INDIVIDUAL TAXATION

INDIVIDUAL TAXATION

Non-residents are taxed on their Belgian-sourced income. Married couples are taxed separately on their earned income but their other items of income are aggregated and included in the taxable income of the spouse with the higher income.

INCOME TAX (PIT)

The personal income tax rates for assessment year 2010, applicable to tax year 2009, income are:

RENTAL INCOME

Non-residents renting out their property will be taxed on rental income exceeding €2,500. Rental income below the limit need not be reported in a non-resident income tax return, provided that it is the only source of income in the country.

Taxable income is based on the ‘cadastral income’, which is the property’s deemed income. This is an annual indexed value determined by the tax authorities, but in practice the 1975 index is used, so that cadastral income values tend to be lower than actual rental incomes.  

The cadastral value is increased by 40%, minus deductible expenses (which includes depreciation, repairs, maintenance, renovations, interest payments, as well as real estate and inheritance tax payments). The expenses relating to immovable property are computed on a flat basis depending on whether the property is built upon or not (which result in a deduction of 40% or 10%, respectively).

Depreciation for rented property is computed through the straight-line (property value – scrap value/estimated life) method. The annual depreciation rate of real estate is around 3% of the property’s investment value based on the original acquisition cost.

CAPITAL GAINS TAX

Generally, capital gains realized by individuals not engaged in business activities are not taxable. However, specific cases are subject to separate taxation.

For developed immovable property sold within five years of acquisition, a 16.5% capital gains tax is levied. After a holding period of five years, no capital gains tax is payable.  

Capital gains tax is levied at 16.5% for undeveloped immovable property sold after five years of acquisition but within eight years of acquisition.

Capital gains tax is levied at 33% for speculative transactions and for undeveloped property sold within five years of acquisition.

However, if the property is sold within 2 years, the seller can claim back around 44% of the taxes and fees paid. All expenses incurred related to the property value are deductible, subject to proper documentation.

PROPERTY TAX

Real Estate Tax (Onroerende Voorheffing/ Pre compte Immobilier)

A levy known as "immovable withholding tax" is imposed on the deemed income from immovable property located in Belgium. Although called "withholding tax", this tax is levied by assessment. Tax on immovable property is levied on the cadastral value of the property at rates ranging from 1.25% to 2.5% depending on the location.

For the Flemish region, the rate is 2.5%, while it is 1.25% for the Walloon and the Brussels regions. Municipal surcharges increase the effective rate to between 18% and 50% or more, depending on the municipality where the property is located.

Municipal Tax

The municipalities may levy surcharges on the national income tax. Regional governments are also entitled to levy surcharges on income tax. The rates vary from 0% to 8.5%, and the average rate is 7% to 7.5%.

Non-residents receiving taxable income exceeding €2,500 from Belgian immovable property must pay a municipal surtax fixed at 7%.