Chapter 19 Personal Income Tax - Tax Reductions⁷¹

A wide range of expenses give entitlement to tax reliefs in the form of tax reductions, which can be of three main kinds.
First, the tax reductions that can neither be converted into tax credits nor give rise to subsequent taxation. They include the tax reductions for personal contributions to group insurance (either at federal or regional level), additional interest, capital repayments, low-energy houses, interest on green loans, electric vehicles, gifts, domestic workers, childcare, overtime work, Local Employment Agencies (LEA) vouchers, renovation of low-rent dwellings, maintenance and restoration of classified monuments, roof insulation, ordinary interest, and renovation agreements (Flemish Region).
Second, the tax reductions that cannot be converted into tax credits, but that can give rise to a later tax levy. This concerns mainly the tax reductions for employer shares and for shares in development funds. Tax reductions for pension savings and life insurance premiums are also included.
Finally, the tax reductions that can be converted into tax credits. They include certain transfers of tax reductions for energy-saving expenditures, the tax reductions for service vouchers, which can be converted into tax credits in certain cases, and the regional tax reductions for owner-occupied homes (Section 19.1.1), which can also be converted into tax credits under certain conditions. While with the 6th State Reform and the implementation of the Special Finance Act, the Regions are now exclusively competent for granting certain tax reductions, some other tax advantages are still granted by the federal authority. The distribution is summarized in Table 19.1.

Table 19.1: Expenses entitling to tax relief
Expenses	Tax reductions which remain a federal competence	Flanders	Wallonia	Brussels-Capital
Long-term savings
Pension savings	X
Personal contributions for group insurance or pension funds	X
Purchase of employers’ shares	X
Individual life insurance premiums not related to immovable property	X
Immovable property
Expenses for another immovable property other than the taxpayer’s own home: Federal tax reduction for longterm savings (individual life insurance premiums + capital repayments)	X
Expenses for acquiring or maintaining the taxpayer’s own home: - housing bonus (with regional variants) - regional tax reduction for longterm savings (loans and agreements which do not meet the conditions giving entitlement to the housing bonus)		Integrated housing bonus	Chèque- Habitat	Old housing bonus (loans contracted in 2015 or 2016)
Renovation of low-rent dwellings		X	X	Transition system
Classified monuments and landscapes		A new tax scheme applies	X
Zones of “positive metropolitan policy”			X
Regional tax reduction for additional interest, regional tax reduction for home-savings, regional tax reduction for interest relating to the conversion of the old creditable withholding tax on immovable property.		X	X
Environment
Roof insulation - dwellings of at least five years			X
Tax reductions for passive, low-energy and zero-energy houses	X
Interest related to green loans	X
Electric vehicles	X
Other expenses
Donations	X
Child-care expenses	X
Remunerations domestic workers	X
Shares of recognised development funds	X
LEA vouchers and service vouchers (Walloonia and Brussels) & Neighbourhood work vouchers (district-work vouchers) and service		X	X	X

In this chapter, expenses for which the tax relief is granted by the federal authority and those for which the tax advantage is granted by the Regions are presented separately. Precisely, the chapter is structured as follows. Section 19.1 describes the specific tax system applicable to investments in immovable properties⁷², where a certain degree of interdependence between federal competence and what has been transferred to the Regions remains. In Section 19.2, tax reductions still granted by the federal authority are presented. Tax advantages transferred to the Regions are instead described in Section 19.3. Finally, Section 19.4 concludes with the regional provisions that exist outside the transfers from the federal State to the Regions.

19.1 Investments in immovable properties

Expenses for investments in immovable properties include primarily mortgage loans (capital repayments and interest payments) and individual life insurance premiums. For tax reductions on such domains, the federal and regional authorities still coexist in the current system. Namely, as of the 6th State Reform, tax advantages regarding the taxpayer’s own home were regionalised. Therefore, the essential distinction relies on whether, on the date payments are carried out⁷³, the expenses concern the taxpayer’s own home (regional competence) or not (federal competence).

19.1.1 Regional competence (own home)

19.1.1.1 Regional “home savings”

According to the Belgian legislation, home savings are mortgage loans contracted with a view to acquiring, constructing, or renovating the taxpayer’s dwelling. On the date in which the loan is contracted, this must be the taxpayer’s single home. The life insurance assigned exclusively to the reinstatement or securing of the mortgage loan is as well part of the home savings.
Home savings are eligible to an increased tax reduction at the marginal rate. The tax reduction for home savings only applies to a first bracket, which is computed on a basic amount that changes depending on the year in which the loan agreement was taken out (see Table 19.2). Additionally, the basic amount is increased by 5, 10, 20 or 30% depending on the number of the taxpayer’s dependent children (1, 2, 3 or more, respectively) on 1 January of the year following that in which the loan agreement was concluded (see Table 19.2).

