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 not have to report the pension. HMRC confirms that if there is a Double Tax Agreement (‘DTA’) and “If the DTA gives exclusive taxing rights to another country, no UK tax is payable and so no relief will be available.”
However, taxpayers “are encouraged to provide further details in the ‘any other information’ section of the SA100 (page TR 7).” I would suggest to write in box 19 (Please give any other information in this space) : “I receive a pension from the Belgian State, this is exempt in the UK in accordance with article 18 of the Double Tax Agreement between Belgium and the UK.”
- 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 :
- 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.
- Contact HMRC to start the Mutual Agreement Procedure egging HMRC to talk to the Belgian tax administration.
- Wait for the tax bill and appeal it (file a “reclamation” (i.e. an internal appeal with the Belgian tax authorities). That will be explained on the tax bill : you have 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 authorities, the entire tax is contested, and the tax 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.
- 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 …
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Comments 48
Hi Mark,
very interesting comments about UK retirees. I have been following this saga on the HMRC forum and this is how I found this blog as somebody gave the link for this recent article.
I am a British citizen with British pension started in 2019 and I recently retired in Belgium. I am domiciled in Belgium since the end of 2020 and therefore considered a Belgium tax resident.
As per the Tax treaty, my British pensions should be taxed in the UK. This has been confirmed by HMRC and a tax accountant in Belgium.
I have 2 questions about other types of income:
1- I am considering accepting a Non Executive Director position for a British company located in London. I will be paid a quarterly director fees to assist to 4 quarterly board meeting and one or two connected meetings in London. So a maximum of 6 days in London for this position. Some of these board meetings will be held remotely, so I will not even have to assist to 6 meetings. This company does not have a subsidiary or sister company in Belgium.
How will this income be considered by the Belgium Tax people? Article 16-1 of the UK Belgium Tax treaty says that fees derived by a resident of Belgium in a capacity as member of a board of a UK company MAY be taxed in the UK. What to that mean in practice? That these fees are taxable in Belgium and may also be taxed in the UK? or something else? The company told me that the fees will be paid directly to my UK bank account without any deduction and that I will have to report it to the tax authority. If only taxable in Belgium, will I report only the net fees after deducting travel and accommodation expenses incurred to attend the London meetings? or???
How do you recommend to set up this situation the most efficient way?
2- in the past, while in London I have acted as an expert witness. It was easy to set up, I registered as self employed and as the income was low I was exempted from charging TVA.
I have been approached to do the same thing from Belgium, but I have declined as I do not now how complex it could be to do that from Belgium.
Most or all of the work will be done remotely from Belgium, but I have to be ready to accept to spend a few days in the UK if the case goes to court.
Article 14-1 of the tax treaty seems to cover this type of professional services which would be taxable in Belgium.
What do I need to do to accept these jobs?
Do I need to register as an independant? register for TVA? what else, is it as easy in Belgium as it was in the UK .
What do you recommand? I am just interested to do this for interesting cases, but if setting this up in Belgium with require too much admin, I will not accept any.
Thanks for your help
Author
We replied in a private email.
Hello
I also find this very interesting but wonder how this applies for the many people have SIP or QROPS pensions plans, and have been encouraged like mad to remove their pensions from existing plans in the UK. But as Belgian resident post Brexit, we have always been told UK pensions would be taxed in the UK (!) and all that is needed is to mention this in Belgian tax returns (where I understood we may still be liable to communal tax on the tax deducted in the UK, but nothing more (assuming tax rate is already at the max level in BE given this starts at ~40k€).
There is no mention either on how lump sum withdrawals, which are allowed in the UK up to 25% (and tax free int he UK) are treated in BE.
We were all meant to be so reassured that tax treaties would remain the same post-Brexit, that freedom of movement and hence pensions were still the pillars of EU etc etc…something tells me this is another classic empty promise
Would love to hear if anyone has better information
Thanks
KR
Doc
Author
Dear Doc,
The article addresses UK residents who receive a pension from Belgium.
As for Belgian retirees
(*) Belgium exempts UK pensions with the “exemption with progression” method. “Exemption with progression” means that Belgium exempts the UK pensions but 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.
This confirms your understanding that “as Belgian resident … UK pensions would be taxed in the UK (!) and all that is needed is to mention this in Belgian tax returns“. The pension would be exempted in Belgium, make you pay more tax on Belgian income, but you will “still be liable to communal tax on the tax deducted in the UK”
As for lump sum withdrawals, which are allowed in the UK up to 25% (and tax-free in the UK). They have to be exempted in Belgium, even if they are not taxed in the UK, but a withdrawal of €100,000 may push all your Belgian income in the 50% band.
