The Belgian parliament recently approved the bill (Doc.parl., Chambre, 2020-2021, n°55-1762/003) which enforces the jurisprudence from the European Union’s Court of Justice regarding the taxation of foreign real estate revenues.
In this respect, the taxpayers were differently treated depending their real estate was located in Belgium or abroad. This difference of taxation can be summarized as follow :
- Regarding real estates located abroad and leased to individuals who are not affecting even partly this building to their professional activity, the taxable base relates to the rents actually collected by the Belgian taxpayer, decreased by 40%. If the real estate is not leased, the “rental value” must be reported as taxable income;
- Concerning Belgian real estates which are not rented or rented to individuals who are not affecting even partly this building to their professional activity, the taxable base is the indexed cadastral income, enhanced by 40%. This indexed cadastral income, even enhanced, represents very often a more advantageous taxable basis compared to the rents actually collected or to the “rental value”.
In order to end to this treatment’s inequality, the Belgian government decided to attribute a cadastral income to the real estates located abroad, to the condition that these latter belong to an inhabitant of the kingdom.
How to determine this new cadastral income
The rules which determine the cadastral income applicable to the real estates located abroad will be similar to the rules used to determine the cadastral income which is applicable to the real estates located in Belgium :
- Regarding buildings, the cadastral revenue equals the “ normal net rental values” of the building on the 1st January 1975 (the “date of reference”) or of an “appropriated plot of reference” ;
- In absence of this “appropriated plot of reference”, the cadastral revenue will be determined by applying the rate of 5,3% to the normal market value of the plot to the 1st January 1975 ;
- In absence of reference to determine the normal market value of the plot to the 1st January 1975, it must be referred to the actual normal market value on which a corrective factor, annually reviewed, will be applied. For financial year 2020, this factor will amount to 15,036%.
Real estate’s reporting requirement
In order to apply a cadastral income, the concerned taxpayers have to report every acquisition or disposal of a real estate located abroad to the general administration of patrimonial documentation in the first four months which follow the acquisition or the disposal.
The taxpayers who, to the 31st December 2020, were already owning a real estate located abroad have until the 31st December 2021 to report it.
Finally, it shall be noted that the taxpayers who reported foreign real estate income during tax years 2020 and/or 2021 will receive an invitation from the general administration of the patrimonial documentation in order to provide the required information to the establishment of this cadastral income. The taxpayers will have until the 31st December 2021 to answer to this request from the tax authorities.
Penalties in case of non-respect of the above mentioned obligation
The taxpayers who would not respect this new reporting obligation are exposing themselves to an administrative fine which could amount from EUR 250,00 to EUR 3.000,00.
Tax consequences on behalf of Belgian taxpayers
The foreign real estate income from Belgian taxpayers won’t be the target of a double taxation, provided that a double taxation treaty has been concluded between Belgium and the state where the real estate is located.
However this real estate income will be taken into consideration in the progressivity reserve. This means that the latter income will be taken into consideration to determine the applicable tax rate to the total incomes from the taxpayers.
Every team members in Tax Consult are at your disposal if you wish to obtain our assistance regarding the reporting of your real estates located abroad.
Shall you have other questions, we invite you to contact us to the following mail : email@example.com or directly send an email to one of our managers who will be pleased to provide you with advice personalized to your situation.
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