Belgium: A Private Wealth Law Overview

Private Wealth Law in Belgium

Belgium is a country with a vast middle class population. Its economic strength is notably based upon a high number of successful family held enterprises and its highly skilled professional workforce. Belgium is also a federal state. In the area of taxation, the federal state is still mainly competent for income tax aspects, whereas the regions have acquired competence regarding inheritance and gift taxes.

Unlike other states, Belgium does not have any specific (temporary) tax regime that applies to individuals moving to Belgium. However, Belgium’s tax legislation still offers favourable treatment of some types of income, and estate and succession planning can be organised in such a way that the inheritance tax burden can be significantly reduced.

Residency

Belgian tax residents are individuals who have established their residence (being their permanent home where they live with their family members) or individuals that have the seat of their wealth (being the place from which individuals manage their economic affairs) in Belgium. Contrary to other states, Belgium does not apply a statutory residence test that implies day-counting; the Belgian test requires a factual analysis.

Taxation of Income

Belgian residents are taxed on their worldwide income with the possibility of claiming exemptions based on income tax treaties.

Rental income from immovable property is only taxed on the basis of the perceived income if the tenant is a company or someone who uses the property to exercise a professional activity. In other circumstances, the rental income is calculated on the basis of the cadastral value, which is much lower than the actual rental value.

Dividend income and interest income are generally taxed at a flat rate of 30%.

Professional income is taxed at progressive income tax rates ranging from 25% to 50% (more than EUR51,070). Many entrepreneurs choose to exercise their professional activity through a (management) company that is subject to a corporate income tax rate of 25%. Even though the subsequent distribution of the profit by the company is taxed as dividend income, it is possible to reduce the withholding tax rate to rates varying from 10% to 18% (if the relevant conditions are met).

Taxation of Gains

Professional gains are taxed at progressive income tax rates ranging from 25% to 50%. With regard to gains realised outside the scope of any professional activity, the tax treatment of the gain depends on the underlying asset.

Capital gains on real estate and non-financial assets (eg, artwork) generally do not constitute taxable income unless if realised in the context of abnormal management, such as in the case of speculative trading transactions.

Capital gains on financial assets are subject to income tax when realised upon a transfer for consideration. There are several categories that each have their own treatment, such as the following.

• Capital gains realised upon a sale of a substantial share participation (ie, at least 20%) are taxable at a rate of 10% above EUR10 million. The first EUR1 million of gain is exempt and more favourable rates apply between EUR1 million and EUR10 million.
• Other capital gains realised on financial assets are generally taxable at a rate of 10%.

The last category covers four major types of financial assets:

• financial instruments;
• certain life insurance contracts;
• crypto-assets; and
• currencies and investment gold.

Inheritance Tax and Gift Tax

Inheritance tax is levied when the deceased was a Belgian tax resident, taking into account the deceased’s worldwide assets.

Inheritance tax ranging between 3% to 30% applies to inheritances in direct line and between partners (spouses and cohabitants). There is no general spousal inheritance tax exemption; the surviving partner, however, benefits from an exemption that is applicable to the family dwelling.

The Walloon regional government decided to reduce the inheritance tax rates by 50% as of 1 January 2028, though the reform may be postponed, and potentially amended further.

The gift tax rates are considerably lower than the inheritance tax rates, with gift tax rates in direct line ranging from 3% to 3.3%. For that reason, many Belgian tax residents set up succession planning that involves making gifts.

From a Belgian tax perspective, gift tax is a registration tax. The registration procedure – triggering gift taxes – is only compulsory for gift deeds passed before notaries if the donor is a Belgian resident. If the donor lives abroad and the beneficiary is in Belgium, the gift is not subject to gift taxes.

If the gift is not passed before a notary, no gift tax is due. However, if the donor dies during a claw-back period following such a non-registered gift, inheritance taxes will be due. The claw-back period is set at five years.

All three regions have introduced a specific favourable regime in the case of inheritance or gifts of family-owned businesses and companies.

Moving From and to Belgium

For individuals moving abroad, the newly introduced exit taxation rules will need to be taken into consideration regarding target non-realised latent gains on financial assets. Individuals moving to Belgium will benefit from an automatic step-up basis.

Look-Through Taxation

Pursuant to look-through taxation provisions, natural persons who must be considered as the founders of a legal construction are obliged to pay tax on the income obtained by it. The income of a legal construction thus becomes taxable in the hands of the Belgian resident founder as if they had received it directly, even if the income is not actually distributed.

The targeted legal constructions include, among others, foreign trusts and low-taxed foreign legal entities. Collective investment vehicles only fall within the scope of the Cayman tax provisions if they are held more than 50%, by one investor or by several related investors (family members).

The look-through taxation provisions are not applicable if the founder can prove that the legal construction exercises an economic activity.

The Cayman tax has recently been tightened such that now any income of an indirectly held legal construction is subject to look-through taxation. As the Cayman tax provisions can have far-reaching consequences, pre-immigration planning is required for those who plan to move to Belgium.

No General Wealth Tax

There is no general wealth tax in Belgium. Belgium did, however, adopt a tax that targets financial instruments held through securities accounts. This tax takes the form of an annual tax of 0.30% on securities accounts that exceed EUR1 million in average value.

A stock exchange tax is due on specific stock exchange transactions of stocks and bonds as well as on redemptions of capitalisation shares of collective investment vehicles executed by Belgian residents through Belgian and non-Belgian financial intermediaries. The rates depend on the type of transaction and vary from 0.12% to 1.32%

Tax Treaties

Belgium has concluded many income tax treaties. However, only two inheritance tax treaties have been concluded with France and Sweden. Belgium has not concluded any gift tax treaties.