Please note: Brexit has nothing to do with this. The tax treaties remain the same post-Brexit and the EU rules still apply. However, what has changed is the reading of the double tax treaty between Belgium and the UK. The same text is read differently now, this just happens to coincide with Brexit.
And that different reading is disputed …
We will post some new articles on the subject of pensions.
Hi Mark,
Just to clarify. I am about to start receiving my Belgian state pension for the first time. I was told that my “Payer a vous” would be X but Y arrived in my bank account. Y was approximately 17% less than X. This does not seem to correspond to any Belgian tax rate I can find – any thoughts?
Now that my pension is being taxed (by the looks of it) in Belgium. How do I declare this on my UK account – or do I even need to bother since tax has already been paid?
The amounts involved are VERY small (under £100 per month) so the hassle completing the Belgian non resident tax form seems a lot of work for so little reward.
Author
Dear Kenneth,
There is a 3.55% INAMI and a 0-2% social security contribution (see here).
And then the pension office deducts tax, normally starting at 25%.
You will receive a statement every year of how much you received in the previous year and what they deducted. And then, in September-October, you will have to file a Belgian tax return for the pensions received and sometime in the following year you will receive a tax bill “avertissement-extrait de rôle”.
In the UK, you do not have to report your Belgian state pension. HMRC confirms that if there is a Double Tax Agreement (‘DTA’) and “If the DTA gives exclusive taxing rights to another country, no UK tax is payable and so no relief will be available.” However, “you are encouraged to provide further details in the ‘any other information’ section of the SA100 (page TR 7).”
I would suggest you mention; “I receive a pension from the Belgian State, this is exempt in accordance with article 18 of the Double Tax Agreement with Belgium.”
Marc, I don’t think your reply of 12 November is quite right about UK tax relief – if Belgium is right and the pension is to be taxed wholly in Belgium, it should not be included in UK taxable income at all, and Foreign Tax Credit Relief is not due.
Author
Thank you, Chris, for correcting me.
If one receives a Belgian state pension, one does not have to report it in one’s UK tax return. HMRC confirms that if there is a Double Tax Agreement (‘DTA’) and “If the DTA gives exclusive taxing rights to another country, no UK tax is payable and so no relief will be available.” However, “you are encouraged to provide further details in the ‘any other information’ section of the SA100 (page TR 7).”
Marc, this thread is very interesting as I am also caught in the new legislation from Belgium! As a UK resident I had thought that Belgian pensions taken before 2013 were exempt from Belgium taxation but it seems that this is now no longer the case. Are you aware of any updated discussion/agreement between HMRC and the Belgian Authorities as to when the taxation in Belgium should start? I had heard that it would be from 2018 but cannot find any reference to this.
Many thanks
Author
Dear David,
The Belgian tax authorities will only go as far back as they can. In 2022, they can only tax the income for 2019, 2020 and 2021. The 2018 could be taxed until 31 December 2021, this means that the tax bill had to be sent out before that date. If they try to investigate 2018 in 2022, they would be too late. They can go back a further 4 years, but only in cases of tax fraud which is clearly not the case here.
Marc,
Thanks for your article on “Confused UK retirees …”, which I’ve just come across. I certainly fit into that category!
I live in Belgium. Prior to coming to Belgium to continue my career, I lived in the UK. I receive two pensions from my time working there. My British Telecom (BT) pension, together with UK state pension, has always been taxed in the UK.
Last month I received notice from the Belgian tax authorities saying that my pensions should in fact be taxed in Belgium, and not in the UK. The Double Taxation Treaty between the UK and Belgium says if you started to receive your pension prior to 1 January 2013, then the pensions should be taxed where you live, and not at source.
However, according to the Belgian tax people, it makes a difference if the pension comes from a public or private body. In my case this makes the issue complicated. I started working for the General Post Office (GPO) in 1963. So, originally my employer was a public body. After much change in UK Government policy, the telecom side of the GPO, i.e. BT was privatised in 1984. So my occupational pension is both public and private!
I ceased receiving a salary from BT in 1990, so my pension contributions in the UK were made largely to a public body.
As an aside, having looked at the text of the Convention on double taxation, I have difficulty to see where the distinction between private and public pensions are made in the text. But I don’t have legal background.
Many thanks if you have any advice on this matter.
Regards,
Brian Jenkinson
Author
Dear Brian,
Thank you for your comment. It raises an interesting question.
If I understand correctly, you took up your pension before 1 January 2013 and, therefore, it is liable to tax in Belgium (article 18 of the double tax treaty between Belgium and the UK).
However, remunerations and pensions paid for (UK) government service are liable to tax in the UK (article 19).
Unless you are a Belgian resident, and you have Belgian citizenship.
I trust you do not have Belgian citizenship.
I assume BT took over the activities of the GPO as well as the pension obligations as you are paid by the BT pension scheme.
