Expats in Belgium face life under new tax regime

In Belgium, the land of chocolate, waffles and exorbitant rates of taxation, the expat tax dream is over.

This month, the country’s special expatriate tax regime — available to people hired from abroad and which was introduced in 1983 — came to an end.

From now on, only those earning over €75,000 gross (the exception is people who are researchers, for whom the threshold does not apply) per year can benefit from the special tax regime, a figure that’s out of reach for many expats — and also Belgians, who can now apply for the tax scheme.

It means a big cut in salary for many, as the previous regime allowed certain write-offs on taxable income, which have now been scrapped and replaced with a flat rate 30 percent deduction capped at €90,000 for work-related expenses.

“The number of people that will be able to now benefit from the new regime is much lower,” said Carolien Van Echelpoel from KPMG, putting the figure of those still getting the expat tax rate at around 10 percent.

According to a question posed in the Belgian parliament, some 27,251 people benefited from the old tax regime in 2023.

The expats who earn under €75k have become Belgian tax residents, as opposed to non-residents living and working in Belgium. “The main consequence of being a non-resident is that you’re only taxable on your Belgian source income … now they will be taxable on foreign investment income and worldwide professional income,” said tax expert Peter Wuyts from consultancy and advisory firm BDO.

The government decided to introduce the new regime to close a legal loophole that allowed long-term residents to benefit from reductions that were intended to only apply to expats on temporary assignment. Under the new regime, those who qualify can only benefit from the reduction from five to eight years. There’s another reason the Belgian government made the move — to get more money for the state budget.

Moreover, a Luxembourg-based EU court ruled in 2023 that the tax exemptions given by Belgium to multinational companies under the old regime constitute illegal state aid, confirming a 2016 Commission decision in which Belgium was ordered to recover €700 million in unpaid taxes from 35 big companies.

Bye bye Belgium

One consequence of the tax change is that Belgian companies might have a tougher time hiring people from abroad, although according to experts POLITICO spoke to, it is too early to assess the exact impact of the government’s move. The experts do agree, however, that the old regime was a useful way to attract foreign talent to the country.

“There are now less possibilities for Belgian companies to attract foreign talent. And yes, that will no doubt have a negative impact on the attractiveness of Belgium and Belgian employers on the market,” said Wuyts from BDO, adding that Belgium still has a “very high tax and security burden on wages.”

Lisbeth Decneut, chief human resources officer at Imec, a research and development organization in the fields of nanoelectronics and digital technology, said the new tax regime “could be an additional curb for recruiting efforts.”

According to Sophie Verhoeven, an expert on international employment at Agoria, a Belgian federation bringing together technology companies, expats could pick another country to work in.

“People from abroad could easily go to the Netherlands or to France, and there they would have a much higher net salary than they have in Belgium,” she said, adding that there is now trend of expats resigning after their employer refused to increase their gross salary to make up for the tax hit.

Despite the possible negative impact on attracting foreign talent, the companies working with Agoria mostly welcome the new tax regime, as it is easier (and cheaper) for them. “Every employer needed to have a consultant before in order to calculate the benefits and the amount of taxes. Now this is no longer needed,” said Verhoeven. According to her, the workload related to the expat tax regime for her and her colleagues has dropped by almost 85 percent.

The expats who work at the EU institutions will continue to be exempt from the Belgian income tax.