Global Mobility Tax
In the wake of the provincial, municipal and district elections, negotiations for the formation of a new federal government in Belgium have resumed.
As highlighted in our previous newsletter, Bart De Wever, leader of the New Flemish Alliance (N-VA) and responsible for forming a new federal government in Belgium, put forward his so-called socio-economic “supernote” during the summer of 2024. This plan outlined significant potential reforms with respect to pensions, labor market and the Belgian tax system.
After negotiations stalled in August on the proposed tax reform, De Wever has spent the recent months reworking compromises between the five Arizona parties. Recently, a revised version of the “supernota” was leaked wherein some proposals from the first supernote have been changed or are no longer on the table. Below is an overview of the key personal income tax-related measures from the updated supernote.
Professional income and family taxation
Increased lump-sum tax free allowance
An increase is proposed of the lump-sum tax-free allowance to an amount of EUR 12.000 by 2029. Currently, the lump-sum tax free allowance amounts to EUR 10.570. The increase would provide a net saving of EUR 357,50 (calculated as EUR 1.430 x 25%).
Tax brackets and rates
The revised supernote includes a new adjustment of the progressive tax brackets. Presently, the Belgian personal income tax consists of four rates: 25% (0 – 15.820 €), 40% (15.820 – 27.920 €), 45% (27.920 – 48.320 €) and 50% (above 48.320 €). The updated plan proposes abolishing the highest rate of 50%. Additionally, a new (but rather limited) tax bracket of 35% is introduced, alongside an upward adjustment of the income thresholds. The new structure would feature the following rates: 25% (0–16,000 €), 35% (16,000–21,000 €), 40% (21,000–30,000 €), and 45% (above 30,000 €).
These changes will primarily benefit high earners and the impact for the individuals with a low income will be rather limited.
The abolition of the marital quotient
De Wever proposes phasing out the marital quotient tax benefit for non-pensioners. This was also part of the initial supernote as well as the proposed tax reform of resigning Minister of Finance Vincent Van Peteghem (CD&V).
The Belgian marital quotient is a tax mechanism that allows married or legally cohabiting couples to shift up to 30% of the higher-earning spouse’s income to the lower-earning (or non-earning) spouse, reducing their overall tax burden by taking advantage of the progressive tax brackets. This change would have a significant impact for couples where one partner earns little or no income.
Job bonus
De Wever seeks to adjust the fiscal job bonus – a tax benefit for low-wage earners – so that the lowest earners would receive maximum support, leaving them with more take-home pay.
Comeback of the “Carenzdag”
A new proposal in the revised supernote is the comeback of the “Carenzdag”. The “Carenzdag”, which previously existed in Belgium, stipulated that blue collar workers were not paid for their first day of sick leave. As white-collar workers were compensated for their first day of sick leave, the “Carenzday” was abolished in 2014 due to this disparity. De Wever now proposes reintroducing the system to discourage misuse of short-term absences without a doctor’s note. It is anticipated that the new “Carenzdag” would apply to both blue- and white-collar workers.
Reinforcing of meal vouchers
The plan also includes reinforcing meal vouchers by increasing their value and expanding the range of spending options.
On the other hand, all other types of vouchers (i.e. eco vouchers, consumption vouchers, culture vouchers; …) will be abolished.
Abolition of special social security contributions
The abolishing of the special social security contribution, a contribution which was introduced back in 1994 as an additional funding of the Belgian social security, remains part of De Wever’s supernote.
Automatic wage indexation remains in place (for now)
The automatic wage indexation system, which adjusts salaries to match increases in the cost of living, will be maintained for the time being. However, De Wever is contemplating a reform of the system and has requested the social partners to provide their recommendations on the matter by the end of 2026.
Management companies / self-employed persons
Addressing the improper use of management companies
As more and more executives establish management companies to optimize their tax situation in Belgium, Mr. De Wever proposes measures to curb this practice. One key measure would be increasing the minimum managerial remuneration (towards the company director) from EUR 45.000 to EUR 50.000, and subject to further indexation, in order to qualify for the reduced corporate income tax rate of 20%.