Table 19.2: Basic amount of the loan giving entitlement to the tax reduction for home savings
Year in which the loan agreement was taken out	Basic amount giving entitlement to the tax reduction for home savings (in €)
1993 to 1998	54,536.58
1999	55,057.15
2000	55,652.10
2001	57,570.00
2002	58,990.00
2003	59,960.00
2004	60,910.00

It is worth noting, however, that this scheme is currently expiring. As a matter of fact, the increased tax reduction only applies to mortgage loans taken out before 1 January 2005.

19.1.1.2 Regional housing bonus, Chèque-Habitat (Wallonia), and Integrated housing bonus (Flanders)

The regional housing bonus originally applied to interest on loans, capital repayments or life insurance premiums assigned to the reinstatement of mortgage loans and outstanding balance insurance premiums related to the taxpayer’s own home. However, with their new autonomy in real estate taxation (obtained from the new Special Finance Act), the three Regions treaded different paths during the last years.

19.1.1.2.1 Brussels-Capital Region

In the Brussels-Capital Region, the regional housing bonus system has been quashed (without being replaced). However, the taxpayer can still benefit (as from 1 January 2017) from an increased abatement under the right of sale.

19.1.1.2.2 Walloon Region

In Wallonia, a year threshold (1 January 2016) was established to determine whether the original regional housing bonus or the new Walloon-specific system applies.

19.1.1.2.2.1 Housing bonus system

For loans contracted until 31 December 2015, the existing tax advantages remain applicable (regional housing bonus), with only one limitation. That is, the maximum amounts eligible for these tax advantages are no longer indexed, but they are maintained at their level on 1 January 2015.
The basic amount is equal to € 2,290; and it remains fixed regardless of any possible change in the taxpayer’s immovable property after 31/12 of the year in which the loan is taken out.
Increments of €760 increase the basic amount during the first ten years of the loan contract. Additionally, if on 1 January of the year following the year in which the loan is contracted taxpayers have at least three dependent children, they are eligible for an additional € 80 increase to the basic amount. Nevertheless, should the taxpayer become owner, occupier, emphyteutic lessee, superficiary owner or usufructuary of a second dwelling, all these increases cease to apply, and they are definitively lost.
The tax reduction amounts to 40% in the Walloon Region.

19.1.1.2.2.2 The Chèque-Habitat system

Mortgage loans contracted from 1 January 2016 to purchase a single home (located in the European Economic Area – EEA) destined as residence of the owner give entitlement to the Chèque-Habitat tax reduction. Besides being related to the acquisition of the single own home, however, the following granting conditions must be fulfilled⁷⁴ to benefit from the Chèque-Habitat scheme.
With regards to mortgage repayments, the mortgage loan must have a minimum term of ten years and it must have been taken with an institution located in the EEA. As regards individual life insurance contracts, where they include a life bonus, they must have a minimum duration of ten years and they must have been concluded with an institution located in the EEA.
The Chèque-Habitat is a flat tax reduction granted since the tax year relating to the taxable period in which the loan has been taken out for a maximum of 20 tax years⁷⁵. As the housing bonus, the actual reduction is made up of a basic amount and possible conditional increases.
The basic amount of the tax reduction depends on the taxpayer’s net taxable income. The rules for its determination are summarised in Table 19.3.

Table 19.3: General principles of the Chèque-Habitat system
Net Taxable Income - NTI (in €)	Basic amount of the tax reduction (in €)
$	$1,520$
$21,733	$[1,520 - (NTI - 21,733) * 1.275%]$
$83,828$	$0$

Increases of € 125 are added to the basic amount for each dependent child on 1 January of the tax year. Disabled children count for two. However, if taxpayers’ net taxable income exceeds € 83,828, they are not eligible to any increase, regardless of the number of (disabled) children.
The part of the tax reduction that cannot be set off is converted into a regional refundable tax credit.

19.1.1.2.3 Flemish Region

As in Wallonia, also in Flanders two different regimes regulate the tax reduction for the expenditures related to the taxpayer’s own home: the regional housing bonus and the integrated housing bonus. The distinction is still made depending on whether the authentic deed of the mortgage loan contract is executed before or after 1 January 2016.