The question then is what are “pensions […] paid by, or out of funds created by a […] State, a political subdivision or a local authority […] in respect of services rendered to that State or subdivision or authority.
The pensions are now paid by a private pension fund, but they were created by the GPO. I think there is scoep for interpretation there. But how do you prove that and how much was paid by the GPO?
Hi Marc
I started receiving my Belgian state pension gross in May 2019 in the UK where I reside. I submitted the Belgian non-resident tax declaration and prepay “versements anticipes” at what I guessed would be my tax rate. Optimistically I thought around 10 percent for 2020 and I’d even naively hoped for a small reimbursement!
To my disappointment my tax bill greatly exceeds my “versements anticipes”. On a small Belgian state pension based on 19 years work as a secretary, I am being taxed for 2020 income at 20 percent (8.9 percent in 2019) and there are “centimes additionnel” of 7 percent . I had hoped to get a Belgian tax free allowance but it appears to me that this cannot have been applied in 2020, I suppose as my Belgian pension is less than 75 percent of my total income? When I submitted my Belgian tax return, I did not report UK tax paid on my non Belgian pension income. This means that the Belgian calculation of the amount to be taken into condideration to calculate the reduction of tax on my Belgian state pension includes income that has already been taxed in the UK, and that the centimes additionnels are on income taxed in the UK. Did I make an error in not reporting UK tax paid on the non Belgian income? If so in what box should it go for any error I now report? I was unpleasantly surprised to see my tax rate increase from 8.9 to 20 percent and not to seem to get a tax free allowance. The reduction of tax on my pension in 2020 is 50 percent less than for 2019 income too. I’m worried I’m making expensive mistakes – I reported gross amounts for my UK retirement income but I made no mention of UK tax paid.
I understand the logic of Minfin wanting to tax the Belgian pension of non residents in the UK but when one reaches one’s 80s or 90s will pensioners have the energy to do 2 tax returns and, far worse, without any Belgian family, who prepares the Belgian tax return if one ends up incapable of handling one’s affairs? Most care home staff in the UK very sadly do not speak French or Flemish and a UK lawyer that speaks French would charge a fortune and only be far away in a big city. Thinking of pensions in terms of the tax reporting of elderly, vulnerable and possibly mentally incapable people, perhaps the easiest option for the retiree is to pay tax in the country of residence? That said, I’m now used to doing 2 tax returns.
Meanwhile, do you think I have made a mistake in reporting to MinFin gross non Belgian pension income – with no mention of UK tax paid? No tax is deducted at source from any of my income and is either prepaid or on demand to both Belgium and the UK.
Best regards
Pamela
Author
Dear Pamela,
I can understand that the tax rate on your pension has gone up from 8.9% to 20%. You had a full year’s pensions in 2020 and only half year in 2019. However, it is difficult to work out whether the tax was calculated correctly without seeing the tax return and the tax bill.
A few notes:
Unfortunately, that you have to pay tax on your pension in Belgium is not a decision taken by the Belgian tax authorities, but a result of the double tax treaty between Belgium and the United Kingdom.
Dear Marc
I am working at a decentralised agency in Portugal. I was recruited from UK and recently received a tax demand from 2017 from Portuguese tax authorities for rental income on my London flat (I have declared this in the UK). I assume from this post that this should not have happened?
Also the UK are treating my as non resident for tax purposes. This also seems wrong?
I also wondered. The UK allows you to pay National Insurance contributions voluntarily to maintain basic state pension rights. Is this impacted by the Withdrawal agreement?
best regards
Paul
Author
Dear Paul,
If you joined the agency before 2021, being recruited from the UK, you have kept your tax domicile in the UK (under the Withdrawal Agreement and in accordance with the Protocol).
In Portugal, you are a non-resident and you do not have to report any overseas income. The local Portuguese tax authorities may not be aware of this rule.
In the UK, you are a resident and you have to report any UK and any overseas income. The local UK tax authorities may not be aware of this rule.
I trust that you have a letter from the agency / the EU Institutions confirming that your tax domicile is in the UK. Try telling them this with a copy of the letter.
As for the NI contributions, this is a purely domestic UK rule (a UK national paying UK NI contributions to maintain basic state pension rights). That should not / could not be impacted by the Withdrawal Agreement that deals with cross-border issues. I am sure the UK will be more than happy to receive your NI contributions
Best regards,
Marc Quaghebeur
Cher Maître Quaghebeur,
In https://www.taxation.be/confused-uk-retirees/#comment-15612 dated 26 May 2021 you recommended that one should not agree to the new system of paying tax on a Belgian state pension to the Belgian authorities, rather than to the UK authorities as in the past, and start a Mutual Agreement Procedure. It seems that the new interpretation of the UK/BE Double Tax Agreement is now generally accepted. So is your advice still the same? If not, what do you advise us to do now?
