Closing the difference in taxable basis between foreign and Belgian real estate
New legislation on taxation of foreign real estate
By law of 17 February 2021 (as published in the Belgian Official Gazette on 25 February 2021) and in light of multiple convictions by the European Court of Justice (1), the Belgian legislator tried to put an end to the ongoing unequal tax treatment between real estate located in Belgium and real estate located abroad.
The law applies to Belgian tax residents who have a property abroad and introduces an obligation to submit a tax declaration to the competent authorities, namely ‘De Administratie Opmetingen en Waarderingen’, who will determine a cadastral income for each foreign real estate (as already exists for Belgian real estate).
The cadastral income (hereinafter “CI”) is a fictitious rental value of immovable property which will be used to determine the taxable basis for property located abroad in the same way as for Belgian real estate (2).
On the basis of the previous legislation, foreign real estate was taxed on the basis of gross rental value or the gross rent paid. The taxation based on the CI is expected to be lower than the previous taxation. Thus, this change in legislation will normally be in advantage of the taxpayer.
A taxpayer who already owned real estate abroad before January 1, 2021 has the legal duty to provide all necessary information to the tax administration by December 31, 2021 at its latest. The tax authorities will in principle contact taxpayers who included foreign immovable income in previous (or this) years’ personal income tax returns. Last month, the tax authorities already started to send out declaration forms to taxpayers.
Note that even if the tax authorities did not send a declaration form, you are still obliged to submit a declaration. In absence of a spontaneous declaration, a fine can be imposed. The rate of the administrative fine ranges from 250 to 3.000 EUR (3).
If a taxpayer either acquires property rights, or buys or sells an immovable property as from 1 January 2021, he has four months, from the moment of disposition or acquisition onwards, to spontaneously declare all relevant information (4).
The declaration can be filled by way of letter to the tax authorities or via the online platform of the FPS Finance, available on Myminfin.
The information the tax authorities request is:
- An indication of what type of property it concerns (e.g. an apartment, commercial property,...)
- The location where the property is situated (country and address).
- Ownership rights:
° The percentage of rights of enjoyment of your right in rem (e.g. usufruct) and the percentage of your rights in rem which do not constitute any enjoyment (e.g. bare ownership) (5).
° Date of acquisition of the property or the right in rem. If that date is before 1 January 2021, the year of acquisition suffices.
° Whether or not it is part of your general community property regime.
- Value: further clarifications that are set out in circular letter 2021/C/21:
° If it concerns developed land: an estimation of the normal market value. If however the normal market value is unknown, the form foresees an alternative (e.g. the year and price of acquisition of the real estate; the year and price of acquisition of the land and the construction costs).
° If it concerns a vacant plot of land: the surface of the property suffices.
Bear in mind that the obligation to notify applies to every holder of a right in rem to real estate abroad. This means that if you are married under a general community property regime, both spouses are under said obligation.
Entry into force
The new legislation entered into force on the 1st of January 2021. As from assessment year 2022 the changes in the personal income tax are applicable.
(1) ECJ 11 september 2014, C‐489/13 Verest-Gerards; ECJ 12 april 2018, C-110/18 Commissie vs.België; ECJ 12 november 2020, C-842/19. (2) Artikel 7, § 1 BITC. (3) Art. 445 § 5 BITC. (4) Art. 473 § 2, 1° BITC. (5) Please note that there is no legal basis for the bare owner’s obligation to submit a tax declaration.