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As part of the year-end legislation 2022, the Belgian Official Gazette published on the one hand, a Program Law (“Programmawet/Loi-programme”) dated December 26, 2022, enacting the 2023 budgetary measures as approved by the Belgian federal government, and on the other hand, a Law containing various tax provisions (“Wet diverse fiscale bepalingen/Loi portant des dispositions fiscales diverses) dated December 21, 2022.
Both laws contain several measures with respect to income taxes, VAT and customs and excises.
From a personal income tax perspective, the Program Law reforms the copyright/software tax regime and abolishes the tax reduction for mortgage loans relating to a second home or residential investment property. The new measures in the Law containing various tax provisions include a tax credit for alimony paid by non-resident taxpayers, a broadened scope of the special tax regime for inbound tax payers and researchers, and clarifications regarding the minimum salary threshold as well as measures relating to the rent to companies for social housing.
In this alert, we highlight the most significant measures related to personal income taxes. For the year-end legislation, related to corporate income tax measures, we refer to our tax alert.
Reform of the copyright/software tax regime
The IP reform included in the Program Law entails various changes to the taxation regime of copyright income in Belgium, a.o. new underlying conditions which need to be fulfilled on behalf of eligible employees.
These changes take effect as from January 1st, 2023. However, a one-year transition regime has been foreseen over the income year 2023 for authors who already applied the IP Reward regime in the course of the income year 2022. Specific rules have been set forth for individuals who fall under this transition regime (including a halving of the applicable IP thresholds).
For more information about this new regime, we refer to our previous alert.
Despite the fact that the Minister of Finance confirmed that the scope of the new tax regime should not be interpreted in a restrictive way, as a consequence of which all sectors would thus principally be able to apply the new taxation regime (as highlighted in the explanatory memorandum), various points of discussion still remain. It might be expected that legal clarification will be provided in the course of the following months (infused inter alia by positions taken by the Administration, Ruling Commission).
Tax reduction for mortgage loans relating to a second home or residential investment property
The Program law abolishes the federal tax reduction for capital reimbursements of mortgage loans, associated with a second home or residential investment property and concluded as of January 1st, 2024. The tax reduction will remain in place however for mortgage loans concluded until December 31, 2023, even if the loan is refinanced afterwards. The interest deduction is not affected by the Program Law so tax payers will still be able to deduct the interest paid from their real estate income, even for a loan that started in or after 2024.
In addition to the above, the tax deduction for life insurances will no longer be applicable in case the life insurance guarantees or reconstitutes the capital of a mortgage loan, concluded as of January 1st, 2024.
An anti-abuse measure avoids that existing mortgage loans are renegotiated in order to extend the tax benefit of such loans. This anti-abuse measure applies to all actions taken as from January 1, 2023.
Tax credit for alimony paid by non-resident taxpayers
Previously, non-resident taxpayers who earn less than 75% of their worldwide professional income in Belgium could not benefit from the tax credit related to alimony payments, even if they cannot benefit from the same deduction in their state of residence.
With the aim of attaining the free movement of workers within the European Union and considering the case-law of the European Court of Justice, the new law provides that if a non-resident tax payer does not meet the 75% rule, the deduction for alimony payments will still be allowed if conditions are met. A.o. the non-resident taxpayer should demonstrate that he did not fully benefit from the deduction in the state of residence.
Broadened scope of the special tax regime for inbound tax payers and researchers and clarifications regarding the minimum salary threshold
A new expat tax regime for inbound tax payers and researchers entered into force on January 1, 2022 (see our previous alert).
The recent Law containing various tax provisions makes some adjustments to this new legislation by the law.
Employer condition
Expats living abroad had to be either recruited from abroad or being assigned from abroad to a Belgian company. Included in the scope of employers are Belgian non-profit organizations as well as Belgian local companies without a multinational footprint. However, public service institutions and Foundations were initially excluded. After an appeal of annulment towards the Belgian Constitutional Court, the legislator now retro-actively enlarged the scope of eligible employers. As from January 1, 2022, companies or branches registered in the Belgian Crossroads Bank for Enterprises are all eligible employers. To give qualified expats, working for public service institutions or Foundations, the opportunity to apply retro-actively for the new regimes, a new application deadline has been set out (solely for them) at 3 months following the 10th day of the publication of this law. As the law was published in the Belgian Gazette on December 29, 2022, the deadline that should be respected is April 8, 2023.
Employee condition
Not only the scope of qualifying employers has been discussed in this new law. Also, the definition of the minimum salary threshold was amended with the aim to remove some ambiguities.
As a refresher, the initial text stated that the remuneration received by inbound tax payers (employees and company directors) for performances in Belgium, should exceed EUR 75.000 per calendar year. The authorities now clarified that for the determination of the threshold, the place where the activity is performed is irrelevant, as long as it concerns income that is considered taxable in Belgium.
Rent to companies for social housing
A private person who rents a house to a "legal entity which is not a corporation" is taxed on the basis of the cadastral income increased by 40% (instead of taxation on the effective rental amounts), provided that this legal entity makes the property available to one or more private persons for exclusive use as a residence. This arrangement will now also apply if the property is rented with the same purpose to a "regional housing company or a social housing company”, even if it takes the form of a corporation. In other words, the rent to social housing companies is assimilated to the rent to a legal entity that is not a corporation.
If you have any questions on these new measures, please reach out to your EY contact.