19.1.1.2.3.1 Housing bonus system

For loans contracted until 31 December 2015, the previously existing tax reduction remains applicable (regional housing bonus). As for the Walloon Region, this tax reduction is made up of a basic amount and two kinds of increases. While the latter are always the same, i.e., € 760 for the first ten taxable periods and € 80 if the taxpayer has at least three dependent children⁷⁶, the basic amount, as well as the overall reduction’s tax rate, vary depending on the year in which the loan is contracted. If the authentic mortgage deeds were executed by 31 December 2014, the basic amount is € 2,280 per taxpayer (per taxable period) and the tax reduction is calculated at the marginal rate (minimum 30%). On the contrary, if the authentic mortgage deeds are executed in 2015, the basic amount, per taxpayer and per taxable period, is reduced to € 1,520 and the tax reduction is calculated at a 40% tax rate.
This last system also applies if the loan has been rolled over from 1 January 2015 under an existing credit line. However, should the loan haven been taken out to replace an existing loan, the date of the initial loan is taken into consideration; and the old system remains applicable only if this date is before 1 January 2015.
Finally, since tax year 2016, the maximum amounts for the housing bonus are no longer indexed.

19.1.1.2.3.2 Integrated housing bonus

As of 1 January 2016, the Flemish Region has grouped together the three systems relating to tax reductions for the taxpayer’s own home (the regional housing bonus, the tax reduction for long-term savings and the tax reduction for standard interest) into one system: the integrated housing bonus.
From 1 January 2016 to 31 December 2019, the integrated housing bonus coexisted with the previous regional housing bonus, with this latter being completely suppressed as from 2020. However, taxpayers who apply for the integrated housing bonus for a loan taken out from 1 January 2016 cannot combine it with the previous tax advantage (regional housing bonus) for a still outstanding loan taken out before 2016.
On the contrary, new loans taken out as from 1 January 2020 are no longer eligible for the regional housing bonus. In order to determine which tax regime is applicable, the date of the authentic loan deed remains the discriminant criterion.
The integrated housing bonus tax system applies to all own homes, regardless of whether it concerns the taxpayer’s single own home or not. The maximum basic amount, for any kind of own home, is € 1,520. Then, if the home is the taxpayer’s single home on 31 December of the year in which the loan is taken out, this maximum amount of € 1,520 is increased by € 760. The usual € 80 increase, provided to taxpayers with at least three dependent children (as from 1 January of the year following the year in which the loan agreement is concluded), still applies.
Under the integrated housing bonus system, additional conditions apply with regards to mortgage repayments and individual life insurance contracts.
As for mortgage repayments:

the loan must have been taken out from 2016 and be secured by a mortgage;
the mortgage loan must have a minimum term of ten years and must have been taken out with an institution located in the EEA;
the mortgage loan must have been specifically taken out to acquire or maintain a dwelling located in the EEA.

As regards the individual life insurance contracts:

the contract must have been taken out by the taxpayer before the age of 65;
where it includes a life bonus, the contract must have a minimum duration of ten years;
the bonuses must be stipulated in favour of the taxpayer, in the event of life, and in favour of the person who acquires the full property or usufruct, in case of death;
the contract must have been concluded with an institution located in the EEA.

19.1.1.3 Regional long-term savings

Tax reductions on long term savings normally fall within the federal authority (Section 19.2). Nonetheless, as for the regional housing bonus, also long-term savings related to taxpayers’ own home were transferred to the Regions.
Within these long-term savings fall the loans and the agreements (e.g. individual life insurance contracts) that do not meet the conditions giving entitlement to the regional housing bonus (or its new substitutes) but that still satisfies certain characteristics. Specifically, for what concerns mortgage repayments, the loan must have a minimum term of ten years and it must have been taken out with an institution located in the EEA. Individual life insurance contracts must have been taken out by taxpayers younger than 65 in an institution located in the EEA and, should they include a life bonus, they must have a minimum duration of 10 years. In addition, the bonuses must be stipulated in favour of the taxpayer, in the event of life, and in favour of the spouse or relatives up to the second degree, in case of death. The amount of capital repayments and life insurance premiums giving entitlement to the tax reduction is limited, for each spouse, to 15% of the first bracket of earned income, and to 6% beyond, exclusive separately taxable income. The first bracket of earned income (regional upper limit) is € 1,900 in Flanders, € 1,910 in Wallonia, and € 2,000 in the Brussels-Capital Region. In addition, the maximum tax reduction is capped to € 2,280 in the Flemish Region, € 2,290 in the Walloon Region), and € 2,400 in the Brussels-Capital Region.
It is worth noting, however, that these tax advantages, in Flanders, only apply to mortgage loans and related life insurance policies contracted before 2016. In fact, as of 1 January 2016, regional tax reductions for long-term savings fall within the scope of the integrated housing bonus (see Section 19.1.1.2.3).