My wife and I have both been receiving Belgian state pensions since 1998 and 2003 respectively as a result of having worked in Belgium and paid the mandatory contributions to the Belgian National Office of Social Security. My wife paid contributions as an employee, and her employer also contributed. I paid contributions as an independent with, obviously, no contributions from an employer. As a result, my wife’s pension is much higher than mine. She currently receives in the order of €11000 gross a year. I receive about €4000 gross.
We moved back to the UK in September 2016 and have since declared our Belgian pensions to the UK authorities. These amounts have been added to our UK pensions (we have no others income) and our UK tax has been calculated with the UK personal allowances deducted. I have done rough calculations for the UK tax year 6 Apr 2019 to 5 Apr 2020 of how much UK tax we would have paid without the Belgian pensions and compared that with the tax including the Belgian pensions. The difference for my wife was £730 less without the Belgian pension and for me it was £656 less. In simple terms this is the amount of tax we paid on our Belgian pensions under the UK system.
We will now apparently have to pay tax on Belgian pensions to the Belgian authorities at the Belgian rates. They want to back-date this to their tax year 1 Jan 2019 to 31 Dec 2019. Using the Belgian state pension amounts we declared to the UK tax authorities for the UK tax year 2019-2020, the tax we would pay on the same amounts under the Belgian system would be £2452 in my wife’s case and £877 in my case, using an average £/€ exchange rate. In calculating the amount payable under the Belgian system, I have taken the basic rate as 25% and added the additional tax at 7% of the resulting tax due. I have not applied any personal allowances for the Belgian calculation because the invidious Belgian system does not allow them if one’s Belgian income is less than 75% of one’s world-wide income so we pay tax from the first Euro. I recognise that the tax years are different but the figures I calculate are indicative of the difference in the tax between the UK system and the Belgian system. For me the difference is £221 and for my wife it is a staggering £1722!
The large differences shown above are in part due to the difference in the basic rates of tax (UK 20%, Belgium 25%). The larger the taxable sum, the larger the difference. However, the main reason for the large difference is that one gets no personal allowances under the Belgium system unless one’s Belgium income is 75% or more than one’s total world-wide income. This is very unlikely indeed to be the case. Such a law is not just and fair taxation: it is more like fiscal greed. At the very least, the Belgian tax law should allow personal allowances in proportion to the ratio of Belgian-sourced income and total world-wide income. For example, if the Belgian authorities grant full allowances when the Belgian/World-wide income ratio is 75% and one’s actual ratio is 50%, then one should be given 2/3rds (66.6%) of the allowances. Alternatively, and at the very least, if one’s Belgian/World-wide income ratio is 50%, one should get half (50%) of the allowances.
To your knowledge, can we, i.e. ALL of us who are affected, collectively object in any way to this treatment and demand a fairer system for allowing personal allowances under Belgian tax law for the taxation of our Belgian state pensions? Is there any arbitration authority we can contact?
My wife and I look forward to your early reply given that, in the next few weeks, we shall have to reply to the demands of the Belgian tax man and agree to, or object to, paying Belgian taxes under the new system – and risk being penalised if we don’t agree. Thank you in advance.
Tee Emm
Author
Dear Mr Emm,
Thank you for your message.
My advice is still that the Belgian tax authorities are wrong, but the Belgian tax authorities and HMRC have agreed on this new position and most pensioners just accept it. They pay the higher income tax and they do not have to declare the Belgian pension anymore. Nobody wants to take this to court starting what may be years of court proceedings.
Your analysis is correct, the 75% rule puts a spanner in the works. Your pensions are probably under or slightly over the €9,270 personal allowance. However, the European Court of Justice has decided that the 75% rule infringes the free movement of workers when this rule denies non-residents the right to deduct maintenance when they receive less than 75 % of their professional income in Belgium and when they cannot benefit from the same deduction at home because they have little taxable income there.
This was a decision relating to the payment of maintenance/alimony, but it would also work for the personal allowance and you could claim this with retroactive effect for 2019, 2020 and 2021.
See : https://www.taxation.be/the-tax-deduction-of-alimony/
Dear Maître Quaghebeur,
Thank you for your prompt reply. My wife and I are unhappily coming to the conclusion that, very reluctantly, we shall have to accept the new situation and be taxed on our Belgian State pensions by the Belgian tax authorities under their current rules, with the considerable loss in income that this entails. To modify the Latin adage “de minimis non curat lex” one might say “de miseriam non curat lex tributum Belgica”.
Your final paragraph saying that European Court of Justice (ECJ) ruling on the application of the 75% rule to maintenance/alimony payments would also work for personal tax allowances for 2019, 2020 and 2021 is very interesting, and raises some questions:
1. Is there any definite expectation that the Belgian tax authorities would accept that the ECJ ruling on maintenance/alimony applies also
to basic tax allowances?
