Immovable property located abroad: new tax rules
On 25 February 2021, the new law treating the declaration and taxation of immovable property located abroad was published in the Belgian Official Gazette. Based on this new legislation, a cadastral income (CI) will be attributed to immovable property located abroad, which means it will be taxed in the same way as immovable property located in Belgium.
Every taxpayer who acquires or disposes of an immovable property located abroad must declare this to the Administration Measurements and Assessments. In this way, the department can assign a cadastral income to the property. This will be possible as of June 2021 via MyMinfin. In the meantime, the taxpayer can also request a declaration form by email or by post from the Administration Measurements and Assessments.
A cadastral income for a property located abroad: what do you need to know?
The new law provides that any acquisition (purchase) or transfer (sale, gift, …) must be reported within a period of 4 months. In the case of modifications (for example a transformation) to the property or in the case of a new construction, the declaration must be done within 30 days first use of the property or the moment it is rented out.
For taxpayers who already owned a property located abroad on 31 December 2020, a transitional arrangement applies. For these taxpayers, the declaration deadline is 31 December 2021. They will be contacted by letter to complete the declaration of their property located abroad. This will however only be the case if the property has correctly been declared in the personal income tax return. If this is not the case, the tax administration will probably not be aware of the existence of the property and will therefore not be able to contact the taxpayer.
In the event of a delay in filling the declaration, the taxpayer risks a fine ranging from EUR 250 to EUR 3.000.
The Administration Measurements and Assessments will determine and assign the various CI’s to immovable property located abroad.
The owner of the property must fill in a questionnaire, which will serve as a basis for determining the KI. At this stage, it is still unclear which questions will be asked, but the value of the property will certainly be an important factor in determining the CI.
The central element will be the normal net rental value on 1 January 1975 (the reference time) of the immovable property. If this rental value is not available, the CI will be calculated by applying the rate of 5,3% to the normal market value of the property at the reference time. Therefore, it will be necessary to determine the value of the property at a certain time on the basis of an actual valuation, a deed of purchase or other type of deed. Depending on the time of the valuation, the tax administration has drawn up a table with correction factors, to be able to recalculate the value to the year 1975. For the year 2021 for example, this factor is 15,018.
For land located abroad, the usual Belgian regulation is applied: the CI should never be less than EUR 2 per hectare.
Based on this new legislation, the legislator confirms that it is no longer possible to deduct foreign tax of the taxable value. A cadastral income is a net income, which implies that all possible expenses, including foreign tax, have already been deducted.
For property located abroad in a country with which Belgium has concluded a Double Tax Treaty, the immovable income is in principle exempt from tax. Please note that this exemption is subject to the progression method. This means that the foreign immovable income is still taken into account to determine the tax rate applicable on other income of the taxpayer that is taxable in Belgium.
For immovable property located in a country without a treaty, the tax is reduced to half. A Double Tax Treaty has been concluded with most countries where Belgian taxpayers have a second residency or vacation home, which means that in most cases an exemption will apply. However, a mini state such as Monaco has no Double Tax Treaty with Belgium, which means that a (limited) taxation will apply in Belgium.