Belgian additional tax for non-residents in violation of EU law

What is the ruling about?

Non-residents receiving Belgian source income, e.g. salary, pension or rental income, are subject to non-resident tax (GNI).

If Belgium (on the basis of the double taxation treaty) is also effectively authorized to levy taxes, the basic tax is calculated according to progressive brackets that are the same for residents and non-residents.

The difference is in the additional tax:

• Belgian tax residents pay an additional municipal tax on top of the basic tax. The rate for this tax varies by municipality and ranges between 0% and 9%.

• A different arrangement applies to non-residents. They pay no municipal tax, but are taxed via federal surtaxes of 7%, calculated on the basic tax.

This arrangement aimed to tax residents and non-residents in a similar way. In practice, however, this can lead to non-residents being taxed more heavily than residents. Belgian tax residents pay taxes lower than 7%, sometimes even 0%, in some municipalities.

Why is this contrary to EU law?

According to the European Court of Justice, this difference constitutes a barrier to the free movement of workers (Art. 45 TFEU).

The Court emphasizes that this obstacle does not require that non-residents be systematically taxed more heavily. It is sufficient that the Belgian regime can lead to a higher tax burden in certain cases, for example when a person lives in Belgium in a municipality with 0% or low additional tax.

Can you get a refund?

Non-residents who have paid this additional tax may be able to claim a refund.

• The Belgian deadline to file an objection is one year from receipt of the assessment notice.

• Court judgments are considered a "new fact," which also opens up the possibility of filing a request for ex officio relief. Such a request can be filed within a period of five years from Jan. 1 of the year in which the tax was established.

What does this mean for the future?

The scope of the Chefquet ruling potentially extends beyond the additional tax for non-residents.

In Belgium, the fact that certain coastal municipalities levy 0% additional municipal tax, specifically in the context of taxing second residences compared to permanent residents, has long been the subject of debate. This arrangement has been challenged for years on the basis of inequality. The ruling could re-fuel these debates and put pressure on the broader municipal tax framework.

So for now, it remains to be seen how Belgium will deal with this case law. We continue to monitor this evolution and are available for further comment.