Tax year and payment dates

1. When does the official tax year start and finish in your jurisdiction and what are the tax payment dates/deadlines?

The individual income tax year runs from 1 January to 31 December. Taxpayers must file their tax declaration before 30 June of the assessment year, subject to changes by the tax authorities. The assessment year is the calendar year following the tax year (for example, for the tax year 2012 taxpayers must, in principle, file tax declarations before 30 June 2013). The tax authorities must issue the assessment notice by 30 June in the year following the assessment year. The taxpayer must pay within two months following the notice of assessment.

Domicile and residence

2. What concepts determine tax liability in your jurisdiction (for example, domicile and residence)?In what context(s) are they relevant and how do they impact on a taxpayer?

Residence

Residence triggers unlimited tax liability (including for income and inheritance tax).

A taxpayer is resident in Belgium if either his residence or centre of economic interests is in Belgium. Residence and centre of economic interests have different meanings and function as alternative criteria. A deceased taxpayer is considered resident if Belgium was his effective residence at the time of his death.

Residence refers to the factual place of residence and the centre of a person’s social and professional interests. It requires a certain degree of permanence or continuity. The law, however, does not set out the minimum duration. Residence is a complex concept and, in most cases, a factual matter that must be determined by weighing up different factors. For example, the centre of a person’s family life is more important than the place where that person factually resides or where he works.

Centre of economic interests

This is the location from where the person’s property is administered, irrespective of the property’s location.

Taxation on exit

3. Does your jurisdiction impose any tax when a person leaves (for example, an exit tax)? Are there any other consequences of leaving (particularly with regard to individuals domiciled in your jurisdiction)?

There is no exit tax if a Belgian resident moves to another country in the European Economic Area (EEA). If a person moves to a country outside the EEA, then pensions, returns of capital and any other proceeds from life insurance contracts are taxable as if they were received by the person the day before leaving Belgium (Article 364bis, Income Tax Code (ITC)).

Being a Belgian citizen or not has no consequences regarding income tax or inheritance tax.

Temporary residents

4. Does your jurisdiction have any particular tax rules affecting temporary residents?

A special income tax regime can apply when a foreign enterprise appoints one of the following to work temporarily in Belgium for one (or more) of its establishments or companies:

  • Foreign executives.
  • Directors.
  • Top-level specialists.
  • Research experts.

They can be granted a special tax regime by administrative ruling. Under that regime, they are deemed to be non-resident for the purposes of income tax, but are treated as residents for the purposes of inheritance tax (IHT) and gift tax if they die in Belgium (see Questions 7 and 8).

Taxes on the gains and income of foreign nationals

5. How are gains on real estate or other assets owned by a foreign national taxed? What are the relevant tax rates?

Not all gains on property are taxed. Profits or gains resulting from the “normal administration of a private fortune” consisting of real property, portfolio securities and movable property are tax exempt. In practice, whether gains result from the normal administration of a private fortune can be controversial.

The following are taxed:

  • Gains derived from speculation are taxed at a rate of 33%. Speculation refers to, for example, the purchase of assets with the intention of making a quick profit (involving an element of risk). Gains derived from purchase and sale transactions on stock exchanges are, in principle, not seen as speculative.
  • Gains on land, if the taxpayer acquired the property rights for consideration and the transfer occurs less than eight years after the acquisition (special rules apply to gifted property). The gain is taxed separately at a flat rate of:
    • 16.5% if the taxpayer held the property for more than five years;
    • 33% if the taxpayer held the property for five years or less.
  • Gains on constructed real property (buildings), if the taxpayer acquired the property rights for consideration and the transfer occurs less than five years after the acquisition (special rules apply to gifted property). The gain is taxed separately at a flat rate of 16.5%. Gains on a taxpayer’s private dwelling are tax exempt.
  • Gains on specific investment products (that is, types of capitalisation investment fund) qualify as interest income and are currently taxed at the rate of 21%. This is income realised on the sale or redemption of shares in undertakings for collective investment in transferable securities (UCITS) that have invested more than 40% of their assets in debt claims.
  • Gains on the transfer of a substantial shareholding (25% or greater) of a Belgian company to a company resident outside the EEA are taxed at 16.5%.
  • Professional gains are taxed as professional income (see Question 6).

These rules apply to both residents and non-residents

 

6. How is income received by a foreign national taxed? Is there a withholding tax? What are the income tax rates?

There are four categories of income:

  • Professional income. This is subject to progressive tax rates and tax is generally levied in the form of a withholding tax. The amount levied can be set off against the taxpayer’s final assessment and any excess is refundable. Self-employed taxpayers can pay quarterly advance tax payments to avoid a tax increase.
  • Investment income (for example, dividends, interest income, royalties). The default withholding tax rate for interest income is 21% (before 2012 it was 15%). The default withholding tax rate for dividends is maintained at 25%. For private persons, this withholding tax used to be the final tax. Liquidation proceeds remain subject to the 10% withholding tax rate. Share buybacks become subject to withholding tax at the rate of 21% (before 2012 it was 10%). Savings from regulated saving deposits continue to be subject to a 15% withholding tax rate for the portion in excess of the tax-exempt bracket with an interest of up to EUR1,830 per taxpayer.

