*Tax reformin Wallonia
On December 4, the Walloon government adopted a decree aimed at reforming inheritance taxation.
These new rules will apply as soon as the deceased has lived in Wallonia for more than two and a half of the last 5 years, and will come into force on January1, 2028.
1. Inheritance tax
- Applicable rates
This decree leads to a drastic reduction in inheritance tax. These will be halved.
Thus :
- Direct descendants, spouses and legal cohabitants: maximum rates will fall from 30% to 15%.
- Between brothers and sisters: maximum rates reduced from 65% to 33%.
- Between aunts/uncles and nieces/nephews: maximum rates reduced from 70% to 35
- Between all other persons: maximum rates reduced from 80% to 40%.
This reform should make it possible to reduce the confiscatory impact of inheritance tax, which forces many heirs to sell the assets received in order to pay the sums due. This affects unrelated heirs in particular, for whom rates can reach up to 80%, making it virtually impossible for them to keep their property as part of their estate.
- The family home
This reform removes the condition that the deceased had to have had his or her main residence in the property for at least 5 years for the spouse or legal cohabitant to be exempt from inheritance tax on the property. This measure brings Wallonia into line with the other regions of Belgium, which had already adopted this principle.
- Generation skipping
From January 1, 2025, when an heir renounces his share of an inheritance in favor of his children, inheritance tax will be calculated on the share received by each child, and no longer on that of the renouncing heir. This means that the inheritance tax payable by the grandchildren may be lower than that which would have been payable by the child of the deceased.
- Blended family
To take account of changes in society, all descendants of the legal cohabitant will now be considered direct descendants of the deceased. This means that the children and grandchildren of the legal cohabitant will benefit from the inheritance tax rates applicable to direct descendants.
Similarly, foster children will be treated in the same way as the deceased’s biological children.
On the other hand, no measures have yet been taken for de facto cohabitants, unlike in the Brussels region and Flanders, where they are already entitled to direct line rates if they have been living with the deceased for at least one year.
- Packages
Heirs will be able to opt for a funeral lump sum of 5,000 euros, plus a debt lump sum of 1,500 euros. They will therefore no longer be obliged to pay actual expenses, which would have required them to gather together all the supporting documents needed to set them off against the estate’s liabilities.
2. Gifts of real estate
Real estate gift tax rates will also fall, to a maximum rate of :
- 14% for direct descendants, spouses and legal cohabitants, compared with 27% at present
- 20% for other people, compared with 40% at present
Registration fees :
Finally, to facilitate access to home ownership, the Walloon government has decided to reduce the rate of registration fees applicable to the acquisition of a property intended to become a principal residence to 3%, compared with 12% previously.
To benefit from this reduced rate, several conditions must be met:
- The home must be clean: the buyer must move in within 3 years of purchase, and stay for a minimum of 3 years.
- The dwelling must be unique: the buyer must not have full ownership of another immovable property, intended in whole or in part for residential use.
These rates have been applicable since January1, 2025.
*Arizona Reform
On January 31, the new Belgian federal government reached agreement on a number of tax measures. This agreement may be subject to adjustments, however, as it has not yet been transformed into a draft law.
The main objective of this program is to stimulate citizens’ purchasing power while strengthening the competitiveness of the Belgian economy.
Among the most important measures planned are the following:
1. for individuals
- Taxation of financial capital gains
A 10% solidarity contribution will be introduced and applied to all capital gains realized on financial assets, including cryptoassets. This contribution will apply from the date of introduction of the measure, so capital gains realized before this date will remain exempt.
A €10K exemption will be introduced to avoid further taxing small investors.
In the case of a 20% shareholding, €1 million will still be exempt, thereafter:
- A capital gain of between €1m and €2.5m will be taxed at 1.25%.
- A capital gain of between €2.5 and €5 million will be taxed at 2.5%.
- Capital gains of between €5 and €10 million will be taxed at 5%.
- Capital gains in excess of €10 million will be taxed at 10%.
Capital losses incurred in the same year in this income category will be deductible, but cannot be carried forward.
- Carried-interest
The agreement aims to make carried-interest tax more attractive than in neighboring countries. At present, carried-interest is taxed at a rate of 30% when it qualifies as a dividend, and is subject to the progressive income tax scale when it is treated as remuneration (i.e. at a rate of up to 50%).
At this stage, it is only indicated that the reform will lead to a maximum taxation of 30%.
- Executive compensation
The minimum salary for company directors will rise from €45K to €50K, and will now be indexed.
In addition, benefits in kind may not exceed 20% of gross annual salary. Additional vouchers may still be granted.
These measures make it necessary to review the tax optimization strategies in place until now.
- Attractive impatriate regime in Belgium
In order to improve Belgium’s competitiveness, the new government wishes to modify the regime for impatriate employees in Belgium through 3 new measures:
- Removal of the €90K ceiling on tax-exempt allowances
- Tax-exempt portion increased from 30% to 35
- Minimum gross salary reduced from €75K to €70K.
- Permanent tax regularization
The government agreement envisages the introduction of more rigorous permanent (para)tax regularization, with higher applied rates.
The rate will be 30% for non-tax-prescribed capital and 45% for tax-prescribed capital.
However, an exception may be made for taxpayers able to prove their good faith.
2. for companies
- Regime of definitively taxed income (RDT)
The RDT deduction, which allows companies to deduct the dividends they receive from their tax base, will be replaced by an exemption.
The conditions for qualifying for this scheme have been modified for large companies. Although the 10% shareholding condition will remain unchanged, the €2.5 million threshold will be raised to €4 million, and the shareholding must be in the nature of a financial fixed asset.
- Intra-group transfers
To improve the competitiveness of the Belgian economy, the intra-group transfer regime will be modified. In particular, it will allow both direct and indirect shareholdings, without excluding new companies, and by allowing RDT deduction of the contribution to the group.
Investments can be deducted without limit.
- Exit Tax
Under the agreement, the emigration of a legal entity will be treated for tax purposes as a fictitious liquidation of the legal entity.
- VAT
From 2028, real-time invoice declaration will be introduced for transactions between taxable persons and for transactions using a cash register system.
3. tax fraud
The agreement contains numerous provisions to combat tax fraud.
- Deadlines
Investigation and taxation deadlines reduced to 3 years as a general rule (4 years for complex and semi-complex declarations / 7 years in the case of fraud)
- The taxpayer’s charter
A new taxpayer charter will be introduced.
- Applicable penalties
Penalties for direct and indirect taxes will be modified.
Initial errors made in good faith by the taxpayer will no longer be penalized automatically, but only by a warning.
- Arbitration procedure
In order to reduce the time taken by tax disputes before the courts, the mediation service will be transformed into a tax arbitration service, which will be accessible once the administrative procedure has been completed.
- Central Contact Point (CCP)
Access to the Central Contact Point will be made more flexible.
Crypto-currency accounts as well as online gaming accounts over €10K held by taxpayers will have to be notified to the PCC.
In this way, with major tax reforms, Belgium intends to keep pace with the evolution of the company and the assets held. This is sure to provoke reactions from Belgian tax lawyers, as well as Belgian taxpayers themselves.
