Taxation no longer based on potential rental value
Up till now, as a Belgian taxpayer owning real estate abroad, you were obliged to declare the gross rental income or potential rental value as part of your personal tax return. As the real estate is located in another country, this amount is not actually taxed in Belgium. However, it is taken into account along with your other Belgian sources of income for the calculation of your average tax rate. This can mean you end up paying more.
For properties located in Belgium, it is sufficient to declare the cadastral income (CI). This CI is significantly lower than the real rental value currently used for foreign properties. Belgians with property abroad felt this practice was discriminatory.
What will happen in practice
Starting with the 2022 assessment year (2021 tax year), a CI will be allocated to any foreign property belonging to a natural person subject to Belgian personal income tax. No CI will be allocated to foreign properties owned by Belgian companies.
The CI for foreign properties will be determined in the same way as for properties within Belgium, namely based on the normal net rental value on 1 January 1975. The Belgian legislator assumes this reference value will not be readily available and has therefore developed a formula to calculate the 1975 market value based on the current market value.
First, apply a corrective factor to the current market value. For 2020, this is 15.036. This factor allows you to calculate the required investment to acquire capital corresponding to the current market value in 1975. Once you have determined the property’s market value for the reference date (1 January 1975), multiply this amount by 5.3% to calculate the CI.
You bought a property in France for EUR 300,000. First, divide this by the corrective factor of 15.036 to determine the market value in the 1975 reference year. EUR 300,000/15.036 = EUR 19,952. To calculate the final CI, multiply this amount by 5.3%. The CI for such a property is EUR 1,057 (0.053*19,952).
Required actions on your part
To be able to determine the CI, the authorities must be aware of the property’s existence. From 1 January 2021, Belgian residents must voluntarily register any acquisition or transfer of rights in rem to immovable property located abroad with the national property documentation centre (Algemene Administratie van de Patrimoniumdocumentatie). This registration must take place within four months of the acquisition or transfer.
If you already owned property abroad on 31 December 2020, you have until 31 December 2021 to declare it. The authorities will contact the relevant taxpayer to determine the CI.
Please note: for the 2021 assessment year (2020 tax year), you must declare the property’s potential rental value in accordance with the previous rules.
Don’t hesitate to contact our experts. They will be keeping a close eye on developments.
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.