During 2012, a separate 4% surcharge applies to taxpayers with investment income (interest and dividends) exceeding net EUR20,020 (for tax year 2013). The 4% surcharge is not due on interest and dividends subject to withholding tax at the rate of 25%. Two collection systems are put in place to collect the 4% surcharge:

  • where the taxpayer allows the debtor of the withholding tax or the paying agency to inform the authorities of the amount of investment income perceived. The 4% surcharge is not withheld at source but is due further to the establishment of the personal tax liability based on the personal income tax return;
  • where the taxpayer does not allow the debtor of the withholding tax to inform the authorities of the amount of the investment income perceived, the 4% surcharge is withheld at source and any excess withheld (for example, because the threshold of EUR20,020 is not reached) can be claimed back through the income tax return. The taxpayer can also opt to suffer the 4% surcharge (even if not due) in exchange for not disclosing his investment income.

The authorities responsible for collection of the information regarding a taxpayer’s personal property income are a central contact point within the Federal Finance Department. This new system introduces a general reporting obligation of investment income in the personal income tax return (for tax year 2013, income 2012. ). However in the agreement reached on Budget 2013 on 20 November 2012, the federal government decided to abandon the general reporting obligation and to reintroduce the system of a final withholding tax on investment income at a default rate of 25% (as of 1 January 2013) (see Question 42). The central contact point within the Federal Finance Department provided by law will never be installed.

The taxes on income reported in the personal income tax return are generally increased with local taxes. Following the decision of the EU Court of Justice in the Dijkman case (Gerhard Dijkman and Maria Dijkman-Lavaleije v Belgische Staat, C-233/09), local taxes do not apply if the dividend and interest income has its source in an EEA member state.

  • Real property income. This is subject to progressive tax rates.
  • Miscellaneous income. This is subject to a variety of tax rates, starting from 16.5%.

Each form of income is aggregated to determine a person’s gross global taxable income in a given tax year. After deducting certain expenses, the net global taxable income is subject to progressive tax rates, ranging from 25% to 50%.

Generally, all rules applicable to residents also apply to non-residents. However, non-residents are only taxed on income from a Belgian source. Some non-residents are taxed on the aggregate value of their real property and professional income. Non-residents who do not qualify for taxation by assessment are taxed at source (withholding tax).

Inheritance tax and lifetime gifts

7. What is the basis of the inheritance tax or gift tax regime (or alternative regime if relevant)?

IHT is due on the worldwide property of a deceased person who is a Belgian resident at the time of his death (see Question 2). For deceased non-residents, a transfer tax is due on their immovable property situated in Belgium.

Gift tax is a registration tax. It is levied on lifetime gifts of immovable property situated in Belgium. Gift tax is only due in relation to lifetime gifts of movable property (movables) if the transfer document (for example, notary deed) is registered in Belgium.

The following gifts are not subject to gift tax, given their lack of registration:

  • Transfer of movables by hand (handgift/don manuel).
  • Bank transfer (bankgift/don bancaire).
  • Transfer by foreign notary deed.

However, gift tax must be paid if such a gift is registered voluntarily.

Different IHT and gift tax rules apply to the Belgian regions:

  • Flanders.
  • Brussels.
  • Wallonia.

Rates of IHT and gift tax generally increase with the value of the transferred asset and according to the relationship between the parties (see Question 8).

The rates of inheritance and gift tax are not related to the beneficiary’s wealth.

8. What are the inheritance tax or gift tax rates (or alternative rates if relevant)?

Tax rates

IHT. IHT rates on transfers to those in the direct bloodline and between spouses vary as follows:

  • From 3% (on amounts received up to EUR50,000) (as at 1 October 2012, US$1 was about EUR0.8) to 27% (on amounts received over EUR250,000) in Flanders.
  • From 3% (on amounts received up to EUR50,000) to 30% (on amounts received over EUR500,000) in Brussels.
  • From 3% (on amounts received up to EUR12,500) to 30% (on amounts received over EUR500,000) in Wallonia.

Subject to certain conditions, which differ in the three regions, (legal) cohabitants benefit from the rates applicable to spouses. Rates can be much higher for other beneficiaries (as high as 65% in Flanders and 80% in Brussels and Wallonia).

Gift tax. Gift tax applies on lifetime gifts of immovable property situated in Belgium. Gift tax rates on transfers of immovable property to those in the direct bloodline and between spouses vary as follows:

  • From 3% (on amounts received up to EUR50,000) to 30% (on amounts received over EUR500,000) in Flanders and Brussels.
  • From 3% (on amounts received up to EUR12,500) to 30% (on amounts received over EUR500,000) in Wallonia.

Registered gifts of movables benefit from the flat rates of 3%, 5% or 7% under certain conditions. Gifts of movables (not voluntarily registered) are exempt from gift tax (see Question 7). From 2012 onwards, the gift tax rates in the Walloon region have increased by 10% (to 3.3%, 5.5% or 7.7%).

In Flanders, the portion of the estate transferred to a direct ascendant (that is, those from whom a person is descended, for example a parent or grandparent), descendant or spouse is split up in an immovable and movable portion, and taxed separately. This usually results in a significantly lower tax burden on death than in Brussels and Wallonia.

Tax free allowance

There are small tax-free allowances in the different regions.

