’t agree. Maybe you forgot to mention a figure in the tax return, or the taxman himself overlooked a figure. Or all your expenses really are business expenses and not private entertainment. Or the taxman got it wrong, and a particular type of income is indeed not taxable. The most common mistake is that the taxman forgets to give an exemption for overseas income.

It is also advisable to ask for a meeting with the tax director. That may help you get your point across.

Finally, don’t forget to sign the letter with your spouse or partner if it is also their tax bill.

And if I wait too long?

Six months seems like a long time, but they pass quickly. If you are too late, your request will be rejected, except in some cases.

Sometimes the mistake is so obvious that it would be inequitable if the taxman didn’t amend the tax bill. The tax authorities are allowed to reopen the tax file up to five years later if there are typos, miscalculations or glaring mistakes. Another reason for the taxman to reopen the file is when you have paid tax twice; in particular, if you paid tax in Belgium as well as in another country.

Your tax return:

2021 Tax Return : The Tax Bill

Now that you have filed your tax return, all that you can do is wait for the taxman to send you the tax assessment or tax bill.

The “avertissement extrait de role”/”aanslagbiljet” is really the tax bill for your 2020 income. If you have not seen one before, you can click here to see one. If the tax bill is not sent before 30 June 2022, the taxman may have to pay back all withholding tax, but that happens rarely.

If the calculation shows a reimbursement, you will receive that about two months later. And if you have to pay tax, you have about two months as well.

Receive the tax bill online

When you file your tax return online, you still receive your tax bill on paper. If you want to receive it online, you need to activate your e-Box in www.mye-box.be

You will always be able to find a copy of your tax bill (and all past tax bills) in your Taxbox in MyMinfin, together with the tax return you filed online in the past (in pdf format).

Check it

If the bill was for several thousands of euros, you will probably have checked it. If, however, you saw that you will get some money back or that you will have to pay a few hundred euros, in two months’ time, you probably just put it on the pile of bills to be paid some time.

In any event, I would advise that you check it to make sure that there are no mistakes. Have they copied your figures correctly? Does the result seem OK? Is it what you expected? If you want to do the calculations again, try the calculation again on Tax-calc.

If you have questions, you can always call the local tax office and ask them to explain how they made their calculations.

And if the taxman made a mistake

If you disagree with the tax bill, try to talk with someone at your local tax office first. You can find the address, the telephone number and the email address on page 2 of the tax bill. If it is a simple mistake, they are often prepared to correct the mistake.

If you cannot convince them, you have to appeal and file a “reclamation” or “bezwaar”.

Your tax return:

2021 Tax Return: Nowhere to Hide

For years, many people thought they could safely “forget” the income they had outside Belgium; the taxman would never find out. The EU Savings Directive was a rude wake-up call as the Belgian tax authorities started receiving information about overseas bank accounts and enquiring about overseas bank accounts.

And when Belgian banks started reporting to the tax authorities abroad, they thought “Surely, Luxembourg and Switzerland would never do that … “. Even that is a thing of the past.

Common Reporting Standard

The Common Reporting Standard is the world’s answer to FATCA, the American law obliging banks all over the world to report the bank accounts of American citizens’ to the IRS. The Common Reporting Standard goes further; it is a Global FATCA (“GATCA”?).

This year, banks, brokers and certain insurance companies and collective investment vehicles in 109 countries will be reporting about your financial situation and income in 2020 to the Belgian tax authorities.

What information will they receive?

  • the numbers of all your bank accounts,
  • the investment income before tax: interest, dividends, income from certain insurance policies, …);
  • the proceeds from the sale of financial assets (stocks, bonds, mutual funds, …);
  • the balance or the value of the account or insurance policy.

This is why your bank keeps asking for a copy of your identity card: they need your contact details and your taxpayer identification number (TIN) so that the information ends up in your tax file. And if you have a company or a trust, the bank has to look through it to find the ultimate beneficiary.

Kenya and Morocco will follow suit in 2022 and Georgia, Jordan, Montenegro, Thailand and Uganda in 2023, and this Global FATCA network will only expand. All offshore financial centres (like Liechtenstein or Panama) are already participating, except for Palau (where is that?). You cannot hide your wealth anymore unless you open a bank account in Afghanistan or Zimbabwe.

The EU Member States have agreed to go even further. Since 2014 they are exchanging other information that they have, e.g. through the tax returns you file there, or employers’ or pension office statements. Your taxman knows that you have:

  • income from employment;
  • director’s fees;
  • pensions;
  • life insurance products;
  • real estate and rental income.

All this must ensure that you don’t forget to report any income.

Your tax return:

2021 Tax Return: Stock Exchange Tax

Belgium has always charged a tax on stock exchange transactions, such as the purchase and sale of some financial instruments (bonds and stocks) on a secondary market, and the sale of mutual funds (UCITS), through a Belgium-based professional intermediary, a bank or broker.

The tax is also due when you buy or sell through a foreign bank or on an online account. And you must declare and pay the stock exchange tax yourself, unless the overseas bank appoints a representative to do that.

The rate varies depending on the nature of the instrument, and the tax is payable by each party to the transaction. The stock exchange tax is charged at :

  • 0.35% on the sale or purchase of shares (maximum €1,600 per transaction);
  • 0.12% for bonds and mutual funds (max. €1,300);
  • 1.32% on the sale of accumulation mutual funds (capped at €4,000);

When a distribution fund redeems its units, no tax is due, but the sale or purchase of such units on the secondary market is taxed at 0.12% (max. €1,300).

Belgian residents who must pay the stock exchange tax must file a tax return and pay the tax before the end of the second month following the taxable transaction.

Your tax return:

2021 Tax Return: Box XIII – Trusts

You have to confirm whether you have set up a legal arrangement (a “construction juridique”) or whether you are the beneficiary of such a legal arrangement. This is a difficult word for a trust, a foundation, or a foreign company in which you accumulate income tax-free.

Cayman tax

If you have such a legal arrangement, you must also declare the interest and dividends that accumulated in it. This is called the “Cayman tax“. It is advisable to get some legal help if you have to pay the Cayman tax.

Your tax return :

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