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taxation.be

Friday
Mar 22nd
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taxbites

Bad loser

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Written by Administrator Tuesday, 11 July 2006

Until recently officials of international institutions were able to benefit from an inconsistency in the Belgian income tax code. Unfortunately for them the taxman has caught on.

Officials working for international institutions are not liable to tax in Belgium. That is an unwritten principle of international law. However, unwritten principles are not worth the paper they are written on. And that is why all international institutions that set up in Belgium sign a treaty with the Belgian State. That treaty lists the privileges of the institutions and those of its civil servants. And one of their privileges is that they do not pay tax in Belgium. (More …)

Tax on Web

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Written by Administrator Monday, 26 June 2006
I've done it, on internet, and I lived to tell the tale. I have filed my tax return on internet. It is not something you do lightly … (More …)

The new tax amnesty

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Written by Administrator Thursday, 15 June 2006
Hardly a year after the end of the 2004 tax amnesty, Belgium has introduced a new, permanent tax amnesty procedure with effect from 1 January 2006.

This will allow individuals and companies to regularize previously unreported income. Unlike the 2004 procedure, which was aimed solely at individuals, the new procedure is aimed at individuals subject to individual income tax and companies subject to corporate income tax. Non-resident companies and individuals can also benefit.

The new regularisaton procedure not only covers unreported earnings and investment income (income tax), but also unreported transactions which are subject to value added tax (VAT). The amnesty is not available for income from certain serious criminal offences (VAT carousels and serious or organized tax fraud, illegal drugs or arms trafficking, …).

When applying for the amnesty, the taxpayer has to pay the tax that he has actually avoided. There is no deadline for regularising unreported income, but as of 1 July 2006 there will be a penalty of 5 percent (10 percent as of 1 January 2007) for income from portfolio investments. However, this regularisation procedure is a one off chance.

We compare both procedures. To read the article click here.

U.S. Tax Cut Package

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Written by Administrator Tuesday, 30 May 2006

The ‘Tax Cut Package’ that was signed into law by President Bush on 17 May will hurt many expatriate workers, pushing them into higher tax brackets in the U.S.

Foreign earned-income exclusion

The new law has some good news. The foreign earned-income exclusion is maintained. Until a couple of years ago it was threatened with extinction. Moreover, the exclusion will be indexed to U.S. inflation as of tax year 2006. U.S. taxpayers will owe no tax on their first $82,400 of income earned abroad (against $80,000 in 2005).

Housing allowances

On the negative side, the law caps the exclusion for housing allowances that U.S. corporations often provide to executives sent overseas. These allowances cover rent, utilities (other than telephone), property insurance, maintenance and furniture rental, and occupancy taxes. Under the old law, the housing allowance was virtually unlimited

The cap is 30 percent of the foreign earned-income exclusion minus the 16 percent that it is assumed would be paid in the United States. For 2006, it is set at $11,586.

Stacking provision

The law also ends a windfall for middle-class U.S. citizens living abroad. Any income beyond the foreign earned-income and housing exclusions will be taxed at the rate that would apply if the exclusions did not exist. In the past, any income beyond the exclusions was taxed at the rate applicable to income computed without taking into account the exclusion and housing allowance at the lowest tax rate. This means that every dollar over the exclusions was taxed as if it were the first dollar earned, and therefore at the lowest tax rate.

This stacking provision will hit foreign income and ordinary income from U.S. sources. This includes social security, pension income, interest income, income from U.S. partnerships and other investment income. It does not include capital gains and qualified dividends, for which the taxation at 15 percent is extended until 2010.

U.S. citizens living in Belgium

The increase is rather hypothetical for Americans living in Belgium because the United States grants a credit for taxes paid in Belgium under the double tax treaty. In high-tax jurisdictions, such foreign tax credit helps soak up the extra U.S. tax liability.

However, the stacking provision means that more retirees abroad who supplement their U.S. retirement savings with part-time work will pay higher tax rates on their ordinary income from U.S. sources.

Many multinational companies offer their employees tax reimbursement or tax equalization. The employer either pays the tax on expatriate benefits which are considered income (e.g. school fees, home leave) or it pays the difference between the tax liability in Belgium and the theoretical tax at home. The difference could be considerable, since many expatriates tend to have more expensive housing than they would at home, mainly because of their entertainment duties.

Capital Gains on Shareholdings

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Written by Administrator Wednesday, 19 April 2006

One of Belgium's major selling points for many years has been the absence of a capital gains tax for individuals. It does not have a wealth tax either. Therefore, Belgium is very attractive for wealthy individuals. Belgium's reputation as a harbor for tax exiles has been seriously dented in recent years, but things are looking better. To read the article click here.

Johnny

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Written by Administrator Sunday, 12 March 2006

It was the news of the day in France. Johnny goes to Brussels. Johnny, of course, is the perennially ageing rocker and French superstar, Johnny Halliday. And the news was that this Frenchman wanted to take Belgian nationality.

Johnny's real name is Jean-Philippe Smet, born in France to a French mother and a Belgian father. Admittedly, his father abandoned him at an early age, but he still feels strong connections to Belgians. These were strong enough to start a procedure to obtain Belgian nationality. This request is now being looked at by the Belgian naturalisation commission.

The French were outraged; this French icon could not become Belgian. Johnny's manager was quick to explain that Johnny did not have any tax reasons, and that he was staying in France. He is not one of those French tax exiles for whom Belgium is a paradise without wealth tax or capital gains tax. (More …)

Help in house

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Written by Administrator Tuesday, 07 March 2006

Couldn't we all do with some help at home? Hiring someone in the black is tempting, it's also very risky. First of all, you cannot employ someone without a visa and a work permit. Secondly, you must take out insurance to cover household staff, or an injured helper could sue you. And most importantly, you have to pay social security and withhold tax. It is not only the helper

who is taking risks. (More …)

End of the anti-avoidance rule ?