Exemptions

The following regional exemptions and beneficial rates exist:

  • Flanders. Family dwellings are IHT exempt, if the beneficiary is the surviving spouse (or cohabitant under certain conditions).
  • Brussels and Wallonia. Family dwellings benefit from reduced IHT rates.
  • Flanders and Wallonia. Family businesses are exempt from IHT in Wallonia, subject to strict conditions. In Flanders the IHT exemption for family businesses has been replaced by reduced flat IHT rates of 3% (direct line and between spouses) and 7% (all other cases) from 2012 onwards.
  • Brussels.The following exemptions exist:
    • family businesses benefit from a reduced flat IHT rate of 3% subject to strict conditions;
    • gifts of family businesses can benefit from a flat gift tax rate of 0% or 3%, depending on the region;
    • IHT exemptions for special types of land (for example, forested land);
    • beneficial rates for legacies and gifts to public institutions and not-for-profit organisations or foundations.

Techniques to reduce liability

If a donor survives for three years after making a tax-free gift of a movable asset, the transfer is free from IHT on the subsequent death of the donor.

Transforming immovable property into movable can avoid high IHT and gift tax rates.

From June 2012 onwards, a new general anti-abuse rule (GAAR) applies in matters of inheritance and gift tax. Many long standing techniques to reduce liability now have to be evaluated under this new rule. The authorities must demonstrate tax abuse. Tax abuse requires the presence of both an objective and a subjective element. The objective element implies the choice of a legal form allowing a tax payer to violate the objectives of a tax law, whereas the subjective element is the choice for this legal form based on the essential aim of achieving a tax benefit.

The taxpayer can avoid the GAAR application if he demonstrates that the choice for his act(s) is justified by motives other than tax avoidance. The explanatory memorandum clarifies that this test implies proof that the taxpayer’s choice is essentially motivated by non-tax reasons (that is, the authorities can not only challenge transactions with exclusively tax based motives).

In a recent circular letter, the Belgian tax authorities made a white list and a black list of techniques to reduce tax liability. For instance, tax free gifts of movable assets are on the white list, the acquisition of property together with heirs (parents acquiring the life interest) is on the black list.

9. Does the inheritance tax or gift tax regime apply to foreign owners of real estate and other assets?

For deceased non-residents, transfer tax is due on their Belgium-located immovable property.

Gift tax is payable on:

  • Lifetime gifts of immovable property situated in Belgium, irrespective of the donor’s and beneficiary’s residence.
  • Lifetime gifts of movables, voluntarily registered in Belgium.

10. Are there any other taxes on death or on lifetime gifts?

Not-for-profit organisations and private foundations are generally subject to an annual tax of 0.17% on the value of their assets.

Taxes on buying real estate and other assets

11. Are there any other taxes that a foreign national must consider when buying real estate and other assets in your jurisdiction?

Purchase and gift taxes

A sale of a new property is subject to VAT at 21%. Land sold together with the new property by the same seller is also subject to VAT (and exempt from registration tax). Buildings are considered new for value added tax (VAT) purposes until 31 December of the second year following the year of the building’s first use.

Transfers of immovable property are subject to registration tax, unless the property is new. The normal rates are:

  • 12.5% of the market value in Brussels and Wallonia.
  • 10% of the market value in Flanders.

Every property in Belgium is listed in the land registry (Kadaster/Cadastre) and an annual rental income is assigned to it (cadastral income). Reduced registration tax rates may apply to immovable property with a low cadastral income.

In relation to gift tax, see Question 8.

Annual rates

Municipalities may impose a surcharge on the individual income tax, generally from 0% to 10%. The maximum income tax rate can therefore amount to 55% if a 10% surcharge is levied (for income tax, see Question 6).

A separate tax is levied on real estate (onroerende voorheffing/précompte immobilier). This is a local tax that is calculated on the cadastral income of the property (see above). The rate varies, depending on the region.

Wealth taxes

There is no wealth tax.

Other

There are no other taxes applicable.

12. What tax-advantageous real estate holding structures are available in your jurisdiction for non-resident individuals?

Different types of companies or entities can act as holding structures for movable or immovable property:

  • Public limited liability company (naamloze vennootschap/société anonyme) (NV/SA).
  • Private limited liability company (besloten vennootschap met beperkte aansprakelijkheid/société privée à responsabilité limitée) (BVBA/SPRL).
  • Public limited liability partnership (commanditaire vennootschap op aandelen/société en commandite par actions) (CVA/SCA).
  • Partnership (burgerlijke maatschap/société de droit commun). This is fiscally transparent (that is, tax is levied on the individual investors rather than the partnership itself).
  • Public or private investment companies, as defined by law (Article 2, §2, 5° ITC).
  • Private foundation (private stichting/fondation privée) (see Question 30).

Taxes on overseas real estate and other assets

13. How are residents in your jurisdiction with real estate or other assets overseas taxed?

Residents in Belgium are taxed on their worldwide income. Foreign income must be included in the income tax return and is taxed at the standard tax rates (see Question 6), unless the double tax treaty provides otherwise (for example, exemption with progression method (see Question 14)).

International tax treaties

14. Is your jurisdiction a party to many double tax treaties with other jurisdictions?

Belgium has entered into double taxation treaties with France, Spain, Hong Kong, Switzerland, the UK and the US, among others. Belgium generally uses the exemption with progression method in its treaties to avoid double taxation. This means that the taxpayer’s income from a foreign source is not taxed by the state of his residence but is taken into consideration to determine the tax rate due on his income in his country of residence.

Belgium has entered into two treaties regarding IHT, with France and Sweden (however, the latter is no longer relevant since Sweden has abolished IHT).

Belgium has not entered into any international agreements regarding gift tax.

