Expat Financial Affairs 11 October 2014 Vlerick Business School Manhattan Center. Gregory Goossens Tax lawyer

Transcription

1 Expat Financial Affairs 11 October 2014 Vlerick Business School Manhattan Center Gregory Goossens Tax lawyer

2 law firm established in partners - 3 associates 2 offices global mobility tax & corporate law social security, employment, immigration, real estate,

3 Resident or non-resident? registration requirement upon city or town hall (immigration process) verification of residency address by local police officer notification to local (resident) tax office presumption of tax residency (worldwide income) non-resident? burden of proof with taxpayer * principal place of residence outside BE * social & economic interest outside BE only taxable on BE source income family residency/spouse in BE? (1994) always a resident for tax purposes! exception = special expat tax status (1983)

4 Resident for tax purposes 6 th State Reform (Act of 8 May 2014) : fiscal domicile on the 1 st of January of tax year taxed on worldwide income, regardless country of source bilateral tax treaties avoid double taxation however : exemption with progression-method ( credit-method) foreign exempt income is taken into account to determine the marginal tax rate at which the non-exempt (Belgian) income is subject prevents taxpayers from taking advantage of lower tax brackets double taxation of interest, dividends & royalties is (still) allowed abroad : WHT / income taxation Belgium: 25% (on net amount) local tax on foreign exempt income (0% up to 9%) municipal surcharge depending on where you live only if stipulated in the tax treaty: i.e. San Marino, Singapore, Germany, the Netherlands & UK!

5 Non-resident non-resident tax status deregister from the local population register (> 24 months) impact on immigration requirements! remain registered, but prove that your actual residence / assets are not (primarily) located in BE : burden of proof with taxpayer ( contact your local tax office) benefit : only taxable on BE source income non-residents cannot claim tax treaty benefits / 75%-rule for personal tax allowances in BE not taxable on foreign investment income, rental income, salary, social & economic interest remain outside BE : ownership/availability of real estate abroad spouse/children/family live(s) abroad contributing to foreign social security system children educated abroad financial assets abroad other relevant elements claim accepted by the tax authorities? resident tax office will forward your file to the non-resident tax office keep in mind slowness in administrative processing

6 Example UK national, married, 2 children works full-time in the Netherlands for a Dutch company lives in BE during the week (registered) returns home to London for the WE can easily demonstrate that assets / family remain in the UK resident tax office: no requirement to file resident tax return Art. 228 BITC92 : non-resident tax only on BE source income! no BE source income, only foreign source non-resident tax office: no requirement to file non-resident tax return Benefits : no local tax on Dutch exempt income! no requirement to e.g. report UK investment/real estate income in BE no hassle with BE tax filings

7 Non-resident categories 6 th State Reform : taxation of non-resident taxpayers = exclusive Federal competency Regional tax measures may apply to non-resident taxpayers based on localization criteria ( tie-breaker rules) the category non-resident taxpayers with an abode in Belgium is abolished non-resident taxpayers are now classified according to 3 categories: non-residents who have earned taxable professional income in Belgium amounting to at least 75% of their worldwide professional income and who reside in a member state of the EEA non-residents who have earned taxable professional income in Belgium amounting to at least 75% of their worldwide professional income and who don t reside in a member state of the EEA non-residents who don't belong to category 1 or 2 tax-free allowances for non-residents : who have received taxable professional income in Belgium amounting to at least 75% of their worldwide professional income who are resident in a member state of the EEA, or who benefit from a nondiscrimination clause foreseen by a double-tax treaty (first category) other non-resident taxpayers will only be able to claim Federal tax-free allowances

8 What about this 183 days? UK (HMRC): Statutory Residence Test (SRT), Finance Act 2013 Automatic overseas tests satisfaction of one of these tests for a tax year means that the individual is automatically deemed non-uk resident for that year; Automatic residence test if none of the automatic overseas tests applies to the individual, the automatic residence test, divided into three automatic UK tests for those living at the end of the tax year, will be applied; the satisfaction of one of these tests for a tax year means that the individual is automatically UK resident for that year (e.g. you spend 183 days or more in the UK in the tax year); Sufficient ties test if neither automatic test applies to an individual, the sufficient ties test will determine the position. This test compares the number of days during a tax year spent by an individual in the UK with the number of 'ties' that the individual has with the UK during that year. These UK ties relate to family, work, accommodation, days spent in the United Kingdom in earlier tax years (i.e., the 90-day tie) and days spent in the United Kingdom in the relevant tax year compared with other countries (i.e., the country tie); US (IRS): Substantial Presence Test (SPT) The individual must have been physically present in the US for at least 31 days in the year for which the tax return is being filed; and The total of (number of days present in the tax year) + (1/3)(number of days in the year before the tax year) + (1/6)(number of days in the year two years before the tax year) should be at least 183 days. Other countries: Australia, Canada, Germany, Russia,

9 No residency test in BE it does not matter how many days per year you reside in BE! legal presumption of residency : registration in BE population register (rebuttable) where your family is established (spouse/children) based on factual circumstances what about the 183-day rule? Circular nr. AFZ 2005/0652 (AFZ 08/2005), 25 May 2005 only relevant for employee income ( art. 15 DTT) short-term assignment of employees in BE / hiring-out of labour salary is paid by, or on behalf of, an employer / borne by a permanent establishment located abroad (not in BE) opportunities for tax planning (i.e. salary split)

10 What to do when leaving Belgium? leaving BE permanently? (> 24 months) : deregistration filing of special tax return within 3 months of departure no more tax compliance requirements after that unless: resident taxpayer becomes non-resident taxpayer BE source income : employment, investment, real estate, taxpayer will remain non-resident as long as the conditions of residency are not fulfilled

11 Belgian real estate (non-resident) immovable withholding tax (annual real estate tax) additional tax filing requirement, if you do not live in BE? no, if not rented out yes, if the real estate income exceeds 2,500 : separate income of each partner (married / legal cohabitation) should be taken into consideration impact of matrimonial property regime! if real estate income of one of both partners exceeds 2,500, both partners will be required to jointly file a non-resident tax return formula : indexed cadastral income x 1.4 (private use) = >/< 2,500

12 Conclusion complexity of determination of tax residency do you consider becoming a non-resident? factual appreciation be aware of consequences (e.g. immigration, 75%-rule, ) a tailor-made solution is required search specific advice for your personal situation!

13 Gregory Goossens Culliganlaan 1B Uitbreidingstraat 46 / DIEGEM 2600 BERCHEM