BELGIUM: An Introduction

Introduction

Belgium is known for its rich history, diverse culture and strategic location in the heart of Europe. For high net worth individuals (HNWIs), Belgium can offer a compelling mix of favourable tax regimes, sophisticated estate planning solutions and a robust legal framework. However, a number of important considerations must be taken into account.

Main Belgian Income Tax Features for HNWIs

As a general rule, individuals are subject to Belgian income taxation on their worldwide income if they qualify as a Belgian resident for tax purposes. To mitigate double taxation, Belgium has entered into a vast number of tax treaties with other countries.

An attractive aspect of Belgian tax law for individuals has long been that capital gains on shares are in principle tax-exempt. While this remains the case for now, the new federal government agreement aims to introduce a 10% capital gains tax on financial assets (see below). Capital gains on Belgian real estate are and remain tax exempt if it is held for a sufficiently long period.

Dividend and interest income is generally subject to a 30% tax rate, without credit for foreign withholding taxes. Nevertheless, under certain conditions, financial investments can be made through particular insurance products (subject to a 2% premium tax at subscription) or through capitalisation funds without Belgian dividend and interest taxation. Also, Belgium does not impose a wealth tax on private individuals. However, there is an annual tax of 0.15% on the value of securities accounts if their value exceeds EUR1 million.

Belgian entrepreneurial families, who are increasingly setting up family offices and/or family investment vehicles, commonly use a private holding company. The Belgian corporate tax regime is quite attractive for holding and investment activities, providing for a full participation exemption on dividends received and an exemption for capital gains on shares if subject-to-tax and participation conditions are met. A Belgian holding company can also distribute dividends to its shareholders at a reduced tax rate of 15% if certain conditions are met.

For foreign entrepreneurs emigrating to Belgium, transferring their shares in non-Belgian businesses to a Belgian holding company can be worthwhile. Under certain circumstances, they may still have a “step up” opportunity – ie, the opportunity to create fiscal capital in the Belgian holding company and eliminate possible double taxation of their foreign dividends. They can also benefit from relatively flexible permit rules.

HNWIs should exercise particular caution with respect to the Belgian Cayman Tax, a measure aimed at countering tax avoidance using low-taxed foreign legal structures. Pursuant to the Cayman tax, amongst others, income attributed to certain foreign legal structures (such as trusts, foundations or corporations) is deemed to be received directly by the Belgium-based natural person who is considered the “founder” of the structure. This regime has been further tightened, with a significantly broadened definition of “founder” – now potentially including any direct or indirect economic rights holders – and the introduction of a 30% exit tax on the reserves of such structures upon the founder's emigration.

Typical Belgian Inheritance Planning Solutions

Whereas personal income taxation is mainly a competence of the federal state, gift and inheritance tax are a competence of the three regions of Belgium (Flanders, Wallonia and Brussels) and depend on the region where the donor resides or the deceased resided.

In the event of passing away, individuals will be subject to Belgian inheritance tax on their worldwide estate. Even though inheritance tax for direct descendants – and between spouses – can be as high as 27% (Flanders), or even 30% (Brussels and the Walloon region), estate planning can minimise such liability.

For movable assets (eg, shares), gift tax between spouses – and for direct descendants – is limited to a flat rate of 3–3.3%. Donations of cash and investments held in a securities account are possible without the application of gift tax (subject to conditions such as a five-year risk period). Gifts of Belgian real estate must be registered in Belgium and are therefore automatically subject to gift tax at progressive rates.

Additionally, a specific preferential regime exists for shares in family-owned companies, which can – under certain conditions – be inherited at a reduced inheritance tax rate of 3% (or 7%) and gifted at a 0% gift tax rate.

Once gift tax has been paid, the donation will not be subject to inheritance tax. In light of the lower tax rates compared to inheritance tax, gifts of both movable and immovable assets are commonly used in estate planning in Belgium. For movable assets, Belgian families often use tax-transparent control structures such as a partnership (maatschap) or a trust office foundation (stichting administratiekantoor). Parents can donate partnership shares or trust office foundation certificates to their children while maintaining a certain degree of control over the underlying assets via a director’s mandate and the modalities stipulated in the by-laws and gift deed.

Belgium also has its own private foundation legislation, which prescribes lower tax rates than that under the general inheritance law. The transfer of assets to a Belgian private foundation through a last will is subject to inheritance tax of 8.5% in Flanders and 7% in the Walloon region.

Recent Developments and Future Outlook

For many years, Belgium has offered some interesting tax features for HNWIs emigrating to the country, such as the absence of capital gains taxation and wealth taxation as well as a relatively favourable gift tax regime. However, while these advantages still generally apply, some new legislative initiatives of the federal and Flemish governments are making Belgium slightly less attractive – or are at least making the situation more complex than it once was.

The new federal government will introduce a capital gains tax on financial assets, including shares, at a rate of 10%. For individuals holding a significant participation of 20%, the first EUR1 million of capital gains would be exempt from taxation – beyond this threshold, progressive tax rates will apply. Furthermore, the participation exemption in the Belgian corporate tax regime will be tightened. If a company holds a participation of less than 10%, the investment must currently have an acquisition value of at least EUR2.5 million to qualify for the participation exemption. However, this threshold is set to increase to EUR4 million, and for financial investments between large-sized enterprises, the investment must additionally be classified as a “financial fixed asset” to qualify for the participation exemption. The final legislative texts, which are still to materialise, are required to assess the full implications.

At the regional level, the Flemish government has enacted an extension of the risk period applicable to indirect gifts from three to five years. For indirect gifts made after 1 January 2025, should the donor pass away within five years following the date of the gift, the transferred assets will be deemed to form part of the deceased’s estate and thus will be subject to inheritance tax. Furthermore, the Flemish government has expressed its intent to close certain loopholes in the tax system, which could have implications for private foundations and the preferential regime for family businesses. In the Walloon region, the new government has announced its intention to cut the inheritance tax rates in half as of 2028.