Dealing with tax, payroll, and employment regulations for your staff from overseas is a tricky process. Belgium is no exception, with fines, sanctions and other penalties applying for not complying with the complex and many-layered aspects of taxation.
Global expansion is a great way to grow your business and Belgium offers many attractive business opportunities. However, the tax laws can be complex and require time-consuming research. By using our PEO-service we will take care of the complicated legwork so that you can focus on your business goals in Belgium.
We have made it our goal to keep track of the latest changes in tax policies to always ensure complete compliance. To keep you informed and updated too we created this guide which includes the basic facts regarding tax regulations in Belgium.
Overview of Taxes in Belgium
- Individual Income Tax: Progressive, from 25% to 50%
- Basic personal allowances: €8,990 (US$10,630), plus deductible child allowances ranging from €1,630 (US$1,930) for one child to €15,250 (US$18,030) for four children.
- Social Security Taxes: The employer withholds and remits to the authorities the equivalent of 25% of the employee’s pay. Employees contribute 13.07%.
- Value Added Tax: The standard rate is 21% applied to goods and services. A reduced rate of 12% applies to such as food served in restaurants, with 6% on medicines, water distribution and agricultural services, among other categories.
- Corporate Taxes: The corporate tax rate was reduced to 25% in 2020 (from 29.58%) with a conditional rate of 20% for small and medium-sized enterprises (SMEs).
- Withholding Tax (WHT): A rate of 30% applies to dividends, interest and royalties paid by Belgian corporations to foreign companies and individuals, with some reductions under Belgian tax laws.
- Other Taxes: Residents pay communal taxes, levied locally, and based on income tax due. Rates vary up to 9% of the income tax to be paid. Non-residents pay a flat surcharge of 7%. There are also capital tax rates applied to earnings from funds, securities, and property. There is also inheritance tax but no actual wealth tax.
Belgium Individual Tax – Single, Married
Income tax must be paid by everyone, regardless of nationality, who is settled in Belgium or has made it their center of financial interest. Tax is payable on their worldwide income. Income earned by individuals neither living there nor having it as a center of financial interest must pay non-residents’ tax on income earned in Belgium. Expatriate workers will normally be liable for Belgian taxes.
Individuals are considered tax residents if:
- Belgium is their main home or center of economic interest
- They are entered on the civil register
- They are present in Belgium for more than 183 days in any 12-month period
Resident and non-resident individuals’ taxable income
- 0 - €13,440 (US$15,890): 25%
- €13,440 - €23,720 (US$28,044): 40%
- €23,720 - €41,060 (US$48,560): 45%
- Above €41,060: 50%
Married or legally cohabiting couples must file joint returns but are taxed separately. If one partner does not work, up to 30% of the working person’s income is attributed to the non-working partner, for up to a maximum of €11,900 (US$14,070) annually.
Taxable income includes all earned income whether salaried or self-employed, interest and dividends, income from property and any miscellaneous sources. Such as meal vouchers and daily expenses are not taxed.
Foreign staff can apply to benefit from the expatriate tax regime if they and the employer apply within six months of starting employment. Employees must be non-residents under Belgian tax law and be employed as executives, directors, researchers or qualify as specialists.
Belgium Individual Tax Rules
- Tax and social security contributions withheld by employers are remitted to the National Social Security Office (NSSO) and the relevant tax authority for their region.
- Remittances to the tax authority should be made by the 15th of the month following salary payment to the employee.
- If tax prepayments are due, they should be made by the 10th day of April, July, October, and December.
- The tax year runs from January 1 until December 31 with returns due by June 30 of the following year for residents and September 30 for non-residents.
- Married couples or those legally living together file joint returns but are taxed individually.
- Permanent residents are taxed on worldwide income; foreigners are taxed on their Belgium-sourced income at the same rates as Belgian taxpayers.
- A tax resident is someone who has lived in Belgium for 183 days over 12 months, or if they are entered in the civil register or if Belgium is their center of main economic and financial interest.
- Taxable income includes all earned remuneration, whether from full-time work or as self-employed: income from interest, dividends, property, and any miscellaneous sources.
- Meal vouchers and daily expenses are not taxed.
Individuals are also accountable for other taxes such as:
- Social security deductions – employees contribute 13.07% from their earnings
- Communal taxes are paid by residents, levied locally, and based on income tax due. Rates vary up to 9% of the income tax
- Non-residents pay a flat surcharge of 7% in communal taxes
- Capital tax applied to earnings from funds, securities, and property
- Inheritance tax, although there is no actual wealth tax
Value Added Tax (VAT) and Excise Duty
VAT incorporates directives set by the European Union in Belgium’s own regulations and is administered by the Ministry of Finance. Registration and returns are processed by the local tax authority.
Foreign companies can register for VAT without forming a local company; there is no threshold for registering but before starting operations companies must have obtained a VAT number by completing Form 604A for submission to the local tax office.
VAT registration is required for companies buying, selling, or importing goods in Belgium; selling goods to EU countries; organizing events, holding stock or distance selling via the internet. VAT compliance is closely monitored in terms of invoicing, foreign currency transactions and credit notes.
At the consumer level, the standard rate is 21% applied to goods and services. A reduced rate of 12% applies to such as food served in restaurants, with 6% on medicines, water distribution and agricultural services among many other categories for reduced or zero-rated goods and services.
Excise duty in Belgium applies to such as coffee and non-alcoholic drinks at the local level and energy products, alcoholic drinks, and manufactured tobacco at the EU level. Excise duty applies to goods imported from outside the EU. Details on rates can be found here.
Belgium Employers’ Social Security and Statutory Costs
These are based on total remuneration including salary, bonuses, and benefits in kind.
For white-collar workers, employers contribute the equivalent of 25% of employees’ pay to the National Social Security Office (NSSO), based on total remuneration including salary, bonuses, and benefits in kind. Employees contribute 13.07%.
Other statutory costs include the national minimum wage of €1,627 (US$1,925) per month or €19,508 (US$23,086) per year based on 12 payments each year, which can be increased by Collective Bargaining Agreements.
Belgium Corporate Taxes
A company based in Belgium is liable for corporate tax on its global profits and income including capital gains. Companies are considered ‘resident’ if they have a legally registered office with management based in Belgium.
The corporate tax rate was reduced to 25% in 2020 (from 29.58%) with a conditional rate of 20% for small and medium-sized enterprises (SMEs).
Capital Gains and Withholding Tax
There is no specific capital gains tax in Belgium, where some categories are taxed as general income. Short-term capital losses are not tax deductible.
The regular Withholding Tax rate is 30% on dividends, royalties and interest payments to foreign individuals or corporations.
Corporate Deductions and Capital Allowances
General deductions include depreciation of assets such as buildings, machinery, funds spent on incorporation, charitable donations, vehicles, operating deficits, interest expenses and bad debts.
Avoid risks – make the right move
Belgium’s tax regulations demand expert advice for incoming foreign companies. Businesses cannot risk stumbling into mistakes over payroll and taxation, running the risk of fines and sanctions. Do not waste time worrying about your move into Belgium – contact us today.