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Tax Insights January 2021 - The Belgian tax administration will determine cadastral income of foreign real estate properties

The Belgian tax administration will determine the notional rental value or so-called cadastral income of foreign real estate properties that are rented out by Belgian residents.

WHAT IS GOING ON?

Belgium was recently condemned for the second time by the European Court of Justice for making an unlawful distinction between the taxation of rental income abroad and within Belgium. A Belgian resident who rents out a real estate property abroad is taxed on the actual rental income, whereas a Belgian resident who rents out a real estate property in Belgium (not for professional purposes) is taxed on the basis of the indexed cadastral income of that property. As a result of the conviction, some argued that anyone renting out a property in Belgium should be taxed on the actual rental income as well instead of on the basis of the indexed Belgian cadastral income. The Belgian minister of Finance, however, applied a different approach in his legislative proposal.

WHAT DOES THE LEGISLATIVE PROPOSAL ENTAIL?

The Belgian tax administration will determine the cadastral income to each foreign real estate property, as is the case for a Belgian dwelling. In practice, this will be done on the basis of information provided by the owners. They will soon receive a list of questions concerning the description of the property, its location, the normal sales value for built property in that region, etc. If the normal market value is unknown, the purchase price and the year of purchase must be communicated, as well as the cost price and the date of completion of any renovation works.

The tax administration hopes to receive all information about the foreign properties in the course of the coming months. Anyone who acquires a foreign property as from January 1st, 2021 onwards will have 4 months to collect and provide all the information. Checking whether the information and data provided are correct will in any case be nearly impossible for these foreign real estate properties. However, data and information will be exchanged with most other European countries. 

The Belgian minister of Finance’s legislative proposal has yet to be discussed and approved before it can enter into force. However, it is expected that there will be no major obstacles.

If you would like to receive additional information on this matter or assistance, the Tax team of RSM Belgium is at your disposal ([email protected]). 

RSM InterTax

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