Taxation of foreign real estate in Belgium changes

An initiative finally was taken in Belgium to eliminate this inequality. As a result of a legislative amendment, a cadastral income (CI) will now also be allocated to foreign real estate (Belgian Act of 17 February 2021, published in the Belgian State Gazette on 25 February 2021, with effect from 1 January 2021).

From assessment year 2022 (read: income year 2021), a CI will be used to tax foreign real estate. A special unit at the Ministry of Finance will determine the foreign CI by applying a rate of 5.3% to the normal sales value of built-on real estate on a reference date of 01 01 1975. Formula: Current normal sales value/correction factor x 5.3%. The correction factor will depend on the year of acquisition. This factor will be published annually in the Belgian State Gazette (2021: 15.018).

Therefore, each Belgian taxpayer (individual or legal entity) with property abroad is obliged to file a tax return. Insofar as the foreign real estate is leased out and rented professionally, as well as when it is leased out to a company, the lessor is taxed on the rental income actually received.

Each Belgian taxpayer with real estate abroad must submit the necessary information to the Federal Public Service Finance (foreign CI unit). Anyone who owned foreign real estate before 01 01 2021 must declare this before 31 12 2021. Afterwards, the Administration will indicate the CI.

All who do not acquire foreign real estate until after 01 01 2021 must from now on expressly report this to the Administration within four months after the acquisition.

If this declaration is not made or is made late, an administrative fine of at least EUR 250.00 up to a maximum of EUR 3,000.00 may be imposed.

Conclusion: for unbuilt-on real estate the following rule applies: CI is determined based on a scale of 2 euros per hectare.

As mentioned, income from foreign real estate for Belgian taxpayers (individual or legal entity) will be taxed in the same way as income from Belgian real estate. The indicated CI must be included in the tax return, just as it should be included for Belgian income from real estate.

The general principle is that Belgians (Belgian residents) are taxable in Belgium on their worldwide income. As a rule, however, income from foreign real estate is exempt from taxes in Belgium if a double taxation treaty has been concluded between Belgium and the country in question.

Nevertheless, declaring this foreign real estate can have a consequence due to the so-called progressivity reservation. In particular, foreign real estate income will be taken into account to determine the tax rate in Belgium, so that taxpayers can be taxed at a higher rate in Belgium.