Tax on property income in Belgium
Taxation Researcher | January 26, 2023
Tax Rate on Rental Income
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Nonresidents 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)
Income tax is levied at progressive rates. The tax bands are adjusted annually.
|TAXABLE INCOME (€)||TAX RATE|
|Up to €13,440||25%|
|€13,440 - €23,720||40% on band over €13,440|
|€23,720 - €41,060||45% on band over €23,720|
|Over €41,060||50% on all income over €41,060|
|Source: Global Property Guide|
Nonresidents renting out their property will be taxed on rental income exceeding €2,500. Rental income below the limit need not be reported in a nonresident 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.
REAL ESTATE TAX
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.
REAL ESTATE TAX
|PROPERTY LOCATION||TAX RATE|
The tax rate is 2.5% for the Flemish region, while it is 1.25% for the Walloon region and 2.25% for 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.
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%.
Nonresidents receiving taxable income exceeding €2,500 from Belgian immovable property must pay a municipal surtax fixed at 7%.
Income and capital gains of companies are subject to the flat corporate tax rate of 29.58%. Income-generating expenses are deductible when calculating taxable income.
Subject to certain conditions, some companies may elect to be taxed at reduced progressive tax rates. One condition is that taxable income must be less than or €100,000.