19.1.2 Federal competence (non-own home)

19.1.2.1 Federal long-term savings

As in the case of the regional long-term savings, the federal ones are loans and individual life insurance contracts that do not meet the conditions giving entitlement to the federal housing bonus. The requirements that these federal long-term savings must meet, and the calculation of the actual tax reduction are the same of the regional ones (see Section 19.1.1.3). The only two differences are the upper limit and the maximum ceiling. In fact, for federal long-term savings, these are € 1,920 and € 2,310 respectively.

19.2 Federal tax reduction

The base for federal tax reductions is the reduced State tax, increased by the tax on the income from movable property.

19.2.1 Pension savings

Three formulas exist for a taxpayer to join a pension savings scheme.
First, taxpayers can open an individual savings account with a financial institution. The account’s administration can either be carried out by the taxpayers themselves or, by means of a written power of attorney, by a member of the financial institution.
Second, taxpayers can open a collective savings account with a financial institution, which pools and manages the assets by investing them in a pension fund specifically designed for that purpose. Third, taxpayers can take out a savings insurance policy with an insurance company in order to build up a pension, annuities or a capital to be paid in the event of life or death.
Regardless of the formula, to be eligible for a tax reduction, the pension savings scheme must meet a series of conditions. Firstly, the deposits must be made by an EEA’s resident aged between 18 and 65. Secondly, the savings account or savings insurance must have a duration of at least ten years, and the instalments must be final. Finally, when the insurance policy is taken out, it must be stipulated that the benefits of the insurance will be paid:

to the pension savers themselves, in the event of life;
to the pension savers’ spouse or to relatives up to the second degree, in case of death.

Should all these conditions be met, the amount taken into account for the tax reduction is however capped to € 960 per taxable period and per taxpayer. Nonetheless, this can be increased to € 1,230 per taxable period and per taxpayer as part of the increased pension savings. The tax reduction, which applies to expenses actually paid, amounts to 30% (25% for the increased pension saving).
If in the same taxable period the pension saver made payments to different savings accounts or savings insurances, the tax reduction is only granted for the payments relating to one account (savings account or savings insurance). In addition, when a tax reduction for a pension savings scheme is granted, no tax reduction is available for the purchase of employer’s shares.
The pension saver is only allowed to open one savings account or savings insurance in the same taxable period.
It is worth noting that this tax advantage on the payment of the pension savings scheme’s premiums leads to an anticipated (advanced) taxation on the accrued capital that the taxpayer must receive on the expiration date of the contract. This advanced taxation, also called “taxation on long-term savings”, is a tax issued from the Code of Miscellaneous Fees and Taxes (indirect tax), and it replaces the PIT. Therefore, as far as this tax is paid, the theoretical capital is no longer subject to personal income tax.
In 2012, this advanced taxation was itself partially anticipated by the levy of a single tax of 6.5% on pension savings scheme on reserves built up via premiums paid before 1 January 1993. Additional changes in the advanced taxation on long-term savings entered into force on 1 January 2015 for the years 2015-2019⁷⁷. Combining a tax advantage granted where premiums or contributions are paid with a taxation upon withdrawal is also possible for individual life insurance policies.

19.2.2 Group insurances or pension funds

A group insurance is a contract between an employer or a group of employers and an insurance company whose purpose is to provide with supplementary pension all or part of the employees.
The financing is made up of two kinds of contributions: the employer’s contribution and the employees’ contribution.
While the employer’s contribution is tax deductible for the employer⁷⁸, the employees’ contributions are eligible for a tax reduction for the employees. To be so, however, the employees’ contributions must meet the following conditions:

they are personal contributions to an additional insurance against old age and premature death;
they are made under a contract assuring a capital or an annuity in the event of life or death;
they are withheld at source from salaries by the employer;
they must be paid to an insurance company, a social security institution or an institution for occupational retirement provisions established in the EEA;
they cannot exceed 80% of the last normal annual gross remuneration.

The tax reduction for employees’ contributions to the insurance company/institution amounts to 30% of the expenses actually paid.
As for pension savings schemes, also in this case the tax advantage on the payment of the premiums leads to a tax levy on the amounts obtained on the expiry date of the contract.

19.2.3 Purchase of employer shares

The purchase of shares in a company established in the EEA gives entitlement to a tax reduction if the following conditions are jointly met:

the taxpayer must be a salary or wage earner in the company itself or in a subsidiary or in a sub-subsidiary thereof;
the shares must be subscribed to at the time the company is constituted or when there is an increase in the company’s capital;
the tax return must be accompanied by documents proving that the taxpayer has purchased the shares and has held them until the end of the taxable period;
the taxpayer must keep the shares in his/her possession for at least five years, except in the case of death⁷⁹.

