Capital Gains

As a matter of principle, Belgium doesn’t tax capital gains if they are made by way of “normal management of private wealth”. Private wealth is anything that you don’t use for your job or for professional purposes. And the normal management of your private wealth is what you do to keep your wealth growing safely, without speculating. Speculation would be e.g. borrowing to get leverage to make more profit.

In general, gains on the sale of shares or property are tax exempt, with a few exceptions:

  • the capital gain on the sale of your main residence is always tax exempt,
  • capital gains on a second residence or other property in Belgium are only tax exempt after five years. If you sell within five years, the capital gain is tax at 16.5 %.
  • capital gains outside the normal management of private wealth are taxed at 33%, plus local tax (between 6 and 9 % of 33%). These include speculative capital gains.
  • capital gains on the sale of an important participation in a company are liable to tax at 16.5% (plus local tax); if you are in this situation, check with your accountant.
  • if you are a day trader, that may well become a professional activity and then your gains may be liable to tax, and possibly social security, as a professional investor.

Your tax return:

2021 Tax Return: Box XII – Paying your Taxes in Advance

If you have paid your tax in advance, e.g. because you don’t have an employer who deducts the tax from your salary, you report that under 1570/2570 in Box XII.

Paying the tax in advance is highly recommended, in particular for self-employed. Not doing so results in a tax increase of 2.25% of the tax. If you don’t have to pay the tax in advance (e.g. the tax on dividends you receive abroad, you are entitled to a tax reduction of 1.125%.

Your tax return :

2021 Tax Return: Box X – Other Tax Deductions

Box X is for all sorts of payments or expenses that you have made and for which you can claim a tax reduction. That goes from

  • gifts to charities (1394): the minimum is €40 per charity, if you have a tax certificate from the charity, you can recover up to 60% of the gift by reducing your tax bill (that is due to Covid, the normal deduction is 45%);
  • childcare (1384): you can deduct €13 per day of expenses for childcare in a crèche or in other after school care centre for children up to 12. If you have children under 3, you may be better off with the additional allowance of €610 for dependents;
  • pension saving (1361/1362); you can pay up to €980 per year to a pension savings fund or insurance, that can give you a tax saving of 30% or €294; you can opt for a 25% tax saving with a maximum of €1,260, the saving is €315. If you pay more than €980 in pension savings, the taxman will assume you opt for the 25% tax saving. Also keep in mind that when you get a tax reduction now, when you turn 60, the bank will deduct 8% tax even if you continue pension saving.
  • titres services/dienstencheques 3365/4365, but 3363/4363 in Flanders) and PWA-chèques / cheques ALE allow you to pay for certain personal services, like cleaning. If you pay with these cheques, you can recover 15% in Brussels on a maximum of €1,500 per spouse or partner; that is €225, so that you only pay €7.65 for a cheque of €9. In Flanders, you recover 30% or €450. In Wallonia, the tax reduction is 10% with a maximum of 150 titres, that is €150 per spouse or partner.
  • If you have legal expenses insurance, you can report the premium (1344/2344) with a maximum of €310 per year and that can give you a tax saving of 30% or €93.

Your tax return :

2021 Tax Return: Box IX – Mortgages

In box IX you mostly report interest and mortgage payments to buy your main residence (under I) or another property (under II).

The tax incentives to buy your main residence are a regional matter and you will see that the codes relating to your main residence start with a 3 (for him, on the left) or a 4 (for her). The rules depend on whether you live. In Wallonia, it is called “chèque habitat“. Brussels Capital region has kept the old federal rules for mortgages taken out until 2016 but replaced these deductions with a reduction on the purchase tax of 12.5%.  Flanders has kept the “woonbonus” for mortgages until 2019 but since 1 January 2020 replaced it with a lower purchase tax.

If you buy a second property, you are entitled to federal tax benefits (under II). That is mostly a deduction of the interest.

If you file online, a wizard helps you complete your tax return for most mortgages taken out after 2004. The taxman knows, from the bank, how much you paid in capital reimbursements and interest and the wizard helps you claiming the correct tax deductions. It does not, however, optimise the deductions for you.

Your tax return:

2021 Tax Return: Box VIII – Maintenance Paid and Losses from Previous Years

Losses

If you have made losses in past years, i.e. you had more expenses than income, you can carry forward these losses to later years and deduct them here.

Maintenance paid

If you pay alimony and/or child support to your ex, you can deduct 80% of these payments from your income.

