Expat Tax for Americans in Belgium – What You Need To Know

Expat Tax In Belgium – Expat Living In Belgium

Belgium, officially the Kingdom of Belgium, lies in the largest industrialized trading bloc globally, the European Union. It is a country in Western Europe with Netherlands to the north, Germany to the east, Luxembourg to the southeast, France to the southwest, and the North Sea to the northwest. The three central geographical regions of Belgium coastal plain in the northwest, the central plateau, and the Ardennes uplands. Both the European Union and NATO is in Belgium. Read on to discover essential tips on US Expat Tax In Belgium.

Belgium is a top European country when it comes to the best locations for industry and logistics. Read on to discover important tips on US Expat Tax In Belgium.

Below is our top 10 list of areas to live in Belgium for expats (in no particular order):

• Antwerp
• Bruges
• Gent
• Genval
• Leuven
• Liege
• Louvain-la-Neuve
• Tervuren
• Waterloo

About Belgium

Belgium shares borders with France, Germany, Luxembourg, and the Netherlands. Belgium has three official languages: Dutch, French, and German. And the currency was the Belgian franc before it switched to the euro in 2002.

The majority of the population has Belgian citizenship. Immigrants and their descendants are of European ancestry and from non-Western countries. Most of them from Morocco, Turkey, and the Democratic Republic of Congo. Belgium has three official languages: Dutch, French, and German.

Belgium lies at the heart of a highly industrialized region, making it the world’s 15th largest trading nation in 2007. Its strongly globalized economy and its transport infrastructure have tight integration with the rest of Europe.

Belgium is also a founding member of the Eurozone, NATO, OECD, and WTO and a part of the trilateral Benelux Union and the Schengen Area. Brussels hosts the headquarters of many major international organizations such as NATO.

Guide To US Expat Tax In Belgium

The Tax Samaritan country guide to US ex-pat tax in Belgium provides a general review of Belgium’s tax environment and how that will impact your U.S. expatriate tax return as a U.S. Expat in Belgium.

As a U.S. taxpayer, all worldwide income is subject to taxation and reporting. For most expatriates, you have a requirement to file a U.S. tax return on an annual basis due on April 15 each year (June 15 if you are residing overseas on the April 15 deadline). The tax treatment for different classes of income can vary significantly from Belgium and the U.S.

For example, certain benefits may be tax-free in Belgium. However, for U.S. tax purposes, these benefits are generally subject to inclusion as gross income. As such, there are many considerations related to US expat tax in Belgium. This brief article will address a few of those considerations.

Belgium Expat Income Taxes

Who Is Liable For Income Taxes In Belgium

Income tax is levied on the worldwide income of Belgian residents and the Belgian-source income of nonresidents. Residents are individuals who are living in Belgium. Residency status determination is based on the facts and circumstances. A rebuttable presumption exists that individuals enrolled in the National Register of the Population are Belgium residents for tax purposes. For married individuals (or individuals officially engaged in a “cohabitant” scenario), a rebuttable presumption exists that the tax domicile is where the spouse or partner and any dependent children live.

Tax Year In Belgium And Tax Filing And Payment Rules

Individuals must file annual tax returns reporting income received during the preceding calendar year, which is the income year. The year of filing is the tax year. The tax return must be completed and returned to the tax authorities by the date indicated on the return unless the taxpayer obtains an extension. The official filing date is 30 June, but the date is sometimes extended for resident individuals and is generally extended for nonresident individuals.

Foreign executives, specialists, and researchers residing temporarily in Belgium may qualify for a special tax regime when they are assigned, transferred, or recruited from outside Belgium to work for a Belgian operation of an international group of companies. The special expatriate status is obtained through a written application to the Belgian tax authorities that sets forth why the relevant employee should qualify. The application is filed jointly by the employee and the employer. It must be filed within six months after the beginning of the month following the month of the employee’s arrival in Belgium.