2. Is there any parallel ECJ ruling applying specifically to personal tax allowances for people in our situation?
3. If not, is this being pursued through the courts by anyone in the same way as the maintenance/alimony case was by the European Commission?
4. Is there any routine scrutiny of national tax laws by the European Commission to ensure that member states do not infringe citizens’ rights? We note that the English translation of the ECJ ruling in French which you quote at https://www.taxation.be/the-tax-deduction-of- alimony/, refers to the Kingdom of Belgium failing to fulfil its obligations “under Article 45 TFEU and Article 28 of the Agreement on the European Economic Area of 2 May 1992”. Brexit should, therefore, have no effect on the application of the ECJ ruling to UK citizens.
Do you specify the tax years 2019, 2020 and 2021 (above) because the maintenance/alimony 75% ruling will be made redundant when the so-called expatriate tax regime changes in Belgium? Presumably, even if the Belgian tax authorities accept that the ECJ ruling regarding maintenance/alimony payments applies equally to personal income tax allowances for present and previous years, this could also cease when the so-called expatriate tax regime changes in Belgium for the maintenance/alimony. The only comfort that we might get from that is that we could then be taxed on our pensions as ordinary Belgium residents and receive the allowances they get. Do you see that happening?
In any event, it seems that for the present we shall have pay tax to the Belgian authorities on our pensions arising in Belgium under their current rules and, if there is any change to the way in which they deny us allowances, reclaim the tax overpaid later. Is that how you see it?
Thank you for your ongoing engagement in this matter and your informed and expert comments.
Best regards,
Terence Maddern
Author
Dear Mr Maddern,
Apologies for the late reply.
¬w No, there is not, but it is just a question of applying the law. I do not think anyone has really taken this up yet.
¬w Not that I can see.
¬w Not that I can see.
¬w Yes, there is.
We note that the English translation of the ECJ ruling in French which you quote at https://www.taxation.be/the-tax-deduction-of- alimony/, refers to the Kingdom of Belgium failing to fulfil its obligations “under Article 45 TFEU and Article 28 of the Agreement on the European Economic Area of 2 May 1992”. Brexit should, therefore, have no effect on the application of the ECJ ruling to UK citizens.
¬w That is not relevant. If Belgium must change its rules to accommodate non-residents. Usually these changes relate to all non-residents, not only EU non-residents.
¬w No, only because the Belgian tax authorities can go back three years.
¬w The expatriate tax regime is irrelevant.
¬w I don’t think so, they might reduce the 75% to 50% or take a percentage depending on the percentage Belgian income/total income.
I trust that this sheds some light on the situation and that you will not hesitate to contact me should you have any further questions.
Best regards,
Marc Quaghebeur
Cher Maitre,
Thank you once again. Your comments are as informative and constructive as ever.
Best regards,
Terence Maddern
Hi,
The belgian taxman is chasing me for tax on my UK company pension.
The first payment was on 20/1/2014. After
the cut off date of 1/1/2014. The letter inforking me of my pension payments was 19/12/2013.
Accoriding to my understanding of section 18 , I should only pay tax in the UK.
Is that correct?
Author
Dear Andrew,
The Protocol entered into force in Belgium on 1 January 2013.
I don’t understand why the Belgian tax authorities are trying to tax you on you UK company pension.
Best regards,
Marc Quaghebeur
HELP! Hi Marc
Today a Belgium tax return in Flemish has arrived at my 85 year old mothers house. I don’t know where to start and am completely lost. How on earth is she supposed to fill this in? She can’t even understand it (nor can I) what do we do? Her Belgium state pension is from her late husbands 12 years of working in Belgium back in the late 80’s.
Is there any help,out there apart form your great info. What happens if we ignore it? Will tax just be deducted and we’ll just have to accept that I reduced pension. It’s completely irresponsible to expect an 85 year old to be able suddenly fill in a tax return in a language she doesn’t understand. Incidentally the form took 4 week to arrive leaving only 4 weeks to return!
Thanks for any help or advice.
David
Author
Dear David,
I have uploaded a short ‘Guide‘ to help British pensioners filing Belgian (Flemish) tax returns.
Of course, it does not beat legal/tax advice, just a first aid kit to file your Belgian tax return.
If you wish to use your services, please contact us by sending an email to david@david-law.be
Hi Marc
I’m hoping you can help.
Today a Belgium tax return in Flemish has arrived at my 85 year old mothers house. I don’t know where to start and am completely lost.
From a bit of searching I understand that tax agreement with the EU has changed and now tax is to be paid in the issuing country and not filled in on her tax return as foreign income. I subsequently found your website.