Maintenance paid can be deducted up to 80% if

  • you have a legal obligation under the civil code (or an analogous rule abroad) or under a court order to pay maintenance to an ex, (grand)children, (grand)parents, parents-in-law or children-in-law;
  • the beneficiary is destitute;
  • they don’t live with you;
  • you pay regularly and the sums aren’t excessive.

You need to identify the person who receives the maintenance on p. 3 of your paper tax return. The tax authorities have warned they are going to pay particular attention to payments made to beneficiaries in other countries. Depending on the double tax treaty (list) between Belgium and the country where the beneficiary lives, you may have to deduct withholding tax and pay that to the State.

 

Some planning opportunities

When one parent pays maintenance, she can take an 80% deduction for her payments if the children are domiciled with the other parent. However, she gets no allowance for dependents; the other parent will be entitled to the full allowance. They both pay less taxes, €100 paid in maintenance gives a tax reduction of about €40.

Your tax return:

2021 Tax Return: Box VII – Investment Income

Box VII is for the income of your investments, i.e. dividends and interest.

These are normally taxed at source; the (Belgian) bank or the company that pays the dividend deducts 30% tax when they pay out. If that is the case, you don’t have to declare the interest or dividends in your tax return, but foreign banks do not withhold Belgian tax

If you received interest on a regulated savings account, that is tax exempt up to €980 per spouse or per partner (that is €1,960 for a couple). Any interest over €980 is taxed at 15% and must be reported in code 1151/2151. The same applies to comparable savings accounts within the European Economic Area. If the bank pays you more than €980, it will deduct 15%, but the bank doesn’t know if you had interest on other savings accounts. If the total interest on all your savings accounts, in Belgium and abroad, is more than €980, you have to complete code 1151/2151.

Dividends and interest on non-regulated savings accounts are taxed at 30%.

It is only when the bank has not deducted the 30% tax – mostly because it is a foreign bank – that you have to report the income under the correct codes, usually 1444/2444.

Moreover, you can now recover the Belgian withholding tax on dividends with a maximum of €800 per spouse or per registered partner (that will give you a tax saving of €240 if the withholding tax was 30%).  You will have to do your homework and make a list of all the dividends you received and the withholding tax deducted. The Belgian withholding tax that has been deducted from dividends from Belgian companies goes in code 1437/2437 with a maximum of €800. Dividends from overseas companies must be reported in code 1444/2444, but you can deduct the rest of the exemption of €800 first.

30% on interest and dividends is quite high as a tax, compared to 15% just a few years ago.  If you have little taxable income, you may opt to have your dividends and interest taxed with your other (taxable) income at the ordinary tax rates. You can deduct the bank charges, the first €8,990 is exempt as a personal allowance, and then the standard tax rates start at 25%. If the average tax rate is less than the 30% withheld at source, the difference is reimbursed. 

Overseas bank accounts

Interest on overseas bank accounts has to be reported, usually in code 1444/2444.

The other country will also want to tax the dividends or interest. Under the double tax treaty (see the list/map), that will be a maximum of 10 or 15%; usually, you will have to provide a certificate of residence in Belgium. If tax has been deducted, you report the net income after tax and 30% tax is due on the net income.

Do not forget to declare overseas bank accounts (see Box XIII).

If you have received dividends, you may also have a securities or brokerage account, this year, you do not have to report these bank accounts, but you may have to do so next year (see Tax on Securities Accounts).  

Bank charges

There is a code 1170/2170 to report the fees and charges you pay to the bank. They are usually not deductible unless you pay tax on the dividends and interest at the standard tax rates rather than at the fixed rate of 30% (see above).

Your tax return:

2021 Tax Return: Box VI – Alimony and Child Support

If you receive alimony, you must declare it in Box VI under code 1192 and you will be taxed on 80% of the maintenance.

There are separate codes for maintenance that is paid retroactively following a court decision (1193) and for maintenance that is paid in a lump sum. In that case, you have to declare every year a percentage of that capital.

Child support

If you receive child support, you don’t declare that in your own tax return (see Family Situation). You need to file a separate tax return for each child, and you declare the child support in code 1192. As long as the child support is less than €11,238 per child, or €936.46 per month, they will not pay any tax. Only 80% of the child support is taxed and 80% of €11,238 is €8,990, which is wiped out by the personal allowance of €8,990.

Even if they do not pay tax, children who receive more than €4,225 in maintenance are not dependent anymore. The threshold is €3,380, and that is 80% of €4,225.

