Living and receiving pensions in different EU Member States

Living and receiving pensions in different EU Member States

  • I live in one EU Member State and receive a pension from another EU Member State. Where will I be taxed?

    Belgium has entered into a double taxation agreement with each individual EU Member State. These different agreements stipulate, for each income category, which country (the source country of the pension or the country of residence of the pensioner) has the right to levy tax on that income.

    As these agreements may vary from country to country, it is advisable to always consult the convention applicable to your situation. It is also important to consult the correct, most specific article within each convention. The type of pension (accrued as a result of employment either in the public sector or in the private sector) determines which country is entitled to levy tax. All agreements in force concluded by Belgium can be found here.

  • I receive a pension of Belgian origin but live in another EU Member State. What are my tax obligations in Belgium?

    Belgium levies the tax as the source country

    If, on the basis of the agreement with your country of residence, Belgium has the right to levy tax as the source country, the pension will be taxed in Belgium. As a result,

    • you must submit a non-resident tax return.
    • the body responsible for paying the pension must deduct withholding tax (unless the amount of the pension is too low).

    Your country of residence levies tax

    If, on the basis of the agreement with your country of residence, that country has the right to levy tax, the income will not be taxed in Belgium and there is no obligation to submit a non-resident tax return.

    Please note! Exemption from submitting the non-resident tax return will be granted only if:

    • all the conditions are met (see agreement itself) and
    • you have the right to invoke the agreement. This is only the case if you are regarded as a tax resident by the tax administration of your country of residence. To this end, you must be able to present a certificate of residence (drawn up by the tax authorities of your country).

    Tax exemption in Belgium is therefore always ‘subject to conditions’.

  • I live in Belgium but receive a pension from another EU Member State. What are my tax obligations in Belgium?

    As a resident of Belgium, you must submit an annual personal income tax return. In the return, you must include all the income that you have received worldwide. Therefore, if you receive a pension from another EU Member State, you must also include that pension in your personal income tax return.

    If, on the basis of the agreement with the other EU Member State, that country has the right to tax the pension, you can request exemption from taxation in the personal income tax return. You can find more information about this here.

    The conventions specify the way in which Belgium, as the country of residence, must avoid double taxation in the article on the method for avoiding double taxation. It relates to exemption with a progression clause. In other words, the pension to be exempted is not subject to income tax, but the income itself is taken into account in determining the rate applicable to other income. Some agreements do, however, allow municipal tax to be charged on the pension to be exempted.

  • I am a Belgian resident and receive a pension. What are the tax rates?

    Periodic pension

    If your pension (statutory or supplementary pension) is paid out periodically, your pension is jointly taxable at the progressive tax rate for personal income tax purposes.

    This means that your pension is added to all other income taxable at the progressive rate. The rate of tax will then increase incrementally the higher your income is.

    Personal income tax is calculated on all taxable income, even if some of it was realised or received abroad.

    The progressive tax rates for 2020 income are:

    Income bracket Tax rate
    Bracket 1 From EUR 0.01 to EUR 13 440 25%
    Bracket 2

    From EUR 13 440 to EUR 23 720

    40%
    Bracket 3 From EUR 23 720 to EUR 41 060 45%
    Bracket 4 More than EUR 41 060 50%











     

    Example:
    A resident has a taxable income of EUR 26 000.
    Calculation of the resident’s basic tax:
    25% of 13 440 = 3 360
    40% of (23 720 – 13 440) = 4 112
    45% of (26 000 – 23 720) = 1 026
    Basic tax = 3 360 + 4 112 + 1 026 = EUR 8 498

    Everyone who is subject to personal income tax is entitled to a ‘tax-free allowance’. This means that a portion of your taxable income is not taxed. The tax-free allowance is EUR 8 990 (for 2020 income). It may be higher depending on your personal situation (e.g. if you have any dependent children).

    Your pension (statutory or supplementary pension) may also entitle you to a pension-related tax reduction.

    Calculating this tax reduction is technically complex. The reduction consists of two elements: a basic reduction of EUR 1 828.41 and an additional reduction of EUR 376.18 for 2020 income. The additional reduction is only granted if your taxable income for 2020 is lower than EUR 23 710. Both the basic reduction and additional reduction may be lowered further depending on your other income.

    Lastly, in certain cases you may also be entitled to a tax reduction if you have a foreign pension: your foreign pension (or a portion thereof) may be exempted or subject to a lower rate of tax in Belgium.

    If you meet the conditions to benefit from an exemption on the basis of the double-taxation treaty, your foreign pension will not be taxed. However, this exempted pension will be taken into account to calculate the taxes on your other income.

    Pension capital

    If your pension is paid out as a lump sum, in principle that pension capital is taxable at a separate rate.

    The type of pension, how it was built up (employer’s contributions, personal contributions) and the time when and circumstances under which the pension capital is paid out are considered together to determine the applicable tax rate (8%, 10%, 16.5%, 18%, 20%, 33% or the progressive rate).

    In some cases, however, pension capital, or a portion of the capital, is converted into a fictitious annuity. This fictitious annuity is jointly taxable at the progressive tax rate for 10 or 13 successive taxable periods. This applies, for example, to capital in the form of a payment intended to compensate fully or partially for a permanent loss of earned income, or capital paid out at a favourable moment, as referred to in law, under individually concluded life insurance contracts (up to the amount used for the reconstitution or securing of a mortgage loan).

  • I am a non-resident and receive a pension. What are the tax rates?

    The tax rate for non-residents (natural persons) is only calculated on the income in respect of which Belgium has the power to levy tax on the basis of the double-taxation treaty and that you realised or received in Belgium.

    When non-resident tax is calculated the income that is exempted on the basis of the double-taxation treaty is not added to your other income that is taxable in Belgium. In contrast to the situation in the area of personal income tax, it therefore has no impact on the tax rate applicable to the income that is taxable in Belgium.

    The brackets (see periodic pension) and rates (see pension capital) that apply to Belgian residents also apply to non-residents.

    As in the case of personal income tax, your periodic pension (statutory or supplementary pension) may entitle you to a pension-related tax reduction. This tax reduction is granted within the limits and subject to the conditions that apply in the area of personal income tax, but with all domestic and foreign income taken into account.

    If the earned income that is taxable in Belgium amounts to at least 75% of the total earned income (both the Belgian and foreign earned income), you are entitled to a ‘tax-free allowance’. This means that a portion of your taxable income is not taxed. The tax-free allowance is EUR 8 990 (for 2020 income). It may be higher depending on your personal situation (e.g. if you have any dependent children).

    Residents of France, the Netherlands and Luxembourg whose earned income that is taxable in Belgium accounts for less than 75% of their total earned income are nevertheless still entitled – on the basis of the double-taxation treaty – to claim personal tax benefits (such as the ‘tax-free allowance’). These benefits are, however, reduced:

    • if you are a resident of France: on a pro-rata basis corresponding to the ratio of employee remuneration (or profit or income from self-employment) that is taxable in Belgium to total earned income
    • if you are a resident of the Netherlands or Luxembourg: on a pro-rata basis corresponding to the ratio of income that is taxable in Belgium to total global income.