Although Belgium is not allowed to tax the income from foreign real estate, this must be considered for the determination of the rate that may be applied to other taxable income. However, because the taxable income of a property abroad is established in a different manner, you may end up in a higher personal income tax bracket. This may result in you paying more taxes.
Your holiday home is not rented out
In its previous judgement, the European Court of Justice focused only on second residences that are not rented out. After this first judgement, however, no amendment to the law was implemented, although the Belgian Administration did distribute an internal guideline that offers a conclusive solution for several countries.
Your holiday home is rented out
With its recent judgement, the Court of Justice ruled that at the time Belgium did not take sufficient measures to eliminate the unequal assessment of the taxable income from non-rented holiday homes. In addition, Belgium is now also being rapped over the knuckles because the Belgian legislation on rented foreign holiday homes also conflicts with the free movement of capital. Individuals who rent out their foreign holiday home must declare the rental income they actually receive. Belgians with a domestic holiday home, on the other hand, are taxed on the indexed cadastral income increased by forty percent.
Consequences for Belgian taxpayers
Belgium will have to amend its legislation in light of these two judgements. In the meantime, owners of non-rented foreign holiday homes can rely on the internal directive issued by the Belgian Administration. However, owners of rented foreign holiday homes shouldn't throw in the towel just yet, either. They can challenge the determination of the taxable income of this property based on recent developments in Belgian case law and the judgement by the European Court.
If you have a foreign holiday home that you do or don't rent out, don't hesitate to contact your account manager or our specialists via firstname.lastname@example.org.
We base our advice on current legislation, interpretations and legal doctrine. This does not prevent the administration from being able to challenge it or to change existing interpretations.