Belgium – Reform of the expat regime

The Omnibus Law of 27 December 2021 introduced the special tax regime as two sets of rules (one for executives and another for researchers), but aside from some minor differences (mainly in the definition of the eligible persons), the conditions are mostly identical and are separated for purposes of facilitating internal references within the Belgian Income Tax Code.

What does the special tax regime entail?

The special tax regime allows companies to pay, in addition to the base salary, a lumpsum amount of up to 30% of such base salary (capped at €90,000 per year) which is treated as “costs proper to the employer” (i.e., exempt in the hands of the executive or the researcher, while still a deductible expense for the employer).

On top of this lumpsum amount, certain exceptional expenses (moving expenses, costs incurred during the first 6 months to furnish the Belgian residence, or school tuition fees) can also be reimbursed tax-free by the employer.

Who is eligible?

The eligible executives (employees and directors) and researchers must meet some basic conditions:

• The must have been recruited outside Belgium by a Belgian company or establishment that is part of a multinational group or a non-profit association, or they must have been seconded by a foreign company which is part of a multinational group to a Belgian company or establishment or a non-profit association, in view of exercising a remunerated activity in Belgium.
• In the course of 5 years prior to the employment, they may not have been tax residents of Belgium or have lived less than 150 km from the Belgian border, nor have been subject to Belgian non-resident income tax.
• They must have obtained formal approval from the Belgian tax administration to apply the special tax regime.

Further specific conditions apply, depending on whether the impatriates are executives or researchers.

Executives must additionally earn a gross annual salary of at least €75,000, including benefits in kind and bonuses but excluding severance pay, compensation for temporary loss of earnings or the 30% lumpsum amount. This threshold can be adjusted by Royal Decree every 3 years in order to reflect inflation.

Researchers will further only qualify (a) if they:

a) devote at least 80% of their working time to R&D activities of a scientific, fundamental, industrial or technical nature carried out in a laboratory or company which run one or more R&D programmes; and
b) avail of a specific diploma and/or can demonstrate relevant professional experience of at least 10 year. Only doctor or master’s degrees in the fields of exact or applied sciences, civil engineering, medical sciences, veterinary medicine, pharmaceutical sciences, architectural sciences or agricultural sciences will qualify as eligible diploma.

Residence certificate

Under the general residence principles, executives and researchers will, in most cases, qualify as Belgian residents for Belgian tax purposes, which implies taxation of the person’s worldwide income. Should the executive or researcher nevertheless claim to qualify as a non-resident for Belgian tax purposes (e.g. because the seat of wealth or the centre of personal interests are still located in the home country), they will have to demonstrate their foreign residence by filing an annual residence certificate issued by the tax administration of his home country.

What needs to be done to apply or maintain the new impatriate tax regime?

The employer must submit an electronic application within three months of starting the employment. The executive or researcher must issue a certificate formally approving the application. The Tax Administration should typically decide on the application within three months in writing, but there is no sanction (e.g. automatic approval or rejection of the request) if that deadline is not met.

Each year, the employer must send a nominative list to the Belgian Tax Administration containing the details of the executives and researchers who benefited from the special tax regime during that year.

The application of the special tax regime can be enjoyed for a maximum of five years. In certain situations, this can be extended by three years. An electronic application for extension must be filed within three months following termination of the five-year period.

An executive or researcher can maintain the benefit of this special tax regime if they would change employers. However, the same conditions continue to apply, and the maximum term of the regime continues to count as of first employment (i.e. prior to changing employers).

What happens with expats that are currently benefiting from the old expatriate regime?

A grandfathering period of two years is foreseen for foreign executives and researchers temporarily employed in Belgium under the old expatriate regime and who have already benefited from the expat status for five years on 1 January 2022.

For those who have been in the “old” system for less than 5 years, an application can still be submitted in order to switch to the new regime for the remainder of the maximum period of 5 years (which can be extended by 3 years) under the “new” regime provided the conditions are met and that the application is received by the Belgian Tax Administration by 30 June 2022 at the latest.

Action points to keep in mind

Expats currently employed in the (old) “expatriate” regime should timely request the roll-over into the (new) “impatriate” regime prior to 30 June 2022. New secondments to Belgium or hires from abroad require an application within three months of beginning employment in Belgium.