Governing law and formalities

15. Is it essential for an owner of assets in your jurisdiction to make a will in your jurisdiction? Does the will have to be governed by the laws of your jurisdiction?

Residents

Belgian residents should make a will. The format can be Belgian or foreign, but it is easier to execute a Belgian will. If there is no will, Belgian intestacy rules apply (see Question 24 and 28).

Non-residents

Non-residents should make a Belgian will if they own immovable property situated in Belgium. Under current Belgian conflict of law rules, Belgian succession law regulates succession to such property. If there is no will, intestacy rules apply.

A will can be governed by either:

  • The foreign testator’s national law (at the time of making the will or at the moment of death).
  • The law of the country in which a foreign testator is habitually resident.

A will governed by foreign law cannot deprive forced heirs of their reserved portion (see Question 24 and 25).

However, Regulation (EU) No 650/2012 on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession (Succession Regulation) is effective from 17 August 2015 and will apply to Belgium. The Succession Regulation provides for uniform European international private law regarding successions with no distinction between movable and immovable assets. A foreign testator resident in Belgium can make a will with choice of law for his national law. This choice of law will now be fully effective in Belgium (even if it deprives forced heirs of their reserved portion) if the testator dies after 17 August 2015.

16. What are the formalities for making a will in your jurisdiction? Do they vary depending on the nationality, residence and/or domicile of the testator?

Under Belgian law, there are three valid forms of a will:

  • Holographic will. This is handwritten, dated and signed by the testator.
  • Public will. This is drawn up by a civil law notary in the presence of two witnesses, or by two civil law notaries.
  • International will.If the testator’s estate is international, he is advised to make an international will (under the Convention providing a Uniform Law on the Form of an International Will 1973) (Treaty of Washington). An international will comprises both:
    • a private document;
    • a notary deed.

Redirecting entitlements

17. What rules apply if beneficiaries redirect their entitlements?

It is not possible to make a post-death variation. However, beneficiaries can reach an agreement (settlement) regarding asset allocation. Property transfers pursuant to such an agreement are regarded as donations with all the usual tax consequences.

Although it is not possible to make a post-death variation, forced heirship rules can override testamentary provisions. This generally applies when forced heirs make a claim for their reserved portions.

Validity of foreign wills and foreign grants of probate

18. To what extent are wills made in another jurisdiction recognised as valid/enforced in your jurisdiction? Does your jurisdiction recognise a foreign grant of probate (or its equivalent) or are further formalities required?

Validity of foreign wills

A foreign will is recognised as valid in Belgium if the foreign testator has made a will in accordance with either:

  • His national law (at the time of making the will or at the moment of death).
  • The law of the country of his habitual residence.

The formal validity of the will is regulated by the law applicable under the HCCH Convention on the Conflicts of Laws relating to the Form of Testamentary Dispositions 1961 (Hague Testamentary Dispositions Convention).

Validity of foreign grants of probate

Under Belgian conflict of law rules, the law governing succession also governs the transfer of possession and administration of the succession. Therefore, Belgium recognises foreign grants of probate if:

  • The grant of probate is prescribed by the law governing succession.
  • The grant of probate is prescribed by the law of the country in which the assets are situated.

Executive powers conferred by a Belgian court decision override the powers conferred to a foreign executor under his national law.

19. Are there any relevant practical estate administration issues if foreign nationals die in your jurisdiction?

There are no particular practical issues that are relevant when foreign individuals die in Belgium. In certain circumstances, bank assets can be blocked for a period of time, but this can normally be easily resolved.

Administering the estate

20. Who is responsible for administering the estate and in whom does it initially vest?

Responsibility for administering

Under Belgian law, the testator can appoint, by will, one or more executors. In principle, the executor must ensure that the estate is administered in accordance with the deceased’s wishes. The will may also permit the executor to take possession of movable assets for one year and one day (saisine). The heirs are deprived of the administration of the movables during that period.

The executor can sell the assets if there are insufficient funds to discharge all legacies for which he is responsible. The executor must render an account of the estate administration, once it is complete.

Vesting

The deceased’s estate passes directly to the legal heirs (saisine).

21. What is the procedure on death in your jurisdiction for tax and other purposes in relation to:
• Establishing title and gathering in assets (including any particular considerations for non-resident executors)?
• Paying taxes?
• Distributing?

Establishing title and gathering in assets

There are no special formalities for the transmission, possession and administration of an estate. From the moment of death, the heirs can take possession of all the deceased’s:

  • Assets.
  • Rights.
  • Legal claims.

The estate passes directly to the heirs and is not administered by executors or administrators, unless the will provides otherwise (see Question 20).

Certain categories of heirs (for example, the state) or legatees (in some cases the universal legatee, that is, a legatee who will receive the entire estate of the deceased under the terms of the will) do not automatically become entitled on the deceased’s death, but must obtain an order for possession (envoi en possession) from the court. Other categories of legatees must ask the heirs to deliver the legacy (delivery is not subject to any formalities) (see Question 28).

Executive powers conferred by a Belgian court prevail over the powers conferred to a foreign executor under his national law.

Procedure for paying taxes

The legal heirs and universal legatees must file the IHT return for the entire estate within a specified time limit (see Question 22).

Other categories of beneficiaries (such as specific legatees or legatees under general title) must in some cases file an IHT return.

