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TAX NEWS - January 2010

Belgium: Personal income tax measures affect employer-provided benefits

The Belgian government recently issued an array of measures (both effective and proposed) relating to personal income taxation, including changes affecting the tax treatment of benefits received from employers (and, in some instances, the deductibility of such for corporate income tax purposes).

Directors' professional expenses

As from 1 January 2010, directors who do not deduct actual professional expenses are entitled to a lump sum deduction, the amount of which relates to the director's gross salary. The amount of the lump sum deductible expenses will be reduced from 5% to 3% of gross salary, with a maximum deduction of EUR 1,555.50 (non-indexed amount). The measure, which does not change the process when a director chooses to apply the itemized professional costs deduction, is intended to reduce the double deduction of expenses (i.e. a deduction of the actual expenses by the company and a lump sum deduction at the level of the director).

Company cars and CO2 emissions

In an effort to influence the choice of company cars by employers and employees, as from 1 January 2010, the valuation of the amount of the benefit in kind for company cars depends on the CO2 emission level of the vehicle. The value of this benefit in kind will be determined as the private use kilometers driven, multiplied by the CO2 emission of the car per kilometer, multiplied by the CO2 coefficient. If the CO2 emission level is not available from the Car Registration Service, the emission standards will be deemed to amount to 205 grams per kilometer for gas, liquefied petroleum gas (LPG) and natural gas engines, and 195 grams per kilometer for diesel engines. The CO2 coefficients to take into account are EUR 0.00210 per CO2 gram for gas, LPG and natural gas engines, and EUR 0.00230 per CO2 gram for diesel engines. These coefficients will be subject to indexation on an annual basis (based on the consumption price index).

The minimum threshold for the distance to determine this benefit in kind remains 5,000 kilometers and the amount cannot be lower than EUR 0.10 per kilometer.

Depending on a car's emission level, the benefit in kind may be higher or lower than the benefit in kind under the previous regime, which was linked to the fiscal horsepower of the automobile. Employers may want to reassess their compensation and benefit packages and reconsider the cars in their fleets, taking into account the impact for the employees (benefit in kind) and the company (cost deduction at the corporate level).

Fuel expenses

As from 1 January 2010, the tax deduction of fuel expenses incurred for professional purposes is limited to 75%. The 25% disallowed professional expenses for fuel is part of the "green tax" package intended to stimulate environmentally friendly behavior.

Benefit in kind for electricity and heating

A royal decree published in the Official Gazette of 10 December 2021 increased the amount of the lump sum taxable benefit in kind to be recognized for the free provision of electricity and heating by an employer to its employees and
directors, as follows:

                                             2009            2010            2011
Electricity - directors            EUR 590       EUR 740        EUR 820
Electricity - other                 EUR 295       EUR 370        EUR 410
Heating - directors             EUR 1,180     EUR 1,480     EUR 1,640
Heating - other                    EUR 590       EUR 740        EUR 820


Belgium grants tax benefits (tax deductions or reductions) for pension contributions made by residents (and some nonresidents) to pension providers established in other EEA Member States and pension providers established in certain countries that have concluded a double tax treaty with Belgium that contains a specific clause. In such cases, Belgium wants to tax the pension's benefits at pay out, even when the beneficiary is no longer a Belgian tax resident. Some of Belgium's treaties already provide a sourcing rule that allocates taxing rights to Belgium when tax benefits were available in Belgium during the build-up of the pension right entitlements. Due to the lack of a similar provision in Belgian domestic tax law, Belgium could not effectively make use of its jurisdiction to tax under the treaties. Such a provision will now be included in Belgian rules relating to nonresident income taxation for individuals to allow the effective taxation of the pension benefits.

The rule applies as from 1 January 2009.

The introduction of the sourcing rule might affect retirement tax planning where an executive intended to take up residence in a foreign country that has concluded a tax treaty with Belgium that allocates taxing rights to the source country before retiring. Any existing tax planning should be re-evaluated in light of the new domestic sourcing rule.

Employer vouchers

The tax treatment of lunch vouchers, sports vouchers, culture vouchers and eco-vouchers will be codified so that such benefits are subject to the same tax treatment as social benefits. As a result, the benefits will be tax free for the beneficiary but are disallowed as a professional expense (i.e. non-deductible for tax purposes) at the level of the employer (with the exception of EUR 1 for lunch vouchers). This measure applies as from tax year 2010 (income year 2009) (the deductibility of the EUR 1 for lunch vouchers as from 1 February 2022).

Energy-saving investments

Changes to the personal income tax rules will narrow the scope of the tax reduction for energy-saving investments because the reduction will no longer apply for new dwellings and the maximum (non-indexed) amount will be reduced from EUR 2,600 to EUR 2,000 (non-indexed amount), as from tax year 2012. However, a 10-year tax reduction of EUR 300 per year will be introduced for the construction of low-energy dwellings and a similar tax reduction of EUR 1,200 per year (nonindexed amount) will apply for zero-energy dwellings. Moreover, the tax reduction is transformed into a tax credit for energy-saving investments made in 2010, 2011 and 2012 relating to the change and maintenance of a boiler, the installation of double glazing, the isolation of roofs, walls and floors, and the installation of thermostatic valves and timers and energy audits.

A tax reduction also will be granted for the purchase of electric cars. For the period 2010 to 2012, this reduction will amount to 30% of the purchase price, up to a maximum of EUR 6,500 (non-indexed amount). A tax reduction will also apply for the charging stations for such cars and these stations will be amortizable over two years and entitle the taxpayer to apply the increased investment deduction.
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