At the end of 2017, the Belgian Parliament passed a major tax reform law that provided for a gradual reduction in corporate income tax. In general, also considering the taxation of individuals, in Belgium the tax burden is among the highest in Europe.
Despite the recent interventions by the legislator, the country's tax system remains complex. In particular, numerous exemptions and incentives are still in force, as evidenced by the global number of tax breaks.

The articulation of public finances
Belgium has a pyramid-like structure made up of a federal state, three communities and three regions. Autonomy, participation, equality and subsidiarity are the hallmarks of the Belgian federalist model. Financial responsibility is structured in such a way that the revenue deriving from some taxes is distributed among the various federated authorities while with financial autonomy the federated entities enjoy maximum freedom in budgetary matters.

Taxation of individuals
Residents are subject to global income taxation from any source, Belgian or foreign. Residence is acquired if the person spends a certain period of time on the national territory, owns the main residence or the center of his economic interests. The non-resident natural person is required to pay taxes exclusively on Belgian source income.
The taxation mechanism is based on progressive rates. There are five rates (25%, 40%, 45% up to 50% for the income bracket that exceeds an amount of € 40,480.00).
Personal income tax in Belgium is calculated by determining the tax base and establishing the tax due on that basis. In determining the tax base, compulsory social security contributions paid either in Belgium or abroad are deductible from taxes, while other deductions are related to marital status and number of dependent family members. The calculation of the tax due is made on the basis of the income received by the taxpayer and that received, if dependent, by the spouse and children. As regards the calculation of the tax base, the deductible expenses related to the company are determined on a flat-rate basis. Taxpayers can choose to deduct real business expenses instead of sticking to the fixed amount.
Rates and brackets are divided as follows:
 

• Up to 13,250.00 at a rate of 25%

• From 13,250.00 to 23,390.00 at a 40% rate

• From 23,390.00 to 40,480.00 at a rate of € 45%

• Over 40,480.00 at a 50% rate

The taxation of corporate income
At the end of 2017, the government launched an important package of tax reforms which included, among other innovations, a gradual reduction in the corporate income tax rate and the introduction of the tax consolidation regime. The reform, which took effect over a three-year period (2018-2020), was based on three pillars: budget neutrality, simplification and fair taxation. The standard corporate income tax rate of 33% was reduced to 29% in 2018 and increased to 25% as of 2020. Small and medium-sized enterprises have seen a reduction in taxation to 20% since 2018 for the first 100 thousand euros of profit. Also starting from 2020 the surcharge on the crisis was abolished.

The tax on capital gains deriving from shares (of 0.412%) is not applied in the case of investments equal to at least 10% of the share capital or with an acquisition value of at least € 2.5 million.

30% of the tax base exceeding the first tranche of 1 million euro qualifies as the minimum effective tax base determined as follows:
 

• the deductions of dividends received, the deductions of patent income, those for the costs of innovation and investments are deducted from the tax base;

• if after these deductions, the remaining taxable income exceeds 1 million euros, the following deductions can only be applied to 70% of the taxable base exceeding one million euros: the deduction for the carry-over of dividends received, the deduction of the innovation costs carried carried forward, the carry-over of tax losses.

 

The Value Added Tax
In Belgium the ordinary VAT rate is 21% and then there are those reduced to 6 and 12%. Value added tax must be paid by registered suppliers of goods and services unless these services are at zero rate, exempt or outside the scope of VAT. Since 2010, the VAT rate for food served in restaurants and catering services has been reduced from 21% to 12%. The reduced VAT rate of 6% on renovation works in residential homes has become permanent.

Real estate tax  
It is levied on income from immovable property located in Belgium and is calculated as a percentage of the notional annual rental value of the property. The tax varies according to the region where the property is located: the rate is 2.5% of the cadastral income for the Flemish region and 1.25% for the Walloon and Brussels regions. Additional rooms are also provided, depending on the municipality where the property is located.

Stamp duty
The stamp is applied only in special cases, such as for example in the case of transactions in public securities and other financial instruments.

Transfer tax
It applies to the transfer and leasing of properties located on the national territory. The rates range from 0.2% to 12.5% (depending on the type of transaction and the region in which the contracted property is located).

Declarations, instrumental obligations and payment of taxes
All natural persons resident and non-resident in Belgium are required to file the annual tax return. The deadline for filing the return is generally by June 30 of the year following that in which the income was received for residents and September 30 for non-residents. The taxpayer receives a pre-filled tax return in May relating to the income accrued in the previous year. Taxpayers without employment, with incomes lower than the taxable quotas, are exempt from the tax return. As far as natural persons are concerned, the tax period is always the calendar year. For the taxation of legal entities, the tax period is the financial year and the link between the tax period and the tax year is based on the closing date of the accounts.

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Social security contributions
The share of social security contributions payable by the employee is equal to 13.07% of the total gross salary, without ceiling.

The employer's share is currently around 27%. The tax changes in force since 2016 provide for a gradual reduction in social security contributions to be paid by the employer to 25%. Furthermore, until 31.12.2021, a reduction in the contributions payable by the employer is foreseen for the first six employees.

Social security contributions are deductible in determining taxable income. For foreign employees with short-term assignments in Belgium who continue to be subject to the social security schemes of their country of origin, an exemption from social security may be granted, depending on the applicant's country of origin.

For example, foreign employees transferred to Belgium from a United States (US) employer for a period not exceeding five years and who remain covered by the US Social Security scheme, the Belgium / United States Social Security Agreement provides the total exemption from Belgian law on social security taxes.

According to various Supreme Court decisions, additional expenses reimbursed to foreign managers or specialists temporarily working in Belgium are, to a certain extent, exempt from social security contributions.

Due to the Coronavirus and the increase in teleworking, the workplace will not be taken into consideration when determining the applicable social security legislation. This agreement is applicable within EU countries and should be considered on a case-by-case basis with non-EU countries with which Belgium has concluded a social security agreement. This break through rule was applicable until December 31, 2021.

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Special social security contribution
A special social security contribution is also due, for an amount ranging between 9.30 euros and 60.94 euros per month. This contribution is collected through monthly deductions from the net salary, even if the final amount due will be determined through the tax return procedure on the basis of the actual net taxable family income.

The special social security contribution is not tax deductible. The maximum amount payable by a family on an annual basis is € 731.28.

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