The tax reduction amounts to 30% of the expenses actually paid, which are however capped to maximum € 770 for each spouse fulfilling these conditions. In addition, this advantage is incompatible with the tax reduction for pension savings schemes.

19.2.4 Low-energy houses – transitional system

The tax reductions for passive houses, low-energy houses and zero-energy houses have been abolished since tax year 2013.
However, a transitional system is foreseen for low-energy house, passive house or zero-energy house certificates for which an application was submitted on 31 December 2011 at the latest and that were delivered on 29 February 2012 at the latest. As a matter of fact, these certificates are considered as being issued on 31 December 2011.
The tax reduction for low-energy houses is granted for ten subsequent tax periods and, under joint assessment, it is granted proportionately depending on each spouse’s taxable income in comparison to the sum of both spouses’ aggregated taxable income.

19.2.5 Green loans

“Green loans” are loans taken out between 1 January 2009 and 31 December 2011 to finance expenses for energy-saving investments (themselves eligible for tax reductions).
Interest paid on “green loans” are also entitled to a tax reduction, which amounts to 30% of the interest actually paid (after deduction of the State intervention in the form of an interest bonus).
The tax reduction does not apply to the interest taken into account as actual professional expenses or for which another loan-related tax advantage, regional tax reduction or regional tax credit has been requested.

19.2.6 Electric vehicles

Expenses to purchase a new vehicle with 2, 3 or 4 wheels (suitable for the transport of at least two persons) are entitled to a tax reduction if the vehicle is exclusively powered by an electric motor. The tax reduction amounts to 15% of the purchase price with a maximum of:

€ 5,040 for a quadricycle;
€ 3,070 for a motorcycle or tricycle.

When a joint assessment is established, the tax reduction is granted proportionately to the share of each of the spouses in both spouses’ aggregated taxable income.
This tax reduction can be granted for more than one vehicle in the same tax year. In case, the abovementioned maximum reductions apply to each vehicle singularly.

19.2.7 Overtime allowances

The tax reduction for hours worked overtime is granted to employees of any sector (profit, non-profit, autonomous public companies, and public limited company).
This tax advantage is calculated based on the overtime allowance for the hours worked overtime. Whatever the number of hours worked overtime is, however, the tax reduction applies to a maximum of 130 overtime hours, which can be increased to:

180 for employees whose employer carries out works in immovable properties⁸⁰;
360 hours for employees who work in hotels.

For what concerns the actual reduction, depending on the allowance scheme, two kinds of reductions can apply. If the overtime is compensated with a legal allowance of 50% or 100%, a tax reduction of 57.75% of the actual allowance applies. If instead the overtime is compensated via a statutory overtime allowance of 20%, the tax reduction is 66.81%.

19.2.8 Childcare

Childcare expenses are eligible for a 45% tax reduction if the following conditions are met:

the taxpayer or his/her spouse must have received professional income (e.g. salaries, profits, proceeds, etc.) or replacement income (e.g. pensions, unemployment benefits etc.);
the child must be dependent on the taxpayer⁸¹, and he/she must be younger than 12 years old (18 for severely disabled children)⁸²;
the expenses must have been paid either to institutions or facilities recognised by local public authorities or by public authorities of the Regions or Communities, or to nursery/elementary schools located in the EEA (or to associations linked to them). The first case includes childcare facilities, such as institutions and host families, which must be necessarily authorised, recognised, subsidised, or supervised by one of the followings: the Office de la Naissance et de l’Enfance; the Kind en Gezin; local authorities; authorities of the Regions or Communities; foreign public institutions located in the EEA. The second case refers to schools and associations linked them. In general, “recognised institutions” include a wide range of facilities (e.g. playgrounds organised by the municipalities, holiday camps organised by youth organisations or residential schools);
the expenses must be certified by supporting documents kept at the disposal of the tax office.

In the determination of the tax reduction, childcare expenses are considered at a daily rate, which is capped to € 11.20 per day and per child.
As from tax year 2017, low-income single parents can benefit from an additional tax reduction for their childcare expenses. In fact, for such individuals, the tax reduction rate is increased to 75%.
To be entitled to this additional tax reduction, however, the taxpayer should not have already benefited from the additional exempted amount for dependent child younger than three years.
In addition, a phasing-out rule (progressive decrease in the additional tax reduction) applies when the taxpayer’s taxable income amounts to between € 15,320 and € 19,410.
Under joint assessment, the tax reduction is granted proportionately to each of the spouses based on their aggregated taxable income.

