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 country where the property is located and that Belgium has to give treaty relief, i.e. exempt it from tax
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 from 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 2021. This means that they would be taxed in Belgium on their salary for the days they were working from home. Belgium has conluded agreements with France, Germany, 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.

Keep in mind that in some double tax treaties, Belgium has reserved the right to calculate the local municipal tax due on top of the professional income as if that income was not exempt.

some 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 deduction of the foreign tax and you pay 30% tax on that net income.

Your tax return:

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