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Written by Administrator Wednesday, 22 February 2006
In 1993 Belgium introduced a general anti avoidance rule in the Income Tax Code, in the Inheritance Tax Code and in the Registration Tax Code. While the Government is asking the Parliament to introduce a similar rule in the VAT code, the Supreme Court on 4 November overturned a decision of the Liège Court of Appeal which appears to leave little future for the anti avoidance rule. Read the article here.

Expatriate delights

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Written by Administrator Sunday, 15 January 2006

For most of us, end of spring is tax return season. The brown envelopes drop in the letterboxes during the spring and they need to be completed and filed by the end of June. Or July, or August, … All too often the Ministry is late in printing the returns, and inevitably the deadline is pushed further and further. This year, the official deadline was 31 August. If your tax adviser filed your tax return via Tax-on-web , it could even be as late as 30 October. And to push the irony, the Ministry confirmed on 9 November that electronic tax returns filed by the following day would still be on time.

There is one category of taxpayers for who the deadline keeps being delayed a bit more every year. Non-residents are supposed to file their tax returns by the end of June as well, but not many tax advisers remember the days when that was the case. For over a decade now, the deadline has been pushed back to October, November, December. And this year non-residents will not even file a tax return. The 2005 tax returns (that is for 2004 income) will probably have to be filed in February. (More …)

Belgian Dentists Empty Their Safes

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Written by Administrator Tuesday, 10 January 2006
On 14 December 2005, the Belgian Parliament adopted a law that will gradually abolish bearer securities starting in 2008. The banks have already noted that investors are taking their bearer securities out of their safes.

Belgium is one of the few countries that still allow shares and bonds to be issued in the form of bearer securities. They helped create the myth of the Belgian dentist. For decades he has had an international reputation as the unsophisticated, reasonably well off investor with a predilection for bearer certificates.

Bearer Securities

The main advantage of bearer securities is that they can remain invisible. They allow the owner to transfer their securities and to collect the income in all anonymity. To counter the abuses which such anonymity allows, the socialist party insisted on the ban on bearer securities.

In his presentation to the Parliament, the Finance Minister emphasizes how bearer securities can be abused for financial crime and to finance terrorism. He explains how they offer opportunities to act against the law and to evade the tax. In particular, they can help an individual to circumvent the forced heirship rules and to disinherit some heirs to some extent.

End of Bearer Securities

It was already in the summer of 2003 that the Government decided to ban all bearer securities. The measure was a concession made by Finance Minister Reynders when the 2004 tax amnesty was put on the rails. The cost of the tax amnesty during 2004 was a general ban on all bearer securities with effect as of 2013.

The Law of 14 December 2005 (Belgian State Gazette, 23 December 2005) introduces a general ban on the issue of bearer securities starting in two years' time.

During a transitional period, no new bearer securities can be issued anymore. As of 1 January 2008, stock, profit shares, bonds and cash bonds, warrants or certificates can only be issued in the form registered or dematerialized securities. A dematerialized security is a record on an account with an acknowledged financial institution. The ban does not apply to commercial securities (such as letters of exchange, promissory notes, warrants, cheques), bearer bonds issued by a Belgian company outside Belgium, or securities governed by a jurisdiction other than Belgian law. Consequently, bearer securities which are registered on an investment account or which are not governed by Belgian law cannot be delivered anymore in bearer form.

If, on 31 December 2007, a bearer security is registered on a custody account or an investment account, it will automatically be converted into a dematerialized security. Belgian companies must modify their articles of association before the end of 2007 to comply with this obligation.

The owners or holders of any bearer securities which were (privately) issued after the law was published, must apply for conversion into registered or dematerialized form before 31 December 2012. For securities that were issued before the law was published, the deadline is 31 December 2013. If the owner of the securities fails to apply for conversion, the issuer can decide that the securities are automatically converted. If the owner or holder of the securities does not promptly apply for conversion, all rights associated with the right will be suspended until the securities are registered in his name or on an account of a recognized account-holder.

Moreover, if the owner has not come forward by 31 December 2015, the securities will be sold or offered for purchase by the issuer. The owner may apply for a refund of the sales price less a penalty of 10% per year.

This legislation will have an effect for many companies. The Federation of Belgian Enterprises estimates that some 150,000 companies are concerned. They are public limited companies (société anonyme), the limited partnerships with shares (société en commandite par actions) or open-ended collective investment companies (société d'investissement à capital variable (SICAV)). They will have to hold general shareholders' meetings to adopt their articles of association, and the financial sector will have to set up a working system of dematerialized securities.

Even before the law entered into force, the banks have felt its effect. Last week, they announced that they had noted a significant increase of securities accounts during 2005, in particular in the second half of the year.

Stepmother

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Written by Administrator Friday, 30 December 2005

If anyone has given stepmothers a bad name, it must be Cinderella and Snow White.

Nowadays, stepmothers have a career of their own and the means to live. All they want is to give and to receive some affection. But all the children see is that they are out to get dad's money. When dad goes, she will get a life interest on dad's estate, for the rest of her life. That means that she has the right to live in his houses, to keep the paintings on her walls, to administer his stock and bonds, collect the rent, the interest and the dividends. The only thing she cannot do is to sell the Van Gogh or the apartment in Knokke. (More …)

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