Resident individuals owning foreign real estate: do not forget to report!
Locations
Background
In two recent judgments rendered in 2014 and in 2018, the Court of Justice of the European Union ("CJEU") ruled that Belgium violated EU law by treating differently the taxation of foreign real estate and Belgian real estate owned by Belgian individual residents.
Hence, Belgium was urged by the CJEU (Belgium was convicted to fines and penalties in 2020) to review the tax treatment of foreign real estate owned by individuals in order to comply with EU law.
On 17 February 2021 (French / Dutch), the Belgian Parliament adopted a law addressing this issue. This law amends the taxable basis of foreign real estate owned by individuals residing in Belgium. Furthermore, it introduces a new reporting requirement.
Previous regime
Belgian tax residents are required to declare the income derived from real estate they own, located either in Belgium or abroad. However, related taxable basis differed in function of the location of the real estate.
Belgian real estate owned by Belgian residents that are not rented or rented out to individuals for non-professional purposes is taxed on the basis of the so-called "cadastral income" (notional income), whereas when rented out to an individual for professional purpose or to legal entities, its taxable basis is determined on the actual rent received.
Foreign real estate owned by Belgian residents was generally taxed on a different basis, determined on their rental value.
The CJEU judged that these different taxable basis violates EU law.
What's new?
As from 1 January 2021, foreign real estate receives a similar tax treatment as real estate located in Belgium. Indeed, instead of being taxable on their rental value, its taxable basis will be based on a "cadastral" income that is determined by the current market value of the real estate property multiplied by correcting factors
This new taxable basis comes with new reporting requirements.
Taxpayers that have reported foreign real estate income in 2019 and 2020 are required to provide the Belgian Tax Authorities with additional information (e.g. property description, property location and property value) by 31 December 2021.
Taxpayers that acquires foreign real estate property as from 1 January 2021 have to provide the same information to the Belgian Tax Authorities within four months following this acquisition.
If taxpayers fail to comply with these formalities, an administrative fine may be applied.
Based on the information received, a dedicated team from the Belgian Tax Authorities will determine the taxable basis of each foreign real estate property, which will then be notified to the taxpayers.
Ultimately, please note that the Belgian Tax Authorities have published a useful FAQ on this topic (French / Dutch).
In case of questions, please do not hesitate to reach out to Geoffroy Galéa and Alain Thilmany
If you'd like to see our other insights and publications, please click here
In two recent judgments rendered in 2014 and in 2018, the Court of Justice of the European Union ("CJEU") ruled that Belgium violated EU law by treating differently the taxation of foreign real estate and Belgian real estate owned by Belgian individual residents.
Hence, Belgium was urged by the CJEU (Belgium was convicted to fines and penalties in 2020) to review the tax treatment of foreign real estate owned by individuals in order to comply with EU law.
On 17 February 2021 (French / Dutch), the Belgian Parliament adopted a law addressing this issue. This law amends the taxable basis of foreign real estate owned by individuals residing in Belgium. Furthermore, it introduces a new reporting requirement.
Previous regime
Belgian tax residents are required to declare the income derived from real estate they own, located either in Belgium or abroad. However, related taxable basis differed in function of the location of the real estate.
Belgian real estate owned by Belgian residents that are not rented or rented out to individuals for non-professional purposes is taxed on the basis of the so-called "cadastral income" (notional income), whereas when rented out to an individual for professional purpose or to legal entities, its taxable basis is determined on the actual rent received.
Foreign real estate owned by Belgian residents was generally taxed on a different basis, determined on their rental value.
The CJEU judged that these different taxable basis violates EU law.
What's new?
As from 1 January 2021, foreign real estate receives a similar tax treatment as real estate located in Belgium. Indeed, instead of being taxable on their rental value, its taxable basis will be based on a "cadastral" income that is determined by the current market value of the real estate property multiplied by correcting factors
This new taxable basis comes with new reporting requirements.
Taxpayers that have reported foreign real estate income in 2019 and 2020 are required to provide the Belgian Tax Authorities with additional information (e.g. property description, property location and property value) by 31 December 2021.
Taxpayers that acquires foreign real estate property as from 1 January 2021 have to provide the same information to the Belgian Tax Authorities within four months following this acquisition.
If taxpayers fail to comply with these formalities, an administrative fine may be applied.
Based on the information received, a dedicated team from the Belgian Tax Authorities will determine the taxable basis of each foreign real estate property, which will then be notified to the taxpayers.
Ultimately, please note that the Belgian Tax Authorities have published a useful FAQ on this topic (French / Dutch).
In case of questions, please do not hesitate to reach out to Geoffroy Galéa and Alain Thilmany
If you'd like to see our other insights and publications, please click here