Is your advice still the same to contact hmrc and ask for a Mutual Agreement Procedure between hmrc and Belgian tax authorities?
How on earth is she supposed to fill this in? She can’t even understand it (nor can I) what do we do?
Her Belgium state pension is from her late husbands 12 years of working in Belgium back in the late 80’s. Is there any help,out there?
What happens if we ignore it? Will tax just be deducted and we’ll just have to accept that She will have a reduced pension.
It’s completely irresponsible to expect an 85 year old to be able suddenly fill in a tax return in a language she doesn’t understand ( not that she can see it with her sight difficulties) Incidentally the form took 4 week to arrive leaving only 4 weeks to return!
I don’t have a clue what to do.
Thanks for any help or advice. David
Hi Marc
I am a Uk resident receiving Be pensions, both state and private since 2007. I have been back in the UK for 9 years and up to now all simple.. no deductions in Be, declare Be income on SA. Then August , out of the blue, received tax bill for 12kEu for 2020 ! I wrote back and quoted 18b. Today I got the tax bill back with interest. Is your advice still not to pay it, starts a Be complaint and raise a MAP with HMRC ? The alternative is to pay it and ask HMRC to redo my 2020 SA and hope to get the rebate ? I am concerned about racking up more interest each month and more threatening letters.
Thanks for any advice
John
Author
Dear John,
My advice is still that the position of the Belgian tax authorities and HMRC is not correct.
However, as long as nobody contests this, they will maintain their position. And nobody is contesting because the cost rarely outweighs the benefit, in particular because all these retirees only worked here for a short period of time. You have to either contest or pay, and then recover from HMRC.
Very informative! I’ve just received a set of forms for an income tax return from Belgium for the first time (state pension received since 2010). They are in the Dutch language (of which I have no understanding) and therefore no idea what applies to me or the information they are requesting. How have others dealt with this language issue? What happens if I don’t respond or simply write to say that I don’t understand the forms and need help in English? I have no issue with tax being deducted from the pension at source, as then I won’t need to declare it in the UK. Many thanks for your help on this matter.
Author
Dear Roger,
I have uploaded a short ‘Guide’ to help British pensioners filing Belgian (Flemish) tax returns.
Of course, it does not beat legal/tax advice, just a first aid kit to file your Belgian tax return.
If you wish to use your services, please contact us by sending an email to david@david-law.be
Thank you Marc, that’s a very helpful guide!
Dear Marc,
Some information for the community and a question if I may?
My elderly father-in-law has received a fairly impenetrable tax return in Flemish for 2021 within the last week. He worked in Belgium for a few years toward to end of his career, and receives a Belgian state pension which is under the Belgian Personal Allowance, and I assume why he has never heard anything about this before. Has has always declared, and been taxed on this by HMRC.
Going on what you state above, would I be right in assuming that the tax return is to establish whether he is actually entitled to a Belgian personal allowance (which he won’t be as only about 5% of his income comes from Belgium).
I am assuming therefore that he will have to pay a bill to the Belgian tax office for 2021 @ 25%. Do you think it likely that they will then go fishing/ demand back tax for the four years earlier?
My father-in-law is lucky in that he is a higher rate tax payer; Would I also be right in assuming that under the UK/Belgium DTA, that we will be able to re-file a 2020/1 and the 2021/2 UK tax return (apportioning as necessary) and use the Belgian tax @25% to offset the British tax @40%.
I assume that we will need to go through this dance going forward each year, but hopefully the Belgian Federal Pensions office will deduct at source?
Many thanks for bringing this matter to our attention.
Author
Dear David,
The tax return is to report the pension and also to establish whether he is entitled to a Belgian personal allowance (which he won’t be as only about 5% of his income comes from Belgium). He will have to pay a bill to the Belgian tax office for 2021 at the lowest tax rate of 25%. I do not think it likely that they will then go demand back tax for previous years.
You will need to file a tax return each year even if the Belgian Federal Pensions office will deduct tax at source.
I have uploaded a short ‘Guide‘ to help British pensioners filing Belgian (Flemish) tax returns.
Of course, it does not beat legal/tax advice, just a first aid kit to file your Belgian tax return.
If you wish to use your services, please contact us by sending an email to david@david-law.be
Dear Marc,
I have also just received a Belgian tax return for the fist time, having always assumed that as I paid UK taxes on my very modest Belgian pension that all was in order. This paperwork also took four weeks to arrive (I have kept their envelope as proof it was not sent on the day it was printed) leaving me very little time to find/take advice and get it back before the 10/11 deadline which they are still imposing, even though in the normal course of events the period is from May/June to November.
I have looked at your very useful guide for the Flemish version. Do you by any chance have a similar guide for the French version. It’s so long sine I lived in Brussels (1984) that the 15 pages of notes in French are now beyond me.
