Not all expatriates go into exile for the same reasons. Some do it to improve their tax situation. But when do you become a (tax) resident of another state? The subject is complex. “Tax residence will be defined using different criteria, answers Grégory Homans, lawyer and managing partner of the tax law firm Dekeyser&Associés. The criteria retained by the Belgian legal order, those retained by the host country and, where applicable, those resulting from a possible double taxation prevention convention (CPDI) that the two States have concluded. In Belgium, it is quite simple: tax residence is deemed to be located where the person is registered at the municipal office, or in the State from which they manage their assets. Other states use different criteria. This lack of uniformity often complicates the situation”.
And what happens in the event of conflict between countries? “The tax treaty concluded between the States resolves this conflict. Belgium has concluded around a hundred relating to taxes and most of them are based on the OECD model. These criteria are generally successive. First of all, this is the ‘permanent home’ – the place accessible at all times where you have your everyday belongings. If a person has a permanent home in both States, he or she will be considered a resident of the State with which his or her personal and economic ties are closest (center of vital interests). If the center of vital interests does not make it possible to determine residence, this person will be deemed to reside in the place where he or she usually stays – the place where one spends more than half the year, outside of stays. occasional’, holidays in particular. If this person habitually resides in both States, he will be deemed to reside in the State of which he has nationality.points out Me Homans.
Few differences depending on status
Second question: can tax residence depend on the status of the person concerned? “When you are active, your status – employee, self-employed, civil servant, etc. – does not matter, explains Grégory Homans. On the other hand, the pension of a Belgian civil servant, paid by the public authorities, will always remain taxed in Belgium. And a special regime also applies to European civil servants: during their mandate, they remain tax residents of their State of origin – the ‘recruitment’ State, in fact. But once retired, the European civil servant will become a Belgian tax resident if he remains domiciled in Belgium.”
Belgian expatriates will no longer be threatened with the closure of their account in Belgium
But how do you choose the right country when you want to emigrate for essentially tax reasons? “It depends on the profile of the candidate for expatriation and the tax objectives that they wish to optimize”according to Me Homans, who distinguishes three scenarios on this level.
1. The pensioner
“For pensioners receiving a private pension, the most interesting countries, until now, were England and Portugal. Portugal created, in 2009, a favorable tax regime, the ‘RNH’ (‘non-habitual residents’, allowing them to receive foreign movable income tax-exempt and to receive a foreign pension taxed at 10%, Editor’s note). But the country ended this regime on January 1, 2024, only those who settled in Portugal before this date can still benefit from it. As for England, it will also end, in April 2025, its ultra-favorable tax regime for ‘non-dom’ (‘resident but not domiciled’, notably exempting from tax movable income of foreign origin which is not repatriated to England), Editor’s note). For pensioners, we must therefore turn today to other countries: Italy and Greece, which have a regime fixing, under certain conditions, the pension tax rate at 7%. And Monaco and Dubai are two other territories that do not tax pensions”points out Me Homans.
gullIncome from investment or commercial properties located in Belgium will remain taxed with us, regardless of the tax residence of their owner.”
2. The “rentier”
First thing to know: expatriation makes no sense from a tax perspective when you only own buildings in Belgium: “income from investment or commercial properties located in Belgium will remain taxed with us, regardless of the tax residence of their owner”, recalls Grégory Homans. And for movable income (interest and dividends)? “To avoid withholding tax in Belgium, you must first transfer your assets outside of Belgium, to a foreign branch of your bank. And for the country of destination, the two ultra-favorable regimes, in Portugal and England, being abolished or in the process of being abolished, a ‘rentier’ will instead turn towards Italy – flat rate tax of 100,000 euros on income of foreign origin – or Greece, where the 7% tax regime also applies. And the other favorable countries are Dubai, Monaco – countries which impose no tax on movable income – and Switzerland, certain cantons of which have a flat tax. ”, notes the tax lawyer
3. Anyone who wants to plan their succession
On this level, Portugal is back in the game. “Portugal, in its common law, does not have inheritance tax but simply an ultra-reduced stamp duty if the inheritance is between spouses or in a direct line, explains Grégory Homans. Monaco and Dubai, too, do not impose any inheritance or gift tax. In Switzerland, most cantons exempt the surviving spouse or direct lineal descendants from inheritance tax. It should also be noted that Canada does not have any inheritance or gift tax. And Italy has gift and inheritance tax at a progressive rate which can go up to 4% directly but each person who wishes to plan their inheritance can allocate 1 million euros to their spouse and each of their children in exemption tax, which also offers very interesting prospects”.
The two Brabants, home to thousands of expatriates
Southern Europe, very attractive
Conclusion: the south of Europe today offers, in addition to its very mild weather, the most attractive territories of the European Union from a tax perspective. But more exotic countries like Dubai, or traditional tax havens like Switzerland or Monaco (where it can however be difficult to become a tax resident) are likely to turn a blind eye to candidates for tax exile. But all this does not prevent France – which has abolished its wealth tax to replace it with a tax on real estate wealth – from remaining, by far, the country which welcomes the most Belgian expatriates.