19.2.9 Gifts/Donations

A 45% tax reduction is granted for gifts made to recognised institutions (in the EEA), insofar as the donations amount to at least € 40 per beneficiary institution. As of 2019, this also applies to donations paid via an online payment platform to a recognised organisation.
The total amount of gifts for which the tax reduction is granted cannot exceed 10% of the global net income of the spouse and, however, it is capped to € 384,300 per spouse.
Under joint assessment, the tax reduction is granted proportionately to each of the spouses based on their aggregated taxable income.

19.2.10 Wages of domestic workers

Expenses made to pay wages to domestic workers during the taxable period are eligible for a 30% tax reduction if the following conditions are met:

the taxpayer must be registered as an employer at the National Social Security Office;
upon the start of the working contract, the employee must have been receiving either the support income or full unemployment benefits for at least six months;
the wage must be subject to social security contributions and must be higher than € 3,920.

The amount entitling to the tax reduction is equal to 50% of the wage paid, with a maximum of € 7,690 and for one domestic worker only.
Under joint assessment, the tax reduction is granted proportionately to the share of each of the spouses in both spouses’ aggregated taxable income.

19.2.11 Shares in Microfinance Development Funds

This tax reduction is available upon the purchase of registered shares issued by recognised development funds that are active in the field of microcredit and microfinance.
For the tax reduction to be granted, the expenses in the share subscription must amount at least € 380. In addition, the taxpayer must hold the shares in his/her possession for at least 60 months uninterrupted, except in the case of death. If the shares are transferred, the new subscriber is not entitled to the tax reduction, and the former one is subject to a tax increase. The amount of this tax increase is determined as the number sixtieths of the initial tax reduction equal to the number of missing months. Under the Special Finance Act, the federal authority remains competent for this tax increase.
The tax reduction for the subscription of shares in development funds equals 5% of the sums paid, with a maximum of € 320 for 2018.

19.2.12 Shares in start-up or small companies

The expenses for the purchase of shares newly issued by a start-up SME are also entitled to a tax reduction. The shares can be subscribed directly (e.g. via a crowdfunding platform) or via participation rights in recognised start-up funds or starter private PRICAF/PRIVAKs which, in turn (and therefore indirectly), invest the sums raised in new shares issued by start-up SMEs. Also the subscription to new investment instruments issued by a financing vehicle are eligible for this tax reduction, insofar as this vehicle directly invests the received payments in new shares of start-up SMEs. On the contrary, this regime does not apply to the shares of a company held by a manager of the company itself.
The tax reduction applies only to new shares, which are issued when the start-up company is set up or when there is an increase in the entirely paid-up capital (within four years following the incorporation of the company). It amounts to 30% of the invested amount and it applies as from 1 July 2015. An increased rate of 45% applies in case of investment in a micro company, regardless if it is a direct investment or an indirect investment via a financing vehicle. In any case, the amount considered for the tax reduction is limited to € 100,000 per person and per taxable period.
Like for any tax reduction, a series of requirements must be met. For what concerns the nature of the start-up SMEs, they cannot be listed, they cannot be real estate or financing companies, and they cannot have distributed dividends. As for the investors, they must meet the holding-period requirement of four subsequent taxable periods. If the shares are held for shorter time, the tax reduction is recalculated in proportion to the actual holding (calculation in 48ths and thus per month). Consequently, the taxation relating to the taxable period in which the holding-period requirement has no longer been met is increased by an equivalent amount (take-back). This take-back scheme also applies where the investment has been made via a starter fund or a private PRICAF/PRIVAK.

19.3 Regional tax reductions

19.3.1 Renewal in “zones of positive metropolitan policy”

The royal decree determining the “zones of positive metropolitan policy” has not been renewed. Therefore, there are no more such areas, and the tax reduction no longer applies in practice.

19.3.2 Maintenance and restoration of classified monuments and landscapes

In Flanders and Wallonia, expenses related to the maintenance and restoration of classified monuments give entitlement to a tax reduction. On the contrary, in the Brussels-Capital Region, this tax reduction has been abolished.
In Wallonia, the tax reduction amounts to 30% of 50% of the expenses (not covered by subsidies) incurred by the owner for the maintenance or restoration of classified monuments or landscapes that are open to the public and that are not leased, with a maximum of € 39,980.
In the Flemish Region, starting from tax year 2019, the tax reduction is equal to 40% and the costs incurred during the taxable period are no longer to be reduced by half.
Under joint assessment, the tax reduction is granted proportionally between the spouses based on their aggregated taxable income.

