Belgium | expatriates special tax regime: tax-free rent allowance

A recent decision of the Court of Brussels may be of interest to expatriates who host representational business activities on behalf of their employer at their home. If the expatriate can produce proof of such a specific expense,  the part of the allowance granted to rent a larger home (in order to host such activities) would be tax free – in addition to the allowance granted under the expatriates special tax regime described below.

By virtue of the expatriates special tax regime, a non-taxable allowance can be granted. Such allowance is generally computed on the basis of a “Technical Note” established by the Belgian tax authorities, which includes housing costs, living costs and a tax equalisation. That total tax-free allowance is, however, capped at a maximum of €11,250 (€29,750 for some specific cases) per year.

The Court of Brussels confirmed that tax free allowances are not capped at the maximum amount of the expatriates allowance. Tax free allowances can be granted separately from the allowance designated by the expatriate special tax regime, when it can be established that such allowance covers other effectively incurred employer-related expenses.

The case relates to home costs. In the case in hand, however, due to (amongst other things) a processing error by the employer, the taxpayer failed to carry on the proof of the nature and the size of the incurred expenses. A properly documented case would succeed in granting an additional tax-free rent allowance for the representational activities – to the advantage of the employer (no tax gross up nor social security contributions).