People are increasingly gaining foreign work experience, which is certainly enriching in many ways, but what about the tax consequences? A Belgian resident is taxable (personal income tax) on his global income. The main rule is that a foreign income (salary as an employee or profits as a self-employed person) is also taxable in Belgium.
Of course, the source state (where someone works) may also tax the same income on the basis of its own tax laws. Double taxation treaties have been put in place to avoid issues of double taxation. Belgium has an extensive network of treaties with other countries, not only with other member states of the European Union but all over the world. Insofar as there is no double taxation treaty with a given state, Belgium has unilateral tax relief rules.
What are the guiding principles in the double taxation treaties?
- For employees living in Belgium:
Salaried employees pay taxes on their salary in the state where they reside, unless they work in the partner state of the treaty. In the latter case, their salary is taxable only in the country where they work. The gross foreign salary must be declared in Belgium, but you can indicate that the income is exempted under the applicable treaty.
For those who do not work full-time abroad, a special rule (183 days) applies on the basis of which the income may only be taxable in Belgium (the state of residence).
Anyone who invokes a tax exemption must prove he complies with the conditions. The predominant issue is that the employee must actually work abroad and thus must be physically present in the partner state.
The tax administration verifies this, and the administration refuses the exemption if the employee cannot prove his physical presence in the source state. In practice, numerous problems arise:
How many days can you telework e.g.? A Belgian resident working in Luxembourg e.g. benefits from a specific regime since 2015 allowing 24 days of telework.
- For self-employed persons and enterprises residing in Belgium or situated in Belgium:
They are also taxable in the state of residence unless they have a permanent establishment in the partner state, such as an office, a factory or a shop. A construction site may also be eligible to the extent that it lasts longer than 12 months.
The income taxable abroad is only the income that can be attributed to the permanent establishment. Self-employed persons and companies must also be able to demonstrate that they meet the conditions for exemption in Belgium. In the affirmative, the income is not taxed in Belgium. Here again, the gross amount must be declared in Belgium, claiming the right of exemption.
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