Foreign real estate gets a cadastral income

You will remember the heated discussion that dragged on for several years. Belgian real estate belonging to natural persons that is not rented out or rented out for private purposes is taxed on the basis of the cadastral income (CI). Foreign real estate was taxed on the rental value or the rent received. In practice, depending on the country, all kinds of formulas appeared to determine this 'rental value'.

After being repeatedly condemned by Europe for this, Belgium has now (finally) amended its legislation (Law of 17 February 2021, Belgian Official Gazette of 25 February 2021).

Attribution of a cadastral income

From now on, all real estate located abroad will be assigned a CI and taxation will arise according to the same rules as for real estate located in Belgium. However, if the immovable property is located in a country with which Belgium has concluded a double tax treaty, the income thus determined remains (usually) exempt with progression. This means that it is only taken into account for determining the tax rate on the other income to be taxed in Belgium. For countries without a treaty, the tax is reduced to 50%.

The taxable base for non-rented or privately rented immovable property is then the indexed CI x 1,4. Where in the old scheme foreign tax could be deducted, this is no longer possible in the new scheme.

The latter also applies to other real estate (for instance rented to a company) that remains taxable on the basis of the net rent. This is the gross amount of rent received and the rental benefits less 10% lump sum expenses for land and 40% for built immovable property. However, this deduction is limited to 2/3 of the non-indexed CI x a revalorization coefficient. The consequence here is that the foreign tax is no longer deductible since it is deemed to be included in the lump sum expenses.

Another consequence is that a possible requalification of rent in remuneration for company directors is now also possible for foreign real estate.

Determination of the cadastral income

The CI is determined in the same way as the CI for Belgian immovable property i.e. on the basis of the normal net rental value on January 1, 1975.
In practice, this is done as follows:

• For land: EUR 2,00 per hectare.
• For buildings: by applying 5,3% on:
  • the normal sales value at the reference time (1 January 1975) or
  • if it is no longer possible to determine the normal sales value on 1 January 1975, the current normal sales value to which subsequently a correction factor is applied, which is determined per year. The correction factor is 15,018 for 2021 and 15,036 for 2020. The previous years can be found in Circular 2021/C/21 of 1 March 2021.

The normal sales value is then the sales value that can be obtained under normal circumstances.

For example, a property purchased in 2021 with a current normal sales value of EUR 400.000 will have a CI of EUR 1.412 = 400.000 : 15,018 x 5,3%.

Procedure and information to be provided

If an immovable property is acquired as from 1 January 2021, this must be reported spontaneously to the authorities within 4 months of the acquisition. For goods acquired before that date, this must be done before 31 December 2021.

The declaration can be submitted via MyMinfin. The form can also be requested by e-mail on the following e-mail address: [email protected] or by letter to the Administration of Measurements and Valuations , Cel Foreign Cadastral Income , Koning Albert II laan 33 box 55, 1030 Brussels. Taxpayers who had already declared foreign real estate income in their tax return in the past, in principle receive the form directly from the tax authorities.

The following information must, among other things, be included: type (villa, apartment), location, share of ownership, current sales value or price paid and year of purchase as well as any costs of construction or renovation works and the year they were completed. After the CI has been determined, this will be communicated by registered letter. An objection can then be lodged within 2 months.

Attention: not only the purchase, but also the sale, succession, rebuilding or any other change in your rights in rem of the foreign real estate, must be reported spontaneously.

Sanction

Taxpayers who fail to make the necessary notifications face a fine of EUR 250 to EUR 3.000.

As from when does this apply?

The newly determined CI will be taken into account in the personal income tax return as from tax year 2022 (income from 2021). For tax year 2021 (income from 2020), everything remains the same as now.

Conclusion

There is no doubt that the discrimination between Belgian and foreign real estate has been eliminated with the new regulation. Whether this will be in the taxpayer's advantage or disadvantage, however, remains to be seen.