Posted by Today I’d like to tell you a little bit about the personal income tax of Belgian employees (permanent contract) and which aspects of cost or investment can enjoy the government’s tax benefit for refund. In fact, Belgium has a lot of tax incentives that are not commonly known, and they have been canceled by the government meanwhile. Now I have listed some tax refund items that still exist, and I hope they will be useful to everyone.
Personal income tax declaration
In a typical Belgian payroll, after removing social security from your payroll, the biggest payment is the withholding of personal income tax. Because the calculation of Belgian personal income tax is very complicated, the display on the payroll is only an estimate, and the employee will not be able to declare it until May or June of the next year. This includes reporting all your other income, changes in family circumstances, and other things such as expenditures or investments that have an impact on taxation.
After you get married, the tax declarations for you and your spouse will be in the same file. In fact, the website of the Belgian government is now very smart. All documents (such as payroll, mortgage, etc.) have been automatically uploaded to your file. Basically, they are automatically filled in when filing taxes, if you don’t have any special situation, you only need to confirm and submit.
Today, we will not talk about how to file a tax return but will talk about the more commonly used expenditures or investments that can be declared for tax refunds for your reference.
I briefly interviewed some friends around me. They all bought houses before 2020. The average annual tax refund for each family is about 2000-4000 Euro. Here is a brief introduction to these tax refund items and the amount of tax refund.
1. Fresh graduates
If you only worked for 3 months in the year you just graduated, you should be able to get more than 2,000 euros for the tax refund in the second year.
This is because your annual total income is only 3 months multiply by your monthly salary, however the withholding tax is estimating your full working year. So the overpaid tax will be returned to you in the form of a tax refund in the coming year.
2. Self living house mortgage Loan
Before 2020, buying a property in Belgium is quite beneficial, the interest rate was low, the down payment was low, and the interest can also enjoy some tax rebates. After processing the buyer-seller agreement, the monthly payment is actually not much different from the monthly rent.
After buying a house with a mortgage loan, the government will give you a preferential tax rebate policy, which can give you a tax rebate of about 900 euros per year per person (depending on the family situation and the length of the loan). However, the Flemish Region of Belgium canceled this policy in 2020 and replaced it with a little preferential tax reduction of 1% when buying a house. Fortunately, if your first owner-occupied house was purchased before 2020, and then you want to change to a larger one, you can transfer your remaining loan, and you can still enjoy a tax refund for this part.
The tax policy for buying a house in Wallonia (called chèque Habitat) is still there, with an annual tax rebate of 1,520 euros. If you have a child, it will be more. Children who want to buy a house can consider Wallonia.
For details, please refer to the link at the end of the article.
3. Personal investment pension savings (pension savings)
Under the Belgian social security system, the burden on young working-class people will become heavier in the future. When our generation gets old, the pension provided by the government may not be enough to maintain our quality of life. This is why many companies buy group insurance for their employees for retirement. In addition to group insurance, individuals can also purchase pension insurance as a long-term investment.
In order to encourage residents to make long-term plans for themselves, the government has specifically introduced preferential tax policies for personal pension insurance. You can choose to save up to 990 euros per year and enjoy a 30% tax rebate on the amount of storage in the next year, or save up to 1270 euros per year and enjoy a 25% tax rebate on the amount of storage in the next year.
The amount of pension savings can be withdrawn after you retire, and the minimum 8% tax is still payable when you withdraw.
4. Housekeeping service cheque (Dienst cheque 1.8 Euro/cheque)
If you need help at home, you can buy housekeeping service checks from the government, 9 euros can pay for one hour of service. Housekeeping staff can help you with housework such as cleaning, washing clothes, ironing clothes, cooking, running errands to buy groceries, going to the post office, pharmacy, or helping elderly people with disabilities at home, etc.
Each cheque can enjoy a tax subsidy of 1.8 Euros (9 Euros for the full price), which will be refunded to you in the personal income tax of the coming year, limited to the first 170 cheques purchased within one year.
I really feel that this service is super good, and the cleanliness of the home greatly improves the quality of life!
5. Family members with no income such as children
If you have children in your family, you can enjoy tax benefits in quite some aspects, such as personal income tax, nursery fees, loan tax refund amount, etc., I think this topic deserves a special article in the future.
6. Transportation expenses not paid by the employer
This is also a new discovery when I write this article for research! If you buy a car or rent a car for commuting, and the company does not reimburse you, you can enjoy tax refunds in the following aspects:
75% of the interest on buying a car or renting a car loan can enjoy a tax rebate
75% of the fuel cost for commuting or business trips can also enjoy a tax rebate (estimated at 0.15 Euro/km)
Buying a car (including used cars) is used for the depreciation of the car on business trips (depreciation)
For details, please refer to the website of the Belgian Federal Taxation Office (link is at the end of the text).
7. Charitable donations
If you have already donated to some charitable organizations recognized by the Belgian government (trade unions, animal protection, environmental protection, cultural protection, etc.) as a charitable act, and your donation amount is higher than 40 euros within a year, the organization will issue a donation certificate, 60% of the donation amount can enjoy the government’s tax rebate (with upper limit).
8. Union member fees
If you join a union, the union member fees can also be declared as a business expense.
9. Support for living expenses for ex-spouses, parents, etc.
If you pay monthly or yearly income to your parents, grandparents, or ex-spouses who have no financial means, 80% of this amount is eligible for a tax refund.
The party receiving the living expenses does not need to live in Belgium.
10. Small company investment
If you invest in some small companies or start-ups (non-financial) established in Belgium after 2013, 25%-45% of the investment amount can also enjoy a tax refund.
11. Help an SME – Win-Win lending
In Flanders, you can lend money with tax benefits to an SME of a friend or family member who is self-employed. This win-win loan gives you an annual benefit of 2.5% on borrowed amounts up to 50,000 euros. The maximum benefit is therefore 1,250 euros per year.
Belgium is one of the highest-taxed countries in Europe, but you also benefit from all the social securities, check one of the posts: Health insurance in Belgium, did you get all the benefits?
Read more about Belgium:
How to read your payslips in Belgium?
Manage your resignation in Belgium
What should you do after getting a job offer in Belgium
How can you spend the 250 euro eco cheques?
Tax refund in Belgium – Optimise your income tax
Health insurance, are you using it to its full potential?
Check all the leaves you might have missed while working in Belgium
Back to school – working student in Belgium
Fun facts about divorces in Belgium
Holiday periods – Belgium vs China
Getting to know about Flemish people
References:
Housing cheque in Wallonia:
Photo by Karolina Grabowska from Pexels
Thanks Lin, I did not know about the possibility of tax deduction for transportation expenses not paid by the employer.
Yes it was quite new for me too, I also discovered from their website during research. You can check more info here : https://financien.belgium.be/nl/particulieren/vervoer/aftrek_vervoersonkosten/andere_beroepsverplaatsingen/financiering
for the home loan advantage
the gross deduction in flanders is 1520( base deduction) + 760 ( xtra deduction for first 10 years)
This deduction gives a 40% tax advantage i.e 912 euro per taxable person.
So if a couple haa taken a loan together then this could already save net 1824 euros a year 🙂