by Hannelore Durieu and Febe Louage
Currently, Belgians with a second residence abroad are taxed differently and often more heavily than Belgians with a second residence in their own country. With this unequal treatment, Belgium is violating one of the basic principles of the EU: the free movement of capital. Belgium was previously condemned by the European Court of Justice for this. Until now, however, internal legislation on this subject has not been adapted. Following a second recent judgement from the Court of Justice, Belgian law must now be amended.
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.
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.
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.
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 email@example.com.
In our opinions, we rely on current legislation, interpretations and legal doctrine. This does not prevent the administration from disputing them or from changing existing interpretations.