Heirs, legatees or beneficiaries are liable to pay IHT on their share in the estate. They are also liable, limited to their share in the estate, for IHT that is due from either:

  • Legatees under the general title (where the legatee is entitled to a portion of the estate under the terms of the will).
  • Specific legatees (where the legatee is entitled to specific assets under the terms of the will).

Distributing the estate

The estate is distributed using a private document or a notary deed. A notary deed is mandatory if the estate contains immovable property situated in Belgium.

22. Are there any time limits/restrictions/valuation issues that are particularly relevant to an estate with an element in another jurisdiction?

The deadline for filing the IHT return depends on where the deceased died:

  • In Belgium. The deadline is four months from the deceased’s death.
  • Outside Belgium, but in another European country. The deadline is five months from the deceased’s death.
  • Outside Europe. The deadline is six months from the deceased’s death.

Taxes and penalties must be paid within two months from the deadline for filing the IHT return. If the deadline for paying the taxes and penalties is missed, interest of 7% is due.

If an heir or legatee living abroad in a non-EEA country receives movable property from the estate of a Belgian resident, he must guarantee the payment of taxes, penalties and interest. A Belgian court determines the guarantee amount.

Foreign inheritance taxes levied on foreign real estate are deducted from the Belgian inheritance taxes. No deduction is provided for foreign inheritance taxes levied on foreign movable property.

The time limit for the tax administration to challenge the valuation method used in the IHT declaration of inherited registered shares is (from the date of filing the IHT return):

  • Two years if the company’s centre of effective management is in Belgium.
  • Ten years if the company’s centre of effective management is outside Belgium.

The EU Court of Justice recently found these rules contrary to the freedom of establishment in the Halley case (Olivier Halley, Julie Halley and Marie Halley v Belgische Staat, Case C-132/10).

23. Is it possible for a beneficiary to challenge a will/the executors/the administrators?

A will can be challenged on the following grounds:

  • Incapacity of the testator.
  • Forgery.
  • Nullity (for example, where a notary has signed the will without witnesses or where a holographic will has been typed instead of handwritten).
  • Violation of forced heirship rights (see Question 24).

A beneficiary can challenge an executor if he violates the executive powers conferred by a Belgian court.

Succession regimes

24. What is the succession regime in your jurisdiction (for example, is there a forced heirship regime)?

Intestacy rules

If there is no will, intestacy rules apply. These divide the estate between the surviving spouse and blood relations as follows:

  • The children inherit equal shares.
  • If the deceased leaves children, the surviving spouse inherits a life interest in the entire estate.
  • If the deceased leaves no children but leaves other heirs, the surviving spouse receives full ownership of the deceased’s share in the community property and a life interest in the deceased’s separate property (see Question 37).
  • If the deceased leaves no other heirs, the surviving spouse receives full ownership of the entire estate.
  • If there is no spouse and no heirs, the state inherits everything.

Forced heirship regime

A forced heirship regime limits a person’s freedom to dispose of his assets by will. Children, ascendants and the surviving spouse are entitled to a reserved portion of the deceased’s estate.

The reserved portion is calculated on the “fictive hereditary mass”, and depends on the number of children. The fictive hereditary mass comprises both:

  • The deceased’s assets on death.
  • Lifetime gifts made by the deceased, whenever and to whoever they were made. The gifts are valued at the time of death, taking into account the state of the gifted property at the time of the donation.

Debts are then deducted from the fictive hereditary mass. The forced heirship shares are:

  • For one child, the total reserved portion is 50%, the reserved portion for each child is 50% and the disposable share is 50%.
  • For two children, the total reserved portion is 66.66%, the reserved portion for each child is 25% and the disposable share is 33.33%.
  • For three children, the total reserved portion is 75%, the reserved portion for each child is 25% and the disposable share is 25%.
  • For four children, the total reserved portion is 75%. The reserved portion for each child is 18.75% and the disposable share is 25%.

Different rules apply if there are no surviving children and/or there is a surviving spouse:

  • No surviving spouse and no surviving children. Ascendants have forced heirship rights. The reserved portion is 25% each for the maternal and paternal line.
  • A surviving spouse.The spouse is entitled to a minimum of:
    • a life interest in 50% of the succession; or
    • a life interest in the family dwelling and household effects.

If there are other heirs, the spouse’s reserved portion will proportionally burden the other heir’s reserved portion and disposable portion.

The remaining part of the estate is freely disposable. An heir with a reserved portion can claim for a reduction of testamentary dispositions or gifts if these exceed the disposable portion.

A Belgian court decided in 1994 that a trust settlement is only valid if it does not violate forced heirs’ rights. A Belgian judge can recognise forced heirship claims against trust assets (Article 124(3), new International Private Law Code (IPLC)), even if the law applicable to the trust provides otherwise. If Belgian inheritance rules apply, protected heirs (that is, descendents, ascendants or surviving spouse) can claim reduction of the funds being transferred to the trust, as this transfer is regarded as a gift. However, the execution of this judgment is regulated by the law of the nation of either the trust foundation or location of trust assets. The law of the trust jurisdiction may provide for the non-enforceability of a foreign court award.

Forced heirship regimes

25. What are the main characteristics of the forced heirship regime, if any, in your jurisdiction?

Avoiding the regime

Marital contracts are popular as a means of protection of the surviving spouse against forced heirship rights of the children. A community contract with an attribution clause can be interesting from a private law perspective, but triggers extra inheritance tax in most cases. A separation contract with participation clause also offers possibilities to protect the surviving spouse from forced heirship rights of children and is more interesting from a tax perspective.