Many thanks for all your helpful advice in this very stressful sea of confusion.
Linda
Author
Dear Linda
Please click here for the Guide in French.
Unfortunately, the link leads to the guide in Flemish.
Author
it’s corrected now
Thank you.
Dear Maitre,
My wife and I have received tax forms from the Belgian authorities (Aagifte in de belasting van niet-inwoners – Aanslajahr 2022\ Inkomsten 2021). Neither of us has sufficiently good Dutch to be able to understand all of the forms so we have made use of your briefing on how to complete the forms, for which we thank you.
However, we have some questions and would appreciate your quick response, given that we have to return the form before 10 November 2022.
1. There is only one code at A.8 1081-83. Does this apply to just one of us or both of us? If we both do not qualify under the 75% rule, should the code 1081-83 be put on the green form we have to return in both the Husband and the Wife columns?
2. If we both indicate with box 1081-83 that we do not qualify under the 75% rule, why should we complete in detail the boxes in Vak X111 1330-28 and 2330-95 with our non-Belgian income? We understood that this is not used to calculate the tax which the Belgian authorities want to take from our Belgian State pensions. However, is it used to add to our pensions to calculate a higher rate of tax and then taken off again at the basic rate, as was done with our non-Belgian income when we were resident in Belgium?
3. Or is a flat rate of 25% used to calculate all the tax on our Belgian pensions? If so, why again do we have to declare our non-Belgian income?
4. What would happen if we did not fill in Vak X111 boxes 1330-28 and 2330-95 but returned the form with these boxes empty?
Thank you for all the help you have provided to us.
Regards,
Terence Maddern
Good day to you all,
I would be interested if anyone among you can answer the following questions. I would imagine that others would be interested, too.
1. Has anyone among you who is resident in the UK already received or paid a tax bill from the Belgian authorities on their Belgian State pension? If so, was the tax rate applied a flat rate of 25% on all the pension? If not, was the total amount of the pension taxed proportionately or progressively in some way? If so, how (if you can work it out!)?
2. Has anyone among you submitted a Belgian tax return on their Belgian State pension without completing the section on world income (Vak X111 1330-28/2330-95)? Was there any come-back from the Belgian tax authorities?
Thank you.
Terence M
I have recently received two tax demands within one week! They were for pension income in 2019 and 2020.
The tax is calculated on progressive rates which for 2022 are:
– up to €13870 25%
– over €13870 and up to €24480 40%
– over €24480 and up to €33510 46%
– over €33510 50%
On top of that there is a 7% surcharge on the calculated tax.
However, the calculation method used to arrive at the final tax figure is more complicated than it might look.
Firstly, they calculate the tax using the progressive rates above.
Secondly, they make a reduction which is described as “Vermindering vervangingsinkomsten, pensioen en werkloosheidsuit met bedrijfstoeslag” which translates to “Reduction of replacement income, pension and unemployment benefits with company supplement”. I have no idea what this means or how it is calculated. In my case, for 2019 it is 10.1% of the tax figure and for 2020 it is 5.1% of the tax figure – go figure!
Thirdly, they then apply a 7% surcharge on the tax figure. I understand that for Belgian resident taxpayers the 7% is a communal (Local Authority) charge. Obviously, non-residents do not belong to a Belgian commune nor receive any benefit from one so this additional charge simply appears to a way of ripping off non-residents.
My annual Belgian pension increased by €401 between 2019 and 2020. The increase in income tax between 2109 and 2020 is, by a remarkable coincidence, also €401. In other words my annual pension increase has effectively been taxed at 100% !!!
I can’t answer the question about not filling in section Vak X111 1330-28/2330-95 as I did fill it in on my returns. I assume that they only use that information to determine if your Belgian pension represents 75% or more of your total income.
You probably did not want to hear all this but it seems that we are between a rock and a hard place. If we fail to pay the tax due, they can either stop paying the pension or charge interest or even both. What we need is a citizen of the EU with deep pockets who can afford to get a proper legal opinion on whether this method of taxation is justified.
Author
Dear Fred,
All this is more or less correct.
The additional alowance for pensions is quite limited, and depends on the level of the income. Too complex to explain.
As for the section Vak XIII – 1330-28/2330-95, please see the guide in Flemish or in French.
Thank you, Fred C, this helps us to know what to expect. I certainly agree that the additional 7% appears to be a rip-off of non-residents and just fiscal greed. I doubt that the Belgian tax authorities will offer any justification – or indeed could do so.
