Unequal treatment in the past
Belgium is now complying with earlier judgments from the European Court of Justice (the “Court”; the judgment of 12 April 2018, case C-110/17; the judgment of 11 September 2014, case C-489/13) and the penalty payment imposed by the Court (the judgment of 12 November 2021, C-842/19).
For owners of real estate located in Belgium, which is not rented or leased to individuals, the tax administration bases the calculation of the tax on the cadastral income (explained below), whereas for real estate located abroad it has been using the (usually higher) “rental value” (i.e. the rent that could be asked if the real estate was rented out) or the “rent and rental benefits actually received”.
“Cadastral income” for immovable property located abroad
In the bill, the legislator has opted to allocate a “cadastral income” to real estate located abroad.
The “cadastral income” is the annual normal net rental value of the property at a certain reference time. This reference point was set at 1 January 1975. Although the “cadastral income” is adjusted for tax purposes according to the consumer price index, it usually does not correspond to the actual (net) rental value of the property.
The bill has introduced a new (fourth) technique for determining the “cadastral income” of built real estate. Based on the current sales value, the sales value in 1975 is then calculated. This is done by applying an annually fixed correction factor (for 2020, this factor would be equal to 15,036). A capitalisation percentage of 5.3% is then applied. This method of calculation will generally apply to immovable property located abroad (Report, No 55-1762/002, 5).
The “cadastral income” of unbuilt immovable property located abroad is fixed at 2 euros per hectare.
Since the “cadastral income” corresponds to the average annual net income, national and foreign taxes are not deductible.
Reporting obligations
For the Belgian authorities to be able to allocate the “cadastral income” to real estate located abroad, the “taxpayer” (i.e. Belgian tax residents, certain legal entities and founders of a legal construction) is required to report certain information within a certain timeframe. For example:
- A “taxpayer” (a Belgian tax resident) who owned a property abroad on 01/01/2021 must submit a declaration to the General Administration of the Patrimony Office before 31/12/2021.
Taxpayers who declared income from real estate located abroad in their declaration for the assessment year 2020 and/or 2021 will in principle be invited by the Belgian tax authorities to provide them with the information necessary to determine the “cadastral income” of these properties.
- A “taxpayer” (a Belgian tax resident) who acquires (or disposes of) a foreign property after 01/01/2021 must, within 4 months, submit a declaration to the General Administration of the Patrimony Documentation.
- A non-resident who owns a property that is not located in Belgium and who becomes a Belgian tax resident (and thus is subject to personal income tax) must declare this property to the General Administration of the Patrimony Documentation. He or she has 30 days to do so, counting from the date on which he or she becomes a Belgian resident for tax purposes.
For acquisitions/alienations of real estate or a change of status (non-resident tax to personal income tax) between 1 January 2021 and the date of publication of the law in the Belgian Official Gazette, different deadlines apply. In addition, please note that the declaration obligation does not apply to new or rebuilt properties that have not yet been put into use or leased.
Entry into force and penalties
The changes to the income tax base apply as from income year 2021 - assessment year 2022.
There is a penalty for either not or not in time complying with the reporting obligations, which is an administrative fine ranging from €250 to €3,000. Therefore, it is important for owners of foreign real estate to submit the necessary declarations to the General Administration of Heritage in due time.
For more information on this subject, please contact:
Kimberley De Plucker - Senior Associate (kimberley.deplucker@tiberghien.com)
Laurine Vanherck - Associate (laurine.vanherck@tiberghien.com)
