Belgians with a second stay abroad are taxed differently from Belgians with a second stay in their own country. As a result, Belgium violates one of the basic principles of the EU, namely the free movement of capital. In the past, Belgium has been condemned for this by the European Court of Justice, but the legislation has not been amended. Following a recent second conviction, Belgian legislation must be amended. However, the Belgian administration has circulated an internal directive that only offers a balanced solution for a number of countries.
Belgium may not tax the income from foreign real estate, but this must be taken into account to determine the rate that may be applied to other taxable income. Because the taxable income of a property abroad is determined differently, it is possible that you will end up in a higher income bracket in the personal income tax, which may result in you paying more taxes.
Renting out your holiday home
Belgium is now being targeted because Belgian legislation on rented foreign holiday homes also violates the free movement of capital. Private individuals who rent out their foreign holiday home have to declare the actual rental income received. Belgians with a second residence in Belgium, on the other hand, are taxed on the indexed cadastral income increased by forty percent.
What are the consequences for Belgian taxpayers?
Following these two judgments, Belgium will have to adapt its legislation in this respect. In the meantime, Belgians with non-rented foreign holiday homes can rely on the internal directive issued by the Belgian Administration. Owners of rented foreign holiday homes may, on the basis of recent developments, challenge the determination of the taxable income of this property.