Chapter 17 Personal Income Tax - Determination of the Taxable Income⁶⁶

The PIT is a yearly tax on income of people living in Belgium. The taxpayer pays regional and municipal surtaxes depending on where he is domiciliated. For couples, generally revenues are taxed separately, but the tax declaration is joint such that if applicable they benefit from the marital quotient or intra-household transfers, which reduces the total tax. The PIT is based on the Aggregate Taxable Income (ATI), which is the sum of income from 4 different sources, minus deduction of some expenses (Chapter…). A progressive tax is applied to the ATI and regional and federal PIT are then determined (Chapter …). Some deductions and tax credits are then taken into consideration and the tax to be paid or refunded computed (Chapter …).

17.1 PIT - Aggregation of income from 4 different sources

The starting point to calculate the taxable income is to sum 4 components: income from immovable property, income from movable property, miscellaneous income and earned income.

17.1.1 Income from immovable property

Taxable income from immovable property is determined based on the cadastral income or rent. It is taxed on one hand through the advanced levy on immovable property (see Chapter …) and on the other hand through the PIT (see hereafter). Cadastral incomes from taxpayers’ own homes are not taxed through the PIT. Moreover, loan interests can be deducted from income from immovable property. When immovable property is jointly owned by spouses it is apportioned on a fifty-fifty basis.

Depending on the purpose given to the building, the computation of the taxable income differs. * Second residence: Indexed cadastral income, multiplied by 1.40 * Used for professional purpose by the owner: Not taxed in PIT (deemed as professional income) * Leased for non-professional purposes: Indexed cadastral income, multiplied by 1.40 * Leased for professional purposes: Rental income less 40% for fixed expenses (capped at 66% of revalorized cadastral income), with a lower limit set at the indexed cadastral income, multiplied by 1.40.

Special rules apply when an immovable property is rented to a company who only partly use it for professional purposes. Special rules also apply when the rented building is furbished. When the immovable property is land, the same rules as for buildings apply, except that the cadastral income is not multiplied by 1.40 and that fixed expenses are set at 10% when applicable. Note that interests on mortgage lead to certain tax advantages detailed in section …

17.1.2 Income from movable property

Dividends and income from bonds, securities, saving certificates, cash deposts and other fixed-interest securities are subject to the withholding tax (see chapter 5: investment income tax) on income from movable property and do not have to be declared in the tax return. Income from movable property that is not subject to the withholding tax has to be declared, and is taxed at fixed rates that depend on the income source. It is the case for income perceived abroad, income from copyright and related rights, life annuities, income from mortgage debts, income from renting, leasing, using or granting movable property. Moreover some incomes have to be declared when exceeding exempted limits. This is the case for incomes from savings deposits (above 960 per spouse), from capital invested in cooperatives or companies with social purpose (above 190 per spouse), or interests from loans granted to certain start-up SMEs (above 15320 per spouse) through recognized crowdfunding platforms. The amount of the taxable income from movable property is calculated for each spouse separately. Any shared income is apportioned according to property law. Different rates apply, ranging from 5 to 30%, depending on the income source (see Chapter …).

Note that when it is more advantageous for the taxpayer to add income from movable property in the aggregate taxable income, this will be automatically applied. For this reason, it can be advantageous for some low-income individuals to declare all income from movable property to benefit from exemptions and being refunded of the surplus of the withholding tax at source.

17.1.3 Miscellaneous income

Miscellaneous income includes all incomes that they were earned outside a professional activity. Only current alimony payments are included in the ATI (aggregated taxable income), at a level of 80%. All other misc. income are taxed separately, and rates, ranging from 16.5 to 33%, depend on the source of income (see Chapter …).

Those other miscellaneous income include: * Occasional profits and proceeds: profits and proceeds not connected with a professional activity (and excluding profits and proceeds obtained through normal management of private fortune and lottery gains). * Occasional profits and proceeds from from collaborative economy, associations and occasional services between citizens * Capital gains from built immovable property: those gains are taxable when the building is situated in Belgium, is not the taxpayer’s own home and is sold less than 5 years after the acquisition or 3 years after a donation. * Capital gains from land: those gains are taxable when the land is sold less than 8 years after acquisition or 3 years after a donation. * Prizes and subsidies (for the part exceeding 4080 EUR), annuities or pensions allocated to scholars, authors or artists by Belgian or foreign public authorities or non-profit public bodies * Allowances to researchers for the exploitation of a discovery or granted to researchers by universities, hautes écoles or public research funding agencies. * Income from a sublease or the transfer of a lease. * Income from a concession to place advertising boards * Income from sporting rights * Capital gains realized on the transfer of an important parcel of shares: those gains are taxed when a significant parcel of shares (> 25%) is transferred to legal entities outside the European Economic Area.