Special Expatriate Tax Regime

Foreign executives, specialists, and researchers qualified under the special expatriate tax regime are treated as non-residents for Belgian tax law purposes. As a result, they are taxed on Belgian-source income only. Accordingly, unearned income and real estate income arising outside of Belgium are ignored in determining Belgian taxable income.

Qualifying individuals are subject to taxation only on employment income or directors’ fees relating to Belgium’s professional activities.

Unless other reliable criteria are available, the amount of remuneration excluded from taxation in Belgium can be calculated as the fraction of the total worldwide income that corresponds to the number of workdays performed outside Belgium compared to the total workdays performed (the travel exclusion). Special rules apply to the calculation of the exclusion. No maximum or minimum travel percentage requirement is applicable to qualify for the special regime.

Belgium Tax Relief

After filing, but no later than 30 June of the following year, there is the issuance of a tax assessment or refund notice. Within two months after this assessment’s receipt, the taxpayer must pay the tax amount due to the tax authorities. Any refund owed is paid within the same two-month period.

Expat Tax Withholding

Employment income and directors’ fees are subject to a payroll tax at source by the employer. This withholding tax is creditable against the final income tax liability. Any excess income tax withheld is refundable to the employee or director.

Social security contributions are generally compulsory for individuals working in Belgium. For 2019, the rate of the employee’s basic social security contribution equals 13.07%. This rate applies to the monthly gross compensation without a ceiling. The employer’s social security contributions are levied at a basic rate of 22.65% of gross monthly compensation, with no ceiling. On top of this basic rate, several specific contributions are due from the employer; some contributions vary based on certain parameters and maybe industry or sector-specific. Some deductions are available, depending on various eligibility criteria. This results in an average actual rate of 25%. These percentages apply to white-collar workers in the private sector.

Double tax treaties entered into by Belgium with other countries provide for abolishing double taxation on such income of Belgium residents through the exemption with progression method. Foreign-source income is exempt from tax in Belgium, but other taxable income is subject to taxation at the rate that would apply to all taxable income. Belgium has entered into double-tax treaties with the United States. Most ex-pats should have their US and Belgium-source income carefully reviewed by an international tax specialist like Tax Samaritan. Unfortunately, many of the tax treaty provisions with the U.S. are subject to the savings clause and thus limit application for U.S. citizens and green cardholders.

What You Need To Know About U.S. Income Taxes

When dealing with US expat tax in Belgium, there are many preferential ex-pat tax treatments that may benefit your U.S. expatriate tax return. In fact, for many U.S. expats, the Foreign Earned Income Exclusion (IRS Form 2555) and other deductions will reduce your U.S. tax liability to zero.

Some of these preferential tax treatments or benefits for US expat tax in Belgium include:

• If you are a U.S. citizen or a resident alien of the United States and live in Belgium, your US expat tax in Belgium is based on your worldwide income. As such, you must file a U.S. return for all the years that you are residing in Belgium. However, as a U.S. expat you may qualify to reduce your U.S. taxable income up to an amount of your foreign earnings that have an annual adjustment for inflation ($107,600 for 2020). Besides, you can exclude or deduct specific foreign housing amounts. This is known as the Foreign Earned Income Exclusion and foreign housing exclusion.
• When it comes to your US ex-pat tax in Belgium, most US expatriates worry about “double taxation.” Paying taxes to two different countries – the U.S. and Belgium. A U.S. taxpayer working overseas in Belgium may reduce U.S. taxable income and “double taxation” by claiming the Foreign Tax Credit on Form 1116. Should any foreign income not be fully offset by the foreign earned income exclusion, housing exclusion, or housing deduction, the foreign tax credit paid or accrued may be used as a deduction or credit on the U.S. tax return. Taxpayers can elect to either deduct the taxes as an itemized deduction or claim as a credit. In most cases, it is to your advantage to take foreign income taxes as a credit.

Don’t Make This Mistake

A common but dangerous mistake is the assumption that if there are zero taxes when claiming these tax benefits, there is no US expat tax filing requirement.

