10 May 2022

Tax letter “new” tax expat regime published !

Belgian tax authorities have finally published (Friday 06/05/2022) their tax letter with respect to the new expat regime (Tax Letter 2022/C/47).

Besides more general explanations, it is especially interesting to learn how tax authorities now approach the expatriation allowance equal to 30% of the expat’s gross salary.

As a reminder, in the explanatory memorandum to the draft law regulating the introduction of this new expat regime, it was stated that the expatriation allowance concerns a lump sum system covering the additional expenses resulting out of the employment in Belgium (i.e. housing, meals, …).

When article 31/1 of the Belgian Income Tax Code was published, reference to a lump sum system was not repeated, which on itself is not an issue since there was a fall back to the explanatory memorandum to the draft law regulating this new expat regime.

With the publishing of the tax letter 2022/C/47, tax authorities now explicitly stipulate the following with respect to the expatriation allowance : “The reimbursement can therefore be regarded as a cost proper to the employer (provided that all other legal conditions are met)”.

The 30% expatriation allowance is therefore only a cost proper to the employer “if all other legal provisions have been met”.

Given the explanatory memorandum referred to a lump sum system, it is surprising to see that tax authorities connect the 30% expatriation allowance to the normal criteria for qualifying as a cost proper to the employer.

Hence, to be considered a cost proper to the employer, the expatriation allowance must meet certain conditions:

  • It must cover costs specific to the employer;
  • It must have actually been spent on the payment of such additional costs relating to the employment in Belgium; and
  • It must be of a professional nature.

Of course, one can estimate lump sum wise costs that are proper to the employer, but being an employer, you will have to be able to provide proof that all legal conditions are met for such qualification, with the risk of having (part of) the expatriation allowance being requalified as salary (i.e. triggering not only taxes but also social security contributions).

The 30% expatriation allowance therefore requires much more attention than initially thought !

As employer, you need to be prepared. It is therefore recommendable to draw up a policy explaining how the expatriation allowance is composed (based on comparative tables between Belgium and the country of origin) as tax authorities will not “just” accept 30% of the gross remuneration as tax-free.

If you have questions or want assistance in drafting a policy covering this expatriation allowance, do not hesitate to reach out !

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