If death occurs after 17 August 2015 (when the Succession Regulation becomes effective (see Question 15)) a testator with foreign nationality can avoid Belgium’s forced heirship rules through a choice of law clause.

Other ways to avoid the forced heirship regime are extremely difficult. For example, the following methods can be used to avoid the forced heirship regime:

  • Purchasing as a joint owner on the basis that total ownership will pass to the last survivor (en tontine) (see Question 36).
  • Migration to a country without forced heirship rules.
  • A trust settlement (see Question 24).

However, these methods are controversial and should be used with caution.

Assets received by beneficiaries in other jurisdictions

Belgian forced heirship rules do not apply to immovable property situated abroad.

Mandatory or variable

Forced heirs can only waive their rights to a reserved portion during the testator’s lifetime in two cases:

  • They explicitly waive their forced heirship rights under Article 918 of the Belgian Civil Code (BCC). Under Article 918, a forced heir can waive his right to make a claim for the reduction of a transaction that infringes his reserved portion, by explicitly agreeing with the sale or gift of such property, with reservation of a life interest, contracted by the deceased with one of his descendants.
  • They are a spouse who agrees to waive their reserved portion where there are children from a previous relationship.

Real estate or other assets owned by foreign nationals

26. Are real estate or other assets owned by a foreign national subject to your succession laws or the laws of the foreign national’s original country?

If the foreign national has his habitual residence in Belgium (see Question 2) at the time of his death, the Belgian courts have jurisdiction over the succession and Belgian conflict of law rules (Private International Law (PIL)) apply.

Under current Belgian PIL rules:

  • Movable assets worldwide are governed by the law of the nation where the deceased had his habitual residence at the time of death (lex successionis).
  • Immovable assets are governed by the law of the asset’s location (lex rei sitae).

However, these rules will change from 17 August 2015 onwards under the Succession Regulation (see Question 15).

27. Do your courts apply the doctrine of renvoi in relation to succession to immovable property?

Under Belgian PIL rules, courts do not accept a reference back (renvoi) unless both:

  • The law of the asset’s location refers the case back to Belgian law.
  • The deceased had his habitual residence in Belgium at the time of his death.

Intestacy

28. What different succession rules, if any, apply to the intestate?

Generally, the same rules apply to testate and intestate succession. However, the following categories of beneficiaries cannot take possession and have to ask the heirs for delivery of the legacy:

  • Universal legatees (if there are heirs with a reserved portion claiming their rights).
  • Legatees under general title.
  • Specific legatees.

The rules concerning liability for the debts of the succession also differ between testate and intestate succession.

29. Is it possible for beneficiaries to challenge the adequacy of their provision under the intestacy rules?

The division of inheritance rights in usufruct (life interest) and bare ownership during the usufruct may cause some practical problems. Often heirs prefer full ownership. The law makes it possible to convert usufruct either into:

  • Full ownership.
  • Cash.
  • Price-indexed and guaranteed annuity.

However, if the bare ownership belongs to the deceased’s descendants, total or partial conversion of the usufruct may be demanded both by the surviving spouse and by one of the bare owners.

Moreover, the surviving spouse can, at any time, demand the conveyance of the bare ownership, against payment in cash, of the real property serving as the principal family dwelling on the day of the opening of the estate.

Trusts

30. Are trusts (or an alternative structure) recognised in your jurisdiction?

Foreign trusts

Belgium has no trust legislation. The legal and tax consequences of a foreign trust are complex and uncertain. Case law is scarce and Belgium does not recognise the HCCH Convention on the Law Applicable to Trusts and on their Recognition 1985 (Hague Trusts Convention). Legal scholars have tried to analyse tax consequences of a foreign trust under Belgian law, but their conclusions are still ambiguous.

However, since 2004, foreign trusts are recognisable in Belgium (Articles 122 to 125, IPLC). The settlor can elect the governing law for the trust (for example, his national law), provided the elected law contains trust provisions. If the settlor has not specified the governing law, the law of the country in which the trustee was habitually resident when the trust was constituted applies.

The Belgian Ruling Commission has recently ruled on the Belgian tax treatment of foreign trusts in several cases (Advance Rulings No. 900.329 of 22 December 2009, No. 700.112 of 8 December 2009, No. 2011.418 dd. of 6 December 2011 and No. 2011.148 dd of 24 May 2011).

Private foundations

A private foundation can be considered as an equivalent structure to a trust. This structure only became available in 2003 and therefore its viability as an estate planning tool is not clear.

Transfers of assets to a private foundation can be either:

  • Tax free. This applies to transfers of movable property if the donor survives for three years after making a gift (see Questions 7 and 8). The transfer can be either:
    • by hand (hangift/don manuel); or
    • by foreign notary deed.
  • At a flat gift tax rate of 7%, if the gift is voluntarily registered.

Private foundations are subject to legal entities income tax (rechtspersonenbelasting/impôt des personnes morales) as opposed to corporation tax. Legal entities income tax has a more limited tax base than corporation tax.

The Belgian Ruling Commission recently ruled on the tax treatment of distributions out of a Belgian private foundation (Ruling No. 2011.275 of 29 November 2011). This ruling concerns income tax law and inheritance tax. In this particular case, the Ruling Commission decided that distributions to the beneficiaries are not subject to inheritance tax or income tax.

31. Does your jurisdiction recognise trusts that are governed by another jurisdiction’s laws and are created for foreign persons?