19.3.3 Renovation of low-rent dwellings

In Wallonia, expenditures paid during the taxable period for the renovation of a dwelling of which the taxpayer is the owner-lessor are eligible for a tax advantage. This tax reduction has been abolished in the Brussels-Capital Region and in Flanders. However, in the Flemish Region, the tax reduction is still granted for the expenses that were paid no later than 31 December 2018 during the taxable period.
In any case, the following conditions must be met:

the building must have been rented out for nine years via a social real estate agency;
the dwelling has been in use for at least 15 years;
the total cost of the work, including VAT, amounts to minimum € 11,990.

In addition, the tax reduction never applies to professional expenses and expenses giving entitlement to the investment deduction.
The tax reduction is granted during nine taxable periods and amounts to 5% of the expenses that have been paid during each taxable period, with a maximum of € 1,200.
The tax reduction cannot be granted concurrently with the tax reductions for expenses for classified monuments and landscapes and for roof insulation.
Under joint assessment, the tax reduction is granted proportionately to the share of each of the spouses in both spouses’ aggregated taxable income.

###Roof insulation In Wallonia, expenses for roof insulation give entitlement to a tax reduction of 30% of the total expenses, up to € 3,200 euros per taxable period and per dwelling⁸³. In Brussels and Flanders, this measured has been quashed since tax years 2017 and 2018, respectively.
The criterion for determining the competent Region is the tax residence of the taxpayer on 1 January of the tax year, while the actual place where the works are carried out can be in another Region. However, on 31 December of the year in which the works start, the dwelling must have been occupied for at least five years.
Professional expenses or expenses giving right to the investment deduction are not considered.
In addition, the tax reduction cannot be granted concurrently with the tax reductions for expenses for renovation of low-rent dwellings and for classified monuments and landscapes.
The expenses are divided proportionally between the spouses depending on the share of each spouse’s aggregated taxable income in the sum of both spouses’ aggregated taxable income.

19.3.4 LEA vouchers, neighbourhood work vouchers and service vouchers

Expenses for the purchase of vouchers are normally entitled to a tax reduction. The amount of the reduction and/or the expenditure ceiling, however, may vary across regions and depending on the kind of voucher. The tax reduction upon the acquisition and use of Local Employment Agencies (LEA) vouchers amounts to 30% in Flanders and Wallonia and 15% in Brussels. In the Flemish Region, the scheme for LEA vouchers was replaced by the scheme for neighbourhood work vouchers, which –as income year 2020 (tax year 2021)– has reduced the rate from 30% to 20%.
Whether it is LEA or neighbourhood work vouchers, however, the following conditions must always be met:

the expense must be made outside the context of any business activity;
for LEA vouchers, the expense must be made towards a person with a LEA contract;
in support of these expenses, taxpayers are to enclose with their income tax return the relative documentation certifying the purchase and employment of the vouchers.

Other service vouchers (different from social service vouchers) benefit from the same tax reduction, i.e., 30% in the Flemish Region and in the Walloon Region, and 15% in the Brussels-Capital Region. Service vouchers are purchased by private individuals to be used for community services⁸⁴. Their use is forbidden within the framework of a professional activity. These vouchers are issued by companies recognised by the Belgian National Employment Service, and they can be used to pay for services provided by approved companies.
In Wallonia, the tax reduction for service vouchers is granted, per taxpayer, only for the purchase (and use) of the first 150 service vouchers, for an expense amounting to € 3 per service voucher. For expenses incurred in 2018, the maximum expense in vouchers eligible for tax reduction is € 1,470 per taxpayer and per year. This applies to both the expenditure on LEA vouchers and service vouchers in Wallonia and Brussels and that on neighbourhood work vouchers and service vouchers in Flanders.
The portion of the tax reduction for service vouchers that cannot be set off against regional surcharges and regional tax increases or against the balance of the federal PIT is converted into a refundable regional tax credit⁸⁵. This only applies to taxpayers whose taxable income –apart from separately taxed income– does not exceed € 45,750⁸⁶.
Under joint assessment, the tax reduction for LEA vouchers, neighbourhood work vouchers and service vouchers is granted proportionately to the share of each of the spouses in both spouses’ aggregated taxable income.

19.4 Regional provisions

Regional provisions are tax reductions at regional level in addition to those resulting from the transfer of tax advantages from the federal state to the regions (Section 19.3). They exist only in Flanders and Wallonia.

19.4.1 Flemish region

19.4.1.1 Win-win loans

This tax advantage applies to loans granted by private individuals to small companies.
The borrower must be a small-to-medium size enterprise, as defined in the European Recommendation⁸⁷ and its possible modifications. Practically, this means that the company:

must have fewer than 250 employees;
must have an annual turnover lower than € 50M or an annual balance sheet lower than € 43M;
must meet the independence criterion.