17.1.4 Professional income

There are seven categories of professional income detailed hereafter. Those incomes include all remunerations received with respect to a professional activity, including benefits in kind (meal vouchers, sport and culture vouchers, eco-vouchers, stock options, company cars, mobility allowances) and replacement income. Some of those benefits in kind are exempted under certain conditions.

Employees’ remuneration: Employees’ remuneration income includes wages, salaries and other remunerations received with respect to a professional activity (for example compensation for termination, arrears, advance holiday pay, benefits in kind).

** Meal vouchers: the employer can offer meal vouchers to employees. Those are exempted from PIT, to the limit of one voucher per worked day, that has a value of 8 euro maximum, under some conditions. ** Sport and culture vouchers: 100 euro’s per year are exempted, under some conditions. ** Eco-chèques: 250 euro’s per year are exempted, under some conditions. ** Hospitalization insurance: exempted. ** Wage bonus (non-recurrent advangtages linked to results): tax exempted under certain conditions. ** Stock options: the taxable benefit in kind is valued at a flat rate that is fixed at 18% of the value of the shares the option relates to. Different rates apply depending on various conditions (see p. 35-36 Memento fiscal). ** Company cars: The fringe benefit that a company car represents depends on CO2 emissions of the vehicle and its catalogue value. ** Mobility allowance and mobility budget

Directors’ remuneration;
Co-working spouses’ remuneration (without own social status);
Profits from agricultural, industrial and commercial activities;
Proceeds from a liberal profession;
Profits and proceeds from former professional activities;
Replacement income (pensions, unemployment with company allowance): replacement income is taxable, but some social transfers are exempted. Those transfers are income support benefits, statuory family allowanes, maternity allowances and legal adoption premiums, disability allowances, war pensions, allowances granted following workplace accidents or occupation deseases under certain conditions.

17.2 PIT - Deductions, exemptions and re-allocations

The net amount of earnings is then calculated in six phases.

deduction of social security contributions (See Chapter )
deduction of actual or lump-sum professional expenses. Lump-sum professional expenses are based on gross taxable income after deduction of social security contributions. Such expenses have to be incurred by the taxpayer in order to acquire taxable income. Those expenses include commuting expenses, expenses relating to immovable property used for a professional activity, insurance premiums, commissions, brokerage expenses, advertising expenses, training costs, invalidty, insurance contributions against incapacity for work, personnel costs, remunerations paid to the co-working spouse, depreciation of property, road taxes, local taxes and indirect taxes and sums paid out to collective child-care facilities (by a taxpayer receiving profits or proceeds). Some of those can only be partly deducted (31% of restaurant bills, 50% of expenses for entertainment allowances and business gifts, 25% of the professional part of the car cost regarding journeys other than commuting, etc.). The law provides lump-sum expenses to some categories of professional income, which take place of actual expenses, unless the latter are higher. For directors, the lump-sum deduction is set at 3%, and can not exceed 2540 EUR. For remunerations paid to the co-working spouse, the rates and maximum are respectively 5% and 4230. For employees and self-employed declaring proceeds or profits, the lump-sum expenses are respectively (see table and table …). The maximum amounts are respectively 4810 and 4230.

Table 17.1: Lump-sum professional expenses employees and self-employed declaring proceeds
Basis of calculation	Lump-sum expenses
0 and more	0.3
^*

Table 17.2: Lump-sum professional expenses self-employed declaring profits
Basis of calculation	Lump-sum expenses
0 - 6000.00	0.287
6000.01 - 11910.00	0.100
11910.01 - 19830.00	0.050
19830.01 and more	0.030
^*

economic exemptions (tax measures to promote investment and/or employment)
offsetting of losses: losses incurred in one professional activity can be set off against profits realized in another activity. Losses incurred in the course of previous taxable periods can also be set off against profits from the current period.
allocation of the co-working spouse: a self-employed taxpayer who receives assistance from his/her spouse can allocate part of her/his income to the spouse, if the spouse has not earned a net professional income exceeding 14200 from a separate activity.
marital quotient: when the professional income of a spouse does not exceed 30% of the total professional income of a couple, income can be transferred to reach 30%, as long as the income of this spouse does not exceed 10940.
compensation for losses between spouses
deduction of alimony payments: if the beneficiary is not a member of the taxpayer’s household, the alimony payment is payable in pursuance of the Civil Code, the Judicial Code or the Law on legal cohabitation and the payments are made on a regular basis or, if they are made in a taxable period subsequent to the period the payment is related to, they are made in pursuance of a retroactive Court order, 80% of the sums paid can be deducted.

The final amount obtained is called the GTI (globally taxable income, GBI (Gemeenschappelijk belastbaar inkomen), RIG (Revenu imposable globalement)). The RIGRID (sum of globally taxable income and separately taxable income) is also computed, as it can sometimes be advantageous for a taxpaer to be taxed on the RIGRID.

17.3 Modelling Assumptions

17.4 Module input

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17.5 Module output