The opportunities of Belgium for foreigners
In the past years and decades Belgium has quite a few times drawn the attention of wealthy individuals: the Dutch, the French and recently also Asians. Given the recent events in the United States, we would invite American citizens to join them and apply for residency in Belgium or Europe.
We will highlight the key features of Belgium below. Cazimir can advise individuals in the application process for Belgian residency and the structuring of their assets. We can also assist them in requesting residency in other interesting European countries, such as Portugal or even Italy in the future.
1. BELGIAN RESIDENCY PERMIT
Citizens of the European Union Iceland, Liechtenstein, Norway and Switzerland can travel freely to Belgium on the basis of their national ID card or passport. They do not require a visa to travel to Belgium nor a work permit to engage in economic activities. As a rule, third-country nationals (non-EU/EEA/Swiss citizens) need a visa to enter Belgium and a work permit to engage in economic activities. Under certain conditions, one can request long-term residency and even Belgian citizenship.
- BELGIAN HEALTH CARE
If you're living and working in Belgium, you will typically be covered by the Belgian healthcare system if you carry out the proper registrations. The Belgian healthcare system is one of the best in Europe and very good hospitals are always within a short distance reach.
3. HOUSING IN BELGIUM
Compared to other European countries, houses in Belgium tend to be less expensive. Moreover, given the fact that Brussels is the capital of Europe, it’s known for his international surrounding and the diversity amongst its inhabitants.
Brussels ranks #21 on Mercer’s 2016 Quality of Life Index, ahead of London at #39 and New York at #44. However, Brussel only ranks #86 on the Cost of Living Index, compared to London at #17 and New York at #11. More bang for the buck!
4. BELGIAN TAXATION OF INDIVIDUALS
Transfer tax
Transfer taxes amount to 10% (Flanders or Walloon Region) or 12,5% (Brussels Region). The purchase of new or recently constructed building are subject to VAT (21%).
Cayman tax
Pursuant to the recently introduced Cayman tax, income attributed to a some foreign legal structures (such as trusts, foundations or even companies) is deemed to be received directly by the Belgium based natural person who is the owner, holder or beneficiary of the foreign legal structure. A heir of the settlor that actually earned income from the foreign legal structure can also be subject to the Cayman tax. The result of the cayman tax is that all income earned by the foreign legal structure will keep its nature (e.g. interest, dividend, capital gain, rent, other) for Belgian tax purposes and will be taxed accordingly in the hands of the Belgian natural person or in the hands of the Belgian non-for-profit organization.
Capital gains tax
An attractive aspect of Belgian tax law is that capital gains on shares realised by Belgian tax-resident individuals or by Belgian non-residents on shares of Belgian companies, outside a professional activity, are taxable only if a substantial shareholding (i.e. participation of 25% or more) is sold to a non-EEA company or if the capital gains are realised outside the normal management of an individual’s private wealth. Hence, in most cases and depending on the facts at hand, capital gains on shares remain tax free if realised outside a professional activity.
Gains realised upon the sale of undeveloped land are subject to taxation at the rate of 33% if realised within five years of acquisition and at the rate of 16.5% if realised between five and eight years from the date of acquisition. There also is a capital gains tax of 16.5 % for gains made on the sale of developed Belgian real property in case the real property has been acquired against consideration and is transferred within five years following the acquisition. The family dwelling is always exempted from capital gains tax.
Income tax
Income tax is calculated by applying a progressive tax rate schedule to taxable income, with rates that go from 25% to a maximum rate 50%.
Dividends and interest
Dividends and interest are subject to a tax of maximum 30%. Belgium has concluded double tax treaties with most countries countries, including the United States. Under this treaty, the US withholding tax on the dividends and interest is reduced to 15% (for private individuals). The total tax, without planning, is therefore 40,5%.
Wealth tax
There is no wealth tax in Belgium.
Exit tax
There is no exit-tax in Belgium.
5. ESTATE PLANNING IN BELGIUM
Inheritance tax
Although inheritance tax in direct line or between spouses (and sometimes cohabitants) goes up to 27% (Flanders Region) or 30% (Brussels or Walloon Region), there are several estate planning possibilities.
Trust and private foundations are recognised in Belgium. Belgium even has its own private foundation law. Trusts are generally not advisable in Belgium given the position of the tax administration that distributions from a trust are subject to income tax. This is principally only applicable if the settlor was a Belgian resident.
Private foundations on the other hand are quite common for estate planning purposes. Transfers in a last will are subject to 8,5% inheritance tax in the Flemish Region, or 7% (Walloon Region) or 25% (Brussels Region). The residency of the deceased determines the applicable rate.
Gift tax
Gifts of moveable assets (shares, stocks, art,...) are not subject to Belgian gift tax, unless the gift is registered in Belgium. If a gift has not been subject to Belgian gift tax and the donor dies within 3 years after the gift (7 years for family businesses in the Flemish Region), the gift is subject to inheritance tax. This is applicable in all Regions. Gift tax on moveable assets depends on the Region where the donor is resident. The gift tax on gifts to children and between spouses (under certain conditions also cohabitants) is 3% (Flanders and Brussels Region) or 3,3% (Walloon Region). Once the gift tax has been paid, a gift never be subject to inheritance tax. This allows in extremis estate planning.
Gifts of real estate are obliged to be registered in Belgium and therefore automatically subject to gift tax. The rates depends on the Region where the donor is resident. Since July 2015 (Flanders Region) and January 2016 (Brussels and Walloon Region) the rates have been substantially reduced. Moreover, one can use the reduced rates every three year per beneficiary, which allows to transfer real estate at low cost.
As a result, gifts of both moveable and immoveable assets are quite common in Belgium. But gifts are principally irrevocable. But one can add terms and condition to the gifts to maintain control over the property, retain a certain income, partner-skipping, etc. Gifts between spouses are revocable and the revocation is principally not subject to gift or transfer tax. The revocation can even be claimed after the death the spouse-beneficiary.
European succession regulation
The European succession regulation came into force on August 17th, 2015. It has an universal application and it allows one to make a choice of law of his national law, even if it it is a law of a non-EU-country.