In addition, the company must be led either by a self-employed person or by a legal entity. Exception is made for cooperative companies, to which the win-win loan scheme can also apply.
Further requirements apply to the company location. That is, one of the places of business of the borrower must be located in the Flemish Region. Also, the company must be registered either with the Crossroads Bank for Enterprises or with a social security institution for self-employed persons (where registration with the Crossroads Bank for Enterprises is not compulsory).
The borrowed funds must be used for company purposes, and they cannot exceed € 200,000 over one or several win-win loan(s).
As for the creditor, he/she must be a private individual living in Flanders⁸⁸ and without conflict of interest with the borrower enterprise. Namely, the creditor can be neither the borrower’s employee or the borrower’s spouse or legal cohabitant (if the borrower is a self-employed person). If the borrower is a legal entity, the creditor cannot be the borrower-legal entity’s manager, director, or shareholder. The win-win loan must be granted outside the creditor’s professional and commercial activities. Moreover, the creditor cannot be a borrower in the context of another win-win loan. Finally, the creditor’s spouse or legal cohabitant is also excluded.
Compliance with these conditions is assessed at the time when the loan is granted.
The loan must be subordinated to both the borrower’s existing debts and to his/her future debts. The amount of the loan granted by the creditor to one or more borrowers cannot exceed € 50,000.
The loan can be repaid in one instalment after eight years or according to an amortization schedule set up by the parties. Regardless, the borrower can extinguish its debt anytime by means of a single repayment of the balance of the principal and the interest. The interest rate must be between 50% and 100% of the legal interest rate applicable at the time the loan is subscribed.
Since the Flemish Decree of 19 December 2014, the tax advantage is granted in the form of a tax credit. It amounts to 2.5% of the arithmetic average of the amounts that have been lent over the taxable period; thus, it is limited to € 1,250 per spouse. In addition, a one-off tax credit is granted in case the win-win loan cannot be repaid by the borrower due to a bankruptcy or liquidation. It amounts to 30% of the lost principal and cannot exceed € 50,000.

19.4.1.2 Renovation agreements

With a renovation agreement, private individuals engage in a contract where one part borrows the other the money to renovate an immovable property. During the term of the contract, neither the creditor can be the borrower himself in another renovation agreement, nor the borrower can be the creditor or the borrower in another renovation agreement.
The term of the renovation agreement must be of maximum 30 years and the interest cannot be higher than a predetermined ceiling.
At the time when the renovation agreement is concluded, the immovable property cannot be registered for more than four years in neither of the followings:

the register of unoccupied buildings;
the inventory of unoccupied and/or neglected industrial sites;
the list of unsuitable and/or uninhabitable dwellings and derelict buildings and/or dwellings.

After the works, the renovated property must be used as principal residence by at least one of the borrowers for at least eight years in a row. As a matter of fact, the tax reduction is granted for the first time on the taxable period in which at least one of the borrowers uses the immovable property as their primary residence and until this condition is met.
The tax reduction is 2.5% of the amount borrowed for the renovation works, with a ceiling of € 25,000 per taxpayer. The average of the amounts provided on 1 January and 31 December of the taxable period is taken into account.
The tax reduction for renovation contracts is abolished for renovation contracts concluded after 31 December 2018.

19.4.2 Walloon Region

19.4.2.1 Coup de pouce loan

The coup de pouce is the Walloon equivalent of the win-win loan. Similarly, therefore, also under the coup de pouce loan a tax reduction in the form of a tax credit is granted to individuals who lend money to a start-up SME. However, several requirements still apply.
With regards to the borrower, it can be either a company or a one-man business (self-employed)⁸⁹.
It must have a place of business in Wallonia, and it must be a start-up company registered with the Crossroads Bank for Enterprises or with a social security institution for the self-employed.
As for the creditor, he/she must be a private individual who grants the loan outside his/her own professional and commercial activities. He/she must both live and have his/her tax residence in Wallonia as of 1 January of the tax year. In addition, the creditor cannot be a borrower under another coup de pouce loan.
For what concerns the actual loan, it must be subordinated, and it must have a term of four, six or eight years. Any creditor can lend a maximum of € 50,000, while borrowers can take a maximum of € 100,000, both on one or more loans.
The tax credit is based on the borrowed amounts, after deduction of the authorised early repayments. The tax base for the tax credit is calculated as the arithmetic average of the amounts of the principal on 1 January and 31 December of the taxable period.
The tax credit amounts to 4% in the first four taxable periods⁹⁰, and to 2.5% in the subsequent ones (if applicable).

19.5 Modelling Assumptions

For the time being, only Flemish regional provisions have been modelled (Section 19.4.1).

19.6 Module input

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19.7 Module output