In the first version of the supernote, a phasing out of the current VVPRbis system, which (under certain conditions) allows management companies to distribute dividends at a reduced movable tax rate, was proposed. However, this proposal has been omitted from the revised supernote, indicating that the VVPRbis system will likely remain unchanged.
New deduction for self-employed individuals
The supernote introduces a new deduction for self-employed individuals (ondernemersaftrek/déduction pour entrepreneurs), allowing to deduct 10% of their gains or profits from their taxes, with a maximum of 10.000 EUR. This is a reduction from the initial proposal, which allowed for a 20% deduction, with a maximum of EUR 20,000.
Taxation of movable (savings and investment) income
Reform movable withholding tax
Currently, there is a tax exemption on interest income from regulated saving accounts (up to €1,020 per person) and taxpayers can reclaim withheld movable taxes on dividends (up to EUR 249,90 per person) through their annual personal income tax returns.
In the initial supernote, De Wever proposed expanding the existing tax exemption to cover interest income from other accounts, state bonds, and other types of movable income, such as dividend income, within a broad tax-exempt basket. However, the revised supernote abolishes the tax exemption altogether. Instead, it introduces a new system where no movable income is tax-exempt, but withheld movable taxes can be reclaimed through the tax return up to a yet-to-be-determined amount (estimated between €1,000 and €2,000). This will apply to all forms of movable income (interest, coupons, dividends), leading to several significant changes:
Introduction of a capital gains tax
The introduction of a capital gains tax was a major sticking point in previous federal government negotiations. Despite this, it remains in De Wever’s supernote, as Belgium is currently one of the few countries where such gains are not taxed under certain conditions.
The new proposal includes the same 10% capital gains tax on the sale of financial assets such as shares and bonds. The costs incurred to acquire these capital gains would be deductible, and small investors would be spared. According to the revised supernote, the first EUR 15,000 of capital gains will be exempt from taxation. However, this threshold is still under discussion, and the question arises whether solely raising the tax-free threshold from EUR 6,000 to EUR 10,000 will be enough to gain the support of the parties, like the MR, which previously opposed the introduction of the capital gain tax.
Tax on stock exchange (TOB)
The transaction tax on buying and selling securities will be reformed. Shares of small companies will be exempt from this tax, and shares from newly listed companies will be exempt for five years. Additionally, the tax rates of the tax on stock exchange transactions will be harmonized.
Tax on securities accounts
At present, there is a 0,15% tax on securities accounts with balances exceeding 1 million euros. De Wever proposes raising the tax rate to 0.20%. However, on the other hand, the supernote also suggests that the tax on securities accounts could be abolished if the capital gains tax generates sufficient revenue.
Taxation of immovable income
Taxation of actual rental income
For many years now, private individuals who rent out property for non-professional purposes are taxed progressively (via their tax return) on the deemed rental income of the property, which is indexed and increased with 40%. This taxation method is beneficial, because the actual (often higher) rental income is not taxed.
In the first version of the supernote, there were no proposals to alter this system. However, the revised supernote indicates De Wever’s desire to adjust the taxable basis for real estate income. The intention would not be to tax the actual rental income, but to make an adjustment to the existing system, such as increasing the 40% rate used to calculate the taxable real estate income. It remains unclear whether these changes will apply to second residences or only to properties beyond the second residence. Primary residences will continue to be exempt from personal income taxes.
Phase-out of federal interest deduction
As from January 1, 2024, there are no more tax benefits for capital repayments and life insurance premiums related to loans for non-primary residences. However, it is currently still possible to claim the federal interest deduction for paid interests. De Wever’s supernote proposes phasing out this federal interest deduction.
The discussions continue and although Belgium received an extension from the European Commission to submit its budget plan, an agreement must be reached as soon as possible as the new government hopes to introduce the reforms as early as January 1 2025. Is a solution finally in the making and will the parties find a common ground for governance? More news to come.
Contact us
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:
Sandrine Schaumont
Partner
Philip Maertens
Partner
Nic Boydens
Partner
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