Context

Non-residents are in general subject to income tax in Belgium on their Belgian source income.

Although the basic rule is very simple and clear, there is quite some litigation on deferred income paid by a non-resident, often the foreign employing company, to an employee who is also non-resident. In particular employees who have left Belgium in a year prior to the year of receipt of any deferred income are concerned. This is e.g. typically an issue when a foreign employer picks up his employee’s Belgian tax bill after that the employee has left Belgium. The Belgian tax authorities believe they can still tax such income, whereas many taxpayers have argued they can’t.

News

The Liege Court of Appeal has ruled on 28 June 2006 that article 228, § 2, 7 as well as article 15 of the BE/US tax treaty do not prevent the Belgian tax authorities from taxing such income, in the case at hand Belgian income taxes paid by the US employer on behalf of one of his expatriates in a year after the year during which the expatriate left Belgium.

This ruling is the first one on this matter at the level of a Court of Appeal. It is not yet known whether further appeal before the Court of Cassation will be filed. Moreover, new court rulings from other Courts of Appeal are also expected. So the debate is not yet over but surely the tax authorities will continue their policy given this recent development.