Belgium tax revenue as a percentage raises to 43.2% of the GDP. As a country with a constitution that guarantees "the right to health," Belgium has an especially costly health care system to maintain. With Belgian citizens paying only a small fee, the government bears the bulk of the cost for care. The country also needs high tax revenues to keep up with its expenditures on infrastructure and industry subsidies. Taxes are collected on both state and local level. The most important taxes are collected on the federal level, including an income tax, social security, corporate taxes and value added tax. At the local level, property taxes, as well as various fees, are collected. Belgium enjoys a reputation for being a tax haven for the idle rich, but ordinary working people suffer from some of the highest tax rates in the world. Income tax is calculated by applying a progressive tax rate schedule to taxable income, with rates that go from 25% to a maximum rate 50%. For residents of Belgium, the taxes are irrespective of their nationality and come even from worldwide income.
Between income tax and social security charges, they add up to 65% of their gross pay each month to the government and the top income tax rate in Belgium is a whopping 50 percent. Employees' income tax is deducted at source by their employers, and if you have various sources of income, Adam Greene CPA suggests to employ an accountant or professional tax advisor to complete your tax returns and ensure that you are properly assessed, as the tax system in Belgium is complicated. And because of this, the Ministry of Finance publishes extensive information on income taxes on its website, often in English as well as the local languages. On the Belgian website, there is a link to a tax survey, which is updated as the laws change. There are local tax offices where you can obtain brochures or have questions answered. Tax brackets for the income year 2016 are applicable to net taxable income after the deduction of social security charges and professional expenses.
Corporate Income Taxes
For corporate income taxes, a range of measures has recently been approved, and other measures are currently under review at the Chamber or pending before the State Council. The Program Act of 1 July 2016 has been published in the Belgian Official Gazette on 4 July 2016. It introduces transfer pricing documentation requirements and extended reporting obligations for payments to tax havens. The draft Act providing urgent tax provisions contains measures related to the reduced withholding tax on dividends distributed to non-resident minority shareholders and repeals the current patent income deduction system. Some draft measures concern the implementation of European Directives. The draft Program Act II provides some changes to the tax provisions applicable to the Belgian Regulated Real Estate Company and introduces the new Real Estate Investment Fund.
Income Taxes
Employers withhold salary taxes according to the personal situation and tax status of the employee. This often covers the income taxes due on your salary, but a tax return form must be filed. Investment income, refunds, tax allowances, and liable municipal or community taxes have to be included on your tax return. There are stiff penalties for self-employed individuals failing to make prepayments as well as a surcharge for 'late' payment. Self-employed individuals must make quarterly pre-payments of estimated income tax based on the amount of tax paid the previous year.
Personal income tax is calculated by determining the tax base and assessing the tax due on that base. Taxation is charged on a sliding scale to successive portions of net taxable income. For the income year 2016, the federal tax rates range between zero and 50%. Residents pay municipal taxes at rates that range between nil and 9% of the total income tax payable. The tax calculation contains two major components, notably the federal personal income tax and the regional personal income tax. Belgian regions are now entitled to retain surcharges on 'reduced federal personal income taxation', and also grant tax reductions/tax credits, so the tax liability differs depending on the region in which the residence of the taxpayer is located on the 1st of January of the respective tax year.
Benefits
When it comes to high taxes in the World, Belgium is high on the charts. The people enjoy a high per capita income and standard of living, and the country consistently ranks high in the quality of life ratings published in the United Nations Human Development Report. The welfare programs funded with the high taxes have kept the poverty rate low, medical benefits, unemployment insurance, family allowance, retirement plans, freedom of education, and disability payments in the event of illness. While the country has a wide social safety net, there are indications that the substantial cost is beginning to take a toll on economic prosperity.
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