Belgian tax authorities investigating the temporary nature of expats

by Ray Clancy on April 23, 2014

Foreign executives working in Belgium who have been benefiting from special expat tax status for 10 years or more are being investigated by the country’s tax man.

Belgian tax authorities are carrying out an extensive audit and making calculations from the first day the expat workers arrived in Belgium regardless of how many employers they may have had.

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It is expected that the tax status of around 3,000 expats will be checked

The crackdown has started with companies with more than 10 employees benefiting from the special tax status who have worked for a decade or more in Belgium.

The aim is to make sure the expats who are non-residents still meet the requirements by verifying whether the centre of their private and economic interests continues to be outside of Belgium after all these years.

A letter has been sent to the relevant companies who will be audited, asking them to list all their expats benefiting from the special tax regime.

In Belgium, there are special tax concessions to non-Belgian executives who ‘temporarily’ exercise a professional activity in Belgium. Those that qualify are treated as non-residents for tax purposes and are taxed only on their Belgian income.

However, expats can only benefit from the special tax regime on the condition that the employment and stay in Belgium are of a ‘temporary’ nature. When filing the initial application for the status, the taxpayer needs to prove that there are sufficient ties with their home country or country of origin such as household bills or insurance.

It is expected that the status of around 3,000 expats will be checked. The tax man wants a list for each person giving Belgian assets, movable and immovable, and will look at where they own property and where their children go to school. The working life of spouses and partners will also be examined.

Once a letter is received the authorities are asking for a reply within one month and three days although an extension can be requested if necessary.

If it turns out that the expat’s centre of private and economic interests is regarded as being in Belgium and therefore no longer abroad, the special expat tax status of the employee will be withdrawn.

Also, new rules mean that if you are an expat benefiting from the special expat tax status in Belgium, your working days outside of Belgium will be excluded from the taxable basis.

The rules amends the method for calculating non-resident individual income tax in respect to personal tax allowances. The category of non-residents with an abode in Belgium will be abolished and expats benefiting from the special tax status who have a foreign travel exclusion exceeding 25% per year will no longer be entitled to the personal tax allowances.

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