With the end of the transitory period of the old special tax regime in Belgium on December 31, 2023, many expats in Belgium changed their classification from non-resident to resident taxpayer from January 1, 2024, onwards. With this change came the loss of benefits provided by the former special tax regime, as well as an increased taxable basis (taxation on worldwide income vs. on Belgium-source income only) and additional formalities.
However, for expats who make alimony payments to beneficiaries in their home country, this shift to resident status grants access to a tax deduction that in most cases was not available when they were classified as non-residents.
If the recipient of the alimony payments is a Belgian resident, the payments are subject to personal income tax in the hands of the recipient, who must declare the alimony payments received as taxable income on their tax return. Eighty percent of the amount received will be added to the taxable basis.
If the recipient of the alimony payments is not a resident of Belgium, the rules are more complex, as the double taxation treaties Belgium has concluded may enter into play. Some of those treaties state that alimony payments made by a Belgian resident to a beneficiary in the other country will be taxable only in that other country. If that is the case, the alimony payments remain deductible in the hands of the payer, but no Belgian taxes will be due by the recipient. Additional conditions (such as the availability of a residence certificate for the beneficiary or proof of effective taxation in the other country) may apply for the exemption from Belgian taxes to be granted.
Some treaties do not include an exemption from taxation in Belgium for alimony payments paid by a Belgian tax resident. In that case, the alimony payment received by the recipient will be taxable in Belgium. This will also be the case if Belgium has not entered into a tax treaty with the recipient’s state of residence. For practical reasons, the Belgian tax rules do not require that the beneficiaries file a tax return in Belgium. Instead, the payer of the withholding tax will be obligated to apply a withholding tax of 26.75% on the payment. This withholding tax is considered to be a final tax and is not recoverable by the recipient.
Note that in all cases where the beneficiary is a non-resident of Belgium, the payer will need to file withholding tax returns and issue annual forms 281.30.
Moreover, when a tax equalisation policy is in place, it should be examined to verify how it deals with the tax reduction resulting from the alimony payments. Depending on how the policy deals with taxes and/or tax reductions on personal income and expenses, the tax reduction will benefit either the expat or the employer. If the policy does not include specific provisions for non-professional income or deductions, we recommend that the policy be reviewed and amended.
For more information on this topic, please consult your regular BDO contact or the author of this article.
Peter Wuyts
BDO in Belgium
However, for expats who make alimony payments to beneficiaries in their home country, this shift to resident status grants access to a tax deduction that in most cases was not available when they were classified as non-residents.
Alimony payments paid by Belgian residents to other Belgian tax residents or Belgian non-residents
Alimony payments are considered a deductible expense in Belgium for the payer, provided certain conditions are met. First, the alimony payments must be made to a person who is not part of the payer's household. Second, the payments must be made on a regular basis (proof must be provided) and in accordance with a court order, a legal agreement, or on the basis of a duty-to-care provision included in the civil law code. Finally, the payments must be made to cover the needs of the recipient. If those conditions are met, 80% of the payment amount is deductible from the payer’s taxable income.If the recipient of the alimony payments is a Belgian resident, the payments are subject to personal income tax in the hands of the recipient, who must declare the alimony payments received as taxable income on their tax return. Eighty percent of the amount received will be added to the taxable basis.
If the recipient of the alimony payments is not a resident of Belgium, the rules are more complex, as the double taxation treaties Belgium has concluded may enter into play. Some of those treaties state that alimony payments made by a Belgian resident to a beneficiary in the other country will be taxable only in that other country. If that is the case, the alimony payments remain deductible in the hands of the payer, but no Belgian taxes will be due by the recipient. Additional conditions (such as the availability of a residence certificate for the beneficiary or proof of effective taxation in the other country) may apply for the exemption from Belgian taxes to be granted.
Some treaties do not include an exemption from taxation in Belgium for alimony payments paid by a Belgian tax resident. In that case, the alimony payment received by the recipient will be taxable in Belgium. This will also be the case if Belgium has not entered into a tax treaty with the recipient’s state of residence. For practical reasons, the Belgian tax rules do not require that the beneficiaries file a tax return in Belgium. Instead, the payer of the withholding tax will be obligated to apply a withholding tax of 26.75% on the payment. This withholding tax is considered to be a final tax and is not recoverable by the recipient.
Note that in all cases where the beneficiary is a non-resident of Belgium, the payer will need to file withholding tax returns and issue annual forms 281.30.
BDO Insights
It is important to ensure that all the requirements for deductibility are met in order to claim alimony payments as a deductible expense. It is advisable to seek professional advice when dealing with alimony payments to ensure compliance with the Belgian tax rules and formalities.Moreover, when a tax equalisation policy is in place, it should be examined to verify how it deals with the tax reduction resulting from the alimony payments. Depending on how the policy deals with taxes and/or tax reductions on personal income and expenses, the tax reduction will benefit either the expat or the employer. If the policy does not include specific provisions for non-professional income or deductions, we recommend that the policy be reviewed and amended.
For more information on this topic, please consult your regular BDO contact or the author of this article.
Peter Wuyts
BDO in Belgium