Belgian tax authorities want to eliminate unequal approach in taxing a second residence located abroad; still not entirely successful?
Still unequal tax approach for second residence abroad?
The new law, which came into being in February 2021 to eliminate the unequal tax treatment of second stays is still not satisfactory.
It was just under years of pressure from Europe that Belgium had no choice but to address this inequality.
A second residence in Belgium is taxed on the basis of the CI. Whereas until now, a second residence abroad was taxed based on the (fictitious) rental income.
In order to eliminate this disparity, the Belgian tax authorities will now also calculate a CI for the second residence abroad.
For this purpose, owners of a second residence abroad had until December 2021 to complete a questionnaire regarding their foreign property (including the current sales value). New proud owners must file a tax return within four months of acquiring the foreign property.
This list was prepared and sent by FPS Finance and, based on the completed questionnaire, FPS Finance will thus calculate a cadastral income.
For this calculation, one uses a formula to convert the current sales value to the sales value the property would have had in the year 1975. This amount is then multiplied by 5.3% to arrive at the return this property could have generated in 1975 (estimated rental income).
In this way, the Belgian cadastral income is calculated and by applying this formula to the foreign residence, one considers to have obtained the equivalent of the Belgian cadastral income. You then pay the personal income tax on this cadastral income (annual personal income tax return).
Is the discrimination with the equivalent of the Belgian KI now eliminated for your foreign residence?
If, for example, in Antwerp, Ghent or Ostend a cadastral income has to be determined, there are numerous reference points for making this determination as correctly as possible.
However, these reference points are not available abroad, which means that for foreign real estate only the sales value is taken into account. Samples show that a second residence on the Belgian coast with a sales value of € 400,000 has a CI of a good € 600, while the same property in Spain has a CI of over € 1,000. Which still makes it discriminatory.
What if you do not agree at all with the KI determined for your foreign property?
If you do not agree with the determined foreign cadastral income, you have two months to appeal against it.
You have to explain to the tax authorities why you do not agree and what you think would be a correct cadastral income.
What if there is no agreement between the owner and the tax authorities?
Then the procedure is that the justice of the peace of the place where the property is located appoints an appraiser. Unfortunately, this procedure is only foreseen for Belgian real estate.
The question that now needs to be asked... Will the Belgian tax authorities come abroad to visit the property in order to take your motivation into account?
Conclusion:
It is more than clear that the obligation imposed by Europe on Belgium to eliminate this discrimination has not yet fully succeeded given that there are still significant differences in approach and result.
Thus, Belgian legislation is certainly not yet on point as far as the provisions of foreign CIs are concerned. It will undoubtedly again be food for a lot of discussion (lack of reference points abroad, different appeal procedure, no site visits by Belgian assessors, ...).
To be continued...
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