That is not true.

If you are working overseas, it is likely that you meet the filing requirements to file a tax return and must do so. It is important to note that the preferential tax treatments, such as the foreign earned income exclusion and foreign tax credit, are not automatically granted until an accurate return is filed correctly.

When faced with US ex-pat tax in Belgium, there are many tax items to consider.

But the above are by far the most common preferential tax benefits.

With top-notch experience and knowledgeable ex-pat tax preparation from Tax Samaritan, you have the assurance that you are paying the minimal amount of U.S. taxes that you are legally under obligation for.

Belgium Foreign Bank Account Reporting – The FBAR (FinCen Form 114)

Another important tax deadline that frequently applies to US expat tax in Belgium is the disclosure of foreign assets on the FBAR (Foreign Bank Account Report – Form 114).

The FBAR filing deadline is April 15th (or the preceding business day if April 15th falls on a weekend). Unfortunately, requesting an extension on your return does not extend the FBAR due date. There is no extension available for the FBAR deadline. Any report filings after this date are a delinquent FBAR. However, in recent years, an automatic extension to October 15th is applicable.

The FBAR must be filed with the Treasury Department (it is not filed with your federal income tax return) whenever you meet the FBAR filing requirements, which in a nutshell is whenever a U.S. person has a financial interest in, or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust or other types of foreign financial account (including an insurance policy with a cash value such as a whole life insurance policy) maintained with a financial institution, with an aggregate value of over $10,000 at any time during the calendar year based on the highest value of each foreign account during the tax year.

Suppose you have bank accounts at Argenta, BNP Paribas Fortis, AXA Bank, Standard Chartered Bank, KBC, or at another bank in Belgium or any other foreign country. In that case, you may meet the filing requirement to disclose your foreign accounts on the FBAR.

Please don’t hesitate to contact Tax Samaritan to learn more about your filing requirements.

U.S. – Belgium Social Security Totalization Agreement

These agreements must be taken into account when determining whether an alien is subject to the U.S. Social Security/Medicare tax or whether any U.S. citizen or resident alien is subject to a foreign country’s social security taxes.

As of this time, Belgium <b>has</b> entered into a Totalization Agreement with the United States. This agreement helps people who would otherwise have to pay Social Security taxes to both countries on the same earnings. The agreement covers Social Security taxes (including the U.S. Medicare portion) and Social Security retirement, disability, and survivors insurance benefits.

Under the agreement, if you work as an employee in the United States, you will typically have coverage by the United States. You and your employer will pay Social Security taxes only to the United States. If you work as an employee in Belgium, you usually will have coverage by Belgium, and you and your employer pay Social Security taxes only to Belgium.

Self-employed individuals living and working in Belgium have coverage by the Belgian system and should obtain a certificate of coverage to claim the totalization agreement’s benefits. You must attach a photocopy of this certificate to your U.S. individual tax return to exempt yourself from U.S. self-employment tax properly. Tax Samaritan can help guide you through this process if unsure of how to proceed.

U.S. – Belgium Tax Treaty And Tax Relief For U.S. Expat Tax In Belgium

The United States does currently have a separate, double-tax treaty with Belgium. Many of the articles apply to non-resident aliens for U.S. tax purposes. Still, they can also extend certain benefits to U.S. citizens, residents, and green card holders (limited by the ‘Savings Clause’), so it is crucial to understand if you qualify for these benefits. We recommend discussing with a tax professional to determine if you are eligible for help in the treaty.

Tax Samaritan Takeaways For US Expats In Belgium

Please click on the hyperlinks below for additional resources for expats residing in Belgium:

Tax Samaritan Expat Tax Services

IRS Publication 54, Tax Guide for US Citizens and Resident Aliens Abroad

Federal Public Service Finance (for tax schedules and other resources)

Major Banks in Belgium

US Embassy in Belgium

Federal Public Service Foreign Affairs (for important contact numbers)