Context

The Belgian tax authorities have published a new practice note (1) in line with the decision of the Court of Justice of 12 December 2002 (C-385/00). In that judgment, the Court ruled that the method used by The Netherlands for exempting foreign-source income from taxation constitutes an impediment to the free movement of individuals/employees within the European Union to the extent that tax deductions in relation to their personal situation are not taken into account. As the Belgian legislation provides for a similar tax relief method, the ruling also affects Belgium.

New Practice Note

The practice note introduces a new additional tax relief in the case of a (partial) loss of (certain) personal income tax benefits resulting from international employment within the European Economic Area. An additional tax relief will be accorded provided certain conditions are met and the actual (Belgian and foreign) tax due on the taxpayer’s total income is higher than the tax that would be due if the income was fully taxable in Belgium (thus qualifying for the full benefit of personal reliefs and allowances).

Although the practice note came into force on 12 March 2008 and applies to all pending cases, questions still remain as to its practical implementation. Moreover, given the high income tax rates in Belgium, each case’s facts will need assessing to calculate whether the practice note will even allow the additional relief to be claimed. Application of the practice note by the Belgian tax authorities in the near future will hopefully clarify its practical aspects.

(1) the new practice note:
FR: http://news.hrservices.be?lk200804221
NL: http://news.hrservices.be?lk200804221