Belgium recognises foreign trusts (see Question 30, Foreign trusts).

32. What are the tax consequences of trustees (for example, of an English trust) becoming resident in/leaving your jurisdiction?

If a trustee becomes resident in Belgium, he is subject to income tax on his worldwide property (most likely including the trust’s assets). In relation to an irrevocable discretionary trust, the Belgian Ruling Commission considers a trustee as the legal owner of the trust’s assets (Advance Ruling No. 900.198 of 7 July 2009 and No. 2011.435 dd. of 13 December 2011). The tax regime depends on the form that the trustee chooses to operate under (for example, a Belgian private foundation, a Belgian limited liability company; see also Ruling No. 900.198 of 7 July 2009).

If a trustee resides in Belgium or has his actual seat of management in Belgium, the trust deed should include a choice of law provision selecting the law of a jurisdiction that has its own trust law (Article 124 (2), IPLC).

33. If your jurisdiction has its own trust law:
• Does the law provide specifically for the creation of non-charitable purpose trusts?
• Does the law restrict the perpetuity period within which gifts in trusts must vest, or the period during which income may be accumulated?
• Can the trust document restrict the beneficiaries’ rights to information about the trust?

Belgium does not have its own trust law.

34. Does the law in your jurisdiction recognise claims against trust assets by the spouse/civil partner of a settlor or beneficiary on the dissolution of the marriage/partnership?

To make a successful claim against trust assets, the transfer of assets to the trust must qualify as a lifetime gift (donation) under Belgian law. Claims can be brought under matrimonial property law or succession law.

Matrimonial property law

Claims can be brought in relation to the following:

  • Lifetime gifts of community property to a trust. These are prohibited, unless they are approved by both spouses (Article 1419, BCC) (in relation to community property, see Question 37).
  • Lifetime gifts by a spouse of his own property to a trust. The other spouse can claim nullity of the transfer to the trust, if the transfer violates the family’s interest (Article 224, BCC). The claim must be brought before court within one year after the other spouse learnt about the transfer.

Legal cohabitants cannot benefit from these protection measures.

Specific claim based on Belgian succession law

The transfer of assets to a trust cannot deprive the surviving spouse from her statutory share under the Belgian succession law (Article 124(3), new PILC).

Legal cohabitants are not entitled to a statutory share.

35. To what extent does the law of your jurisdiction allow trusts to be used to shelter assets from the creditors of a settlor or beneficiary?

The transfer of Belgian property to a trust does not deprive creditors of their rights under Belgian civil law under the principle of unity of property (Articles 7 and 8, Belgian Mortgage Act). Where conflict of law rules apply to the enforceability of the transfer in relation to everyone (erga omnes), they concern property and insolvency law, not trust law.

A creditor can, on its own behalf, bring proceedings to invalidate acts made by the debtor to defraud the creditor’s rights, as long as (Article 1167, BCC):

  • The creditor’s claim existed before the challenged act.
  • The challenged act either impoverishes the debtor or, at a minimum, limits the creditor’s rights to recover his money.
  • The debtor has a fraudulent intention.

Ownership and familial relationships

36. What are the laws regarding co-ownership and how do they impact on taxes, succession and estate administration?

Under Belgian law, a group of individuals can have an undivided share in an asset, for example, when a group of siblings inherit property from a parent. An individual can also sell or give property to a group. Unless an agreement provides otherwise, each co-owner is presumed to have an equal share in the undivided property. Each co-owner pays taxes on his share. When a co-owner dies, the surviving owners do not automatically become entitled to his share in the asset. Rather, that share forms part of the deceased’s estate.

Joint owners can, when purchasing property, determine by deed that the total ownership of the property will pass to the last survivor (en tontine). A purchase en tontine can in some cases avoid high IHT rates and the forced heirship regime (if applied carefully). However, between spouses and cohabitants, the tax authorities regard an agreement with an en tontine clause as a gift.

Community property between spouses is a form of co-ownership. Generally, community property acquired during marriage is divided equally between the spouses (see Question 37). The spouses can modify this rule by contract.

The contracting parties should carefully consider the legal and tax consequences of:

  • Agreements with en tontine clauses.
  • Marital contracts that vary the equal division of community property.

37. What matrimonial regimes in trust or succession law exist in your jurisdiction? Are the rights of cohabitees/civil partners in real estate or other assets protected by law?

When ascertaining the rights of the surviving spouse, the marital property regime should be taken into account, followed by succession. In the absence of a prenuptial agreement or marital contract, the regime of community property of marital gains applies. Under this regime, all property acquired by the spouses during the marriage is common, except for pre-marital, donated and inherited property. The spouses own these separately, although income from such property is shared. In their marital contract, spouses can:

  • Limit the community property regime.
  • Amend the terms of the community property regime.
  • Extend the regime of community property of marital gains to a total community property system.
  • Introduce a limited community regime along with a separation of property regime. The separation of property regime remains the dominant regime but a community limited to specified assets (for example, the family home) is created. Between spouses, the limited community regime functions under the same rules as the ordinary community property regime.

Community property is automatically dissolved if one of the spouses dies. In these circumstances, the community must be settled, liquidated and distributed before the succession can be divided. If there is a separation of property regime, this must be settled by dividing jointly held property before the succession can be divided.

Special clauses in marital contracts can be very useful for limiting IHT and gift tax.

