The Pros and Cons of High-Income Tax Rates in Belgium

Tax obligations are often a key factor for prospective expatriates considering an overseas location.

Often a key factor for prospective expatriates considering an overseas location, is tax obligations.

It is important to understand the broader context and why in many cases, higher taxes indicate better living standards, social security support, and expendable income.

Belgium is an excellent real-world case study, with the OECD calculating that the average tax-paying resident paid an effective rate of 39.8% in 2021, against an average of 24.6%.

While many foreign nationals necessarily consult experienced expat financial advice to identify suitable tax efficiencies, there are also considerable benefits to moving to a country where high tax revenues lead to outstanding infrastructure and government investments.

Belgium Tax Rate Overview for 2023

The exact tax rates you might pay in Belgium as an expat depend on where you live, with a combined federal personal income tax and regional equivalent, which can result in varying reductions and tax credits alongside additional tax liabilities.

Most tax credits apply equally to all taxpayers, regardless of whether they are residents or non-residents. However, there are specific rebates and deductions aimed at non-residents earning 75% of their overall income inside Belgium.

Residents pay communal taxes from zero to 9%, although the average is 7%, with a flat rate of 7% also applied to non-residents.

For 2023, the personal income tax rates, applied to net taxable income post-social security deductions, where applicable, are as follows.

Taxable Income	Tax Rate
Up to €15,200	25%
€15,200 - €26,830	40%
€26,830 - €46,440	45%
Over €46,440	50%

Further information about tax bands, allowances, exemptions and other tax regimes is available from the Federal Public Service.

Are There Advantages to Higher Rate Tax Regimes?

On the face of it, a country known to have one of the highest tax liabilities worldwide may seem undesirable, and there are potential downsides, such as challenges for businesses trying to compete in global marketplaces, a lack of skilled labour if professionals move elsewhere to maximise their earnings, and the possibility for tax evasion.

However, as we've intimated, that isn't the end of the conversation. Despite the initial perception that high taxes automatically indicate a negative, expats may find that there are also notable benefits.

Examples include:

• Controlled pricing and inflation, with general groceries almost 5% less expensive in Belgium than in the UK and other EU countries.
• Excellent schools, medical care, highway networks and social support programmes.
• High average salaries, with only 3.4% of the working population earning in the lowest 10% income band.

Expats working and living in Belgium find that the work/life culture is significantly different to that they may have experienced elsewhere, with world-class family allowances, workplace pensions, sickness payments and insurance coverage.

The most recently available statistics show that the average income in Belgium, within the Brussels region, was €4,507 (£3,970) in 2020, compared to £2,193 in the UK and €3,342 (£2,944) in France.

These statistics prove that the conceivable exodus of high-skilled professionals simply isn't the reality in Belgium. The comfortable living standards, stability and low crime rates in the country more than outweigh the Belgium tax obligations higher earners are subject to.

The healthcare system is also well-regarded. Public funding means that most foreign nationals with a valid visa or residency can access services at a very low cost or even free of charge, effectively meaning that higher tax burdens lead to lower living costs elsewhere.

Correlations Between High Taxes and Economic Stability

Belgium is well known as a country with a multicultural, diverse and internationally-minded business climate. Most workplaces are populated with professionals from various countries and backgrounds – many employers look for candidates with no less than three fluent languages.

Foreign nationals relocate for many reasons, often to find a better quality of life, to follow career opportunities, enjoy a warmer climate, or to launch a business – and, for investors and those with a high net worth, economic stability may be just as important as the cost of living.

This is another factor that contradicts the presumption that higher taxes negatively affect business since Belgium remains a thriving hub, the primary base of the European Commission, and sustains annual immigration of roughly 120,000 people.

Economies with higher personal and corporate tax regimes provide stability, with social security programmes well-funded and reducing issues such as inequality, poverty and deprivation, which in turn foster a vibrant business sector and a growing volume of resources.

As a prospective business owner, entrepreneur, investor or expat, the long-term assurance of a prosperous economy with strong growth potential may be very attractive; regardless of the income tax band you may fall into.

Affordability vs Cost of Living

The cost of living is high on the agenda of late, as inflation and material scarcity ramp up the prices of everyday outgoings, from fuel to electricity and groceries.

Another important consideration when comparing living costs in Belgium, or any other country with high taxes, is the contrast between cost and affordability.

In the vast majority of countries, the capital city is the most expensive place to live, with soaring property values and high rental prices – London, Paris, and New York are obvious examples, but the same remains true almost everywhere else.

Belgium bucks the trend because, while it certainly isn't a cheap place to live, those same high taxes we've been exploring also mean that housing and transport costs in Brussels compare favourably with other capital cities in Western Europe. Other general prices are equally affordable, including entertainment and restaurant dining.

Of course, living further afield in Leuven, Tervuren, or Rixensart makes it feasible to live well on a more modest income within a 30-minute drive of Brussels, but there is less of a divide between the capital and other regions.

Therefore, affordability is a different metric from pure cost since average salaries are higher, most general expenses lower, and the differential between net expendable income is likely far smaller between Belgium and any other developed country than a quick look at a tax table might lead expats to believe.

For more information regarding tax rates and obligations in Belgium, contact Chase Buchanan Private Wealth Management for further guidance.

Chase Buchanan Ltd is authorised and regulated by the Cyprus Securities and Exchange Commission with CIF Licence 287/15.

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About Chase Buchanan Private Wealth Management

Chase Buchanan is a highly regulated wealth management company who specialises in providing global finance solutions for those with a global lifestyle. We are global financial advisers, supporting expatriates around the world from our regulated European headquarters, and local offices across Belgium, Canada, Canary Islands, Cyprus, Malta, Portugal, Spain, UK and the USA.

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