In any case, you need to identify the person who pays the maintenance, even if they aren’t Belgian residents, and if you file on paper on the relevant box at the bottom of page 3.

Your Tax Return :

2021 Tax Return: Cross border taxation

If you live in Belgium and you have income from another country, both countries will want to tax the entire income and that may result in double tax.

To prevent double taxation, governments sign “conventions for the avoidance of double taxation”. In these double tax treaties, the two states agree which of them can tax business income, rental income, dividends, interest, royalties, salaries, pensions, etc. More importantly, the treaty also says what they must do to prevent double taxation (that is called “treaty relief”).

It isn’t as simple as “I live and work in Belgium, but I work for a US company and I am paid on my US account, so I don’t have to declare my salary in Belgium”. You really need to read the text of the actual treaty (see the list/map); double tax treaties have a similar structure, but no two treaties are the same.

  • for rental income, all treaties say that the income is taxable in the other country and that Belgium has to give treaty relief.
  • for remuneration, you only pay tax in the other country for the days* you actually work there and
    • if you worked there 183 days or more in a year, or
    • if you were paid by a local company, or
    • if you were paid by the local branch of a company.

* Note that if you live in Belgium and work in the week in Switzerland for a Swiss company, you pay tax in Switzerland but only for the days you work in Switzerland. If you work at home on Fridays, or if you have to take a business trip to the US, your income for those days isn’t taxable in Switzerland but in Belgium.

 **  Note for Corona-times and your tax return next year. Due to Covid-19, workers had to work from home in 2020. This means that they would be taxed in Belgium on their salary for the days they were working from home. Belgium has concluded agreements with France, Luxembourg and the Netherlands to agree that the days of confinement at home are not deemed to be working days in Belgium (see Taxes in Corona Times). Unfortunately, there is no such agreement for people who could not go and work in other countries.

  • government remuneration and pensions are usually taxable only by that government;
  • state pensions are mostly – but not always – taxable in the country that pays the pension;
  • private pensions are usually – but not always – taxable in Belgium if you live here.

If the income is taxable in the other country, you still have to declare it in Belgium. Belgium gives treaty relief by way of “exemption with progression”. This means that Belgium looks at all your income to determine the average tax rate, but exempts the income that is taxable abroad.  This means that the income is exempt but it pushes your other income (the income that is liable to tax in Belgium) higher up in the progressive tax rates.

For remuneration, you have to complete box IV.O.

For pensions, that is box V.C.

Dividends, interest and royalties are taxable in both countries, and usually the tax withheld in the country of source is limited to 10 or 15% when you present a certificate of residence. In Belgium, you declare the net income after tax and you pay 30% tax on that net income.

Your tax return;

2021 Tax Return: Box V – Pensions

Box V is for pensions and other similar income. Your state pension goes in code 1228/2228 and a survivor’s pension goes in 1229/2229. The tax that has been deducted goes in code 1225/2225.

Other pensions such as the complementary pension paid by a pension fund or other pension schemes are to be reported usually under code 1211/2211. Pensions paid by the European Institutions are not liable to tax while pensions paid by other international organisations usually are.

In Belgium, employer funded pensions are geared to be paid out in the form of a pension capital. There is a 5.55% social security contribution and a fixed tax rate of 10% if you take your pension at the legal retirement age of 65. The code will normally be 1215/2215.

If there are special forms of pension, the payslip issued by a Belgian organisation will clarify the code. If it is an overseas pension, you have to work out in which code the pension goes.

Please note that if you receive an overseas state pension that may be liable to tax in the other country. If you receive a government pension from another country, that will definitely be taxable there. Private pensions paid by an overseas pension fund or scheme are usually taxable in Belgium but that depends on the double tax treaty (check the list / map), e.g. a pension from the U.K. is normally taxable there, unless you first took out your pension before 2013.

If the double tax treaty states that the pension is taxable in the other country and that Belgium must exempt it, you must report the pension under the relevant code as set out above, but you must mention that it is exempt at the end of box V under letter C. Do not forget to copy that at the bottom of p. 3 of the tax return.

Even if the double tax treaty says that an occupational pension is liable to tax in Belgium, that does not always mean that it is fully taxable in Belgium. If the overseas pension has been built up by the employer to the individual and definitive benefit of the employee, in particular before 2004, the pension is not taxed as an occupational pension. It is deemed to be an annuity that belongs to the pensioner and it includes a reimbursement of capital and a payment of interest. Only the interest part is taxed at a fixed rate of 30%.

Your tax return :

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