On intestacy, legal cohabitants (of the same sex or otherwise) have very limited intestacy rights and are only entitled to a life interest in the family dwelling and furniture. This can be altered by will. There are no forced heirship rights between legal cohabitants.

38. Is there a form of recognised relationship for same-sex couples and how are they treated for tax and succession purposes?

Like heterosexual couples, same-sex couples can enter into marriage or make a declaration of legal cohabitation (see Question 39, Civil partnership). For the purposes of matrimonial law, succession law and tax law, they are treated in exactly the same way as heterosexual couples.

For IHT purposes, legal cohabitants can benefit from the same rates as spouses, subject to certain additional conditions (see Question 8, Tax rates). Legal cohabitants have very limited rights on intestacy and there are no forced heirship rights between them (see Question 37).

39. How are the following terms defined in law:
• Married?
• Divorced?
• Adopted?
• Legitimate?
• Civil partnership?

Married

This refers to those who have entered into a marriage contract before a civil servant, including same sex couples. Civil marriage must be entered into before entering into a religious marriage.

Divorced

This is where a marriage has been dissolved by a final court decision.

Adopted

There are two types of adoption:

  • Ordinary adoption. The adopted child receives succession rights from the adoptive parents, but not from the adoptive parent’s families. The adopted child does not lose succession rights from his biological parents.
  • Full adoption. Fully adopted children are treated as equal to blood relations and lose their succession rights in relation to their biological parents.

Legitimate

Generally, children born out of wedlock (illegitimate children) are treated equally to children born within wedlock. Small differences in treatment remain, but Belgian courts usually find these to be unconstitutional.

Civil partnership

The term civil partnership does not exist under Belgian law. This should be understood to refer to the legal cohabitation created by the Law of 23 November 1998. Legal cohabitation is available to heterosexual and same-sex couples, and even to close relatives.

40. What rules apply during the period when an heir is a minor? Can a minor own assets and who can deal with those assets on the minor’s behalf?

Generally, minors are legally represented by their parents. Investment decisions and other legal actions concerning the minors’ property usually require a judge’s approval. Minority lasts until the age of 18 years is reached.

A minor can own assets. These assets are managed by the minor’s parent(s) or guardian (for example, if both parents have deceased).

Capacity and power of attorney

41. What procedures apply when a person loses capacity? Does your jurisdiction recognise powers of attorney (or their equivalent) made under the law of other jurisdictions?

When a person loses capacity, each interested party (that is, a party with an interest that is not solely pecuniary) can file a court application for a special protection regime. There are different types of special protection regime. If a judge places the person under a special protection regime, an administrator is appointed to administer the assets of that person.

Foreign powers of attorney are recognised under certain conditions.

Proposals for reform

42. Are there any proposals to reform private client law in your jurisdiction?

A bill has recently been approved by the federal parliament which includes:

  • Strengthening the income tax regime on income realised at sale or redemption of fund units in collective investment funds.
  • Changes to the income tax regime for non-residents.
  • Amendments of the notional interest deduction regime. The possibility to carry-forward excess notional interest deduction (NID) for seven taxable periods will be abolished as from the 2013 tax year. However, the current stock of NID carry-forwards will remain available although its use will be restricted.

On 20 November 2012, the Federal Government reached an agreement on Belgium’s Budget 2013. The relevant plans for private clients include:

  • An increase of the 21% tax rate to 25% on investment income (interests, dividends, royalties and other types of movable income such as lifetime annuities) from 2013. The withholding tax will regain its final character for interest and dividend income. The 4% surcharge introduced in 2012 and the related notification to the Central Contact Point within the tax authorities will be abolished as of 2013. For movable income earned in 2012, the 4% surcharge remains applicable, but the Central Contact Point will not be installed and the notification obligations are deemed never to have existed.
  • Interest on regulated savings deposits (in excess of the tax-exempt bracket) will remain subject to 15% withholding tax. Liquidation bonuses remain subject to 10% withholding tax.
  • An increase of insurance premium taxes from 1.1% to 2% for unit-linked life insurance products (Tak 23/Branche 23) and insurance savings products (Tak 21/Branche 21) for premium paid as of 2013.
  • An introduction of a reporting obligation in the personal income tax return regarding foreign life insurance contracts to combat tax fraud.
  • The NID rate will be calculated based on the average ten-year government bond rate for July, August and September 2012, resulting in a lower effective NID rate of 2.74% for large enterprises and of 3.24% for small- and medium-sized enterprises for tax year 2014.
  • Changes to the corporate tax regime of capital gains on shares. Capital gains currently qualifying for full exemption would become subject to a separate tax at the rate of 0.4%, calculated on the net amount of the gain that until now would be exempt. The separate tax would not apply to small- and medium-sized companies which meet the conditions laid down in Article 15 of the Companies Code.
  • Changes to the current tax amnesty regime. The permanent tax amnesty regime with the Ruling Commission will be abolished at the end of 2013. During 2013, the penalty for undeclared investment income will increase (15% instead of the current 10%). Furthermore, during 2013, it will be possible to obtain tax amnesty (including criminal amnesty) for capital originating from certain money laundering offences, such as, severe and organised tax fraud as well as abuse of company assets and forgery of documents. This will take the form of a capital levy (probably at a rate of 35% if the tax fraud has prescribed).

The federal parliament recently approved some proposals that include minor reforms of succession law (see Question 24). For example, a person will be able to validly waive his right to the inheritance of a parent who died intestate (post mortem), in favour of his own children.

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