I an yet another daughter of an elderly widow resident in the UK since 2006 who’s just been hit with a tax demand from the Belgian authorities. The pension relates to work done by my father in Brussels when they lived there between 1991 and 2005 and it’s my understanding this is a private Belgian pension organised by his employers since he wasn’t working for the state or civil Sevice . I suppose it’s possible that a small proportion is state pension but I can’t see a way of finding out what proportion. Since my mother started receiving this in July 2012 after my father’s death I thought she had to pay tax on it in the Uk. I wrote to the Belgian tax authorities in October and thought they had accepted our case but now it seems they have simply ignored my letter. Yet that seems to be still what the HMRC are advising as recently as 5 days ago.
1. How do I confirm the pension is private not state?
2. Do I now contest with the Belgian authorities and also try to persuade HMRC to raise a MAP?
My mother has dementia and like others here I find the forms sent to be impenetrable. I tried at one point to get access online (apparently the forms online are partially completed) but without a Belgian identity card that seems impossible unless I take my immobile and incapable mother in person to Belgium to get an identity key. Yes really! Thank you for all the help on this forum. It’s so appreciated.
I know this thread is over two years old, but I hope it’s still alive, because I would very much welcome some urgent advice. I am a retired UK civil servant. I now live in Belgium and indeed have held Belgian nationality for five years. I first declared my UK civil service pension in 2019 (2018 income). This was done with the help of an administrator in the Oudenaarde tax office. I showed her all the documentation related to the pension: gross income, net income, and tax deducted at source by Mer Majesty’s revenue & Customs (HMRC). A couple of months later I received a letter from the Gent FOD office asking for further clarification, which I gave. This included that I was not a Belgian national, and that I had paid UK income tax on the pension. I received no further requests for clarification. Furthermore, the relevant page dealing with this matter on the UK government website (https://www.gov.uk/tax-on-pension/tax-when-you-live-abroad) states that: “If you’re not a UK resident, you don’t usually pay UK tax on your pension. But you might have to pay tax in the country you live in. There are a few exceptions – for example, UK civil service pensions will always be taxed in the UK.” The next I thing I got was the overall assessment of (and my wife’s) annual tax for 2018, which showed that our income tax was (or appeared to be) in order. I therefore, not unreasonably, assumed that this was indeed the case and continued to submit my tax return in subsequent years on this basis, and in good faith.
Fast-forward to 2023. I have just received a letter from the Belgian FOD informing me that I should have paid BE – not UK – income tax on my pension. They have quoted the UK-BE Convention on Double Taxation, paragraph 19 of which seems to indicate that, since I reside in Belgium and have Belgian nationality, Belgium – not the UK – has the right to tax my UK civil service pension. This was confirmed to me in an interview in the Oudenaarde tax office last week. They are now going to claim income tax on my 2020 and 2021 pension (tax returns 2021 & 2022 respectively). They informed me that I would need to reclaim from HMRC the UK tax that was deducted at source. By my calculations the tax due will be of the order of €5-6.000 per annum instead of £2500 I paid each year in the UK. The same goes for 2022 (2023 tax return). On top of this they are going to charge me a “belastingverhoging” of 10% on my tax bill for “onvolledige of onjuist aangifte” and “1e overtreding zonder het opzet de belasting te ontduiken”.
On the face of it, it seems I don’t have a leg to stand on, since the law seems pretty clear. However, I would welcome your advice on the following:
1. Can I challenge the claims for back tax for 2020 and 2021, on the grounds that I submitted my tax form on the basis of the tacit agreement by FOD in 2019 that my civil service pension being taxed in UK was not incorrect? In other words, am I liable for their mistakes or oversights?
2. Can I ask them to withhold charging me Belgian tax for 2020 and 2021 until I received confirmation from HMRC that they will repay me the tax they collected on my pension for 2021 and 2022?
3. Can I challenge the 10% “belastingverhoging”, which to my seems totally iniquitous and unreasonable under the circumstances.
4. For 2022 income, I assume there is nothing to challenge. Is that correct?
Thank you in advance and my apologies for this rather long request. I imagine you are exceptionally busy and will fully understand if you are not able to provide in-depth advice. But FOD need my response by 15 October, so if you were able to help before then, that would be really appreciated.
Author
a quick answer:
1. No, there are no tacit agreements in tax matters. The law is the law.
2. Yes, but if they do they will charge you interest.
3. Yes, you can try to.
4. Not on the basis of the information above.
Hi,
I have received a Belgian State Pension for the first time in 2023. I understand that I have to complete a Belgian Tax Return every year, but I have some questions:
1. When do I have to complete the return?
2. Do I have to include my wife’s finances? She has no income in Belgium. She manages her own affairs in the UK and what happens if she does not wish to provide me with her details?
3. How do I submit the completed return? By email, snail mail, upload?
4. How and when do I pay the tax?
Many thanks,
DC
Author
A quick answer :
1. by 30 June
2. no
3. if you receive a paper tax return, on paper, by snail mail.
4. two months after you receive the tax assessment.