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Belgian Citizen vs Belgium Resident - the same tax treatment?

Question

Hello,

I'm a UK citizen legally permanently resident in Belgium.

I'm 65 in November and considering applying for nationality under the 65 years old and legally resident for 5 years route.

I currently rely on two small pensions (one taxable in the UK, the other in Belgium). Next year I'll also be entitled to the UK state pension, which I believe will also be taxable in the UK.

Is there a financial aspect to my nationality decision, or is the treatment of residents and citizens the same?

Thanks.

becasse

The UK state pension is taxable in Belgium if you are a registered Belgian resident. Only UK pensions that result from UK government or local government service remain taxable in the UK, all others are taxable in Belgium. That won't change if you become a Belgian citizen unless you renounce your British nationality (which you don't have to).

Jun 17, 2020 09:39
anon

Your nationality has no impact whatsoever on your tax status as a legally permanent resident in Belgium.

Jun 17, 2020 20:07
wezembeekwanderer

Both answers are correct.
One question is if you are eligible to apply under the 5 year system. You will normally need to have been paying Belgian social security without any break for 5 years otherwise you may need to apply under the 10 year residency system. Your commune can advise if you are eligible. It won’t change your tax situation but it would, for example, allow you to settle/retire in any EU state post finalisation of Brexit.
An accountant can advise on tax costs. It all depends on what you consider to be small!
I have also been advised to make an appointment with the Pension service who apparently are very helpful.

Jun 17, 2020 23:45
Nobbsey

Thanks everyone.

@wezembeekwanderer
I will be applying for nationality purely on age and 5 years legal residence. See https://www.agii.be/thema/procedures-om-belg-te-worden/je-bent-meerderja...

@becasse
Are you sure about the UK state pension? The double taxation treaty between UK and Belgium changed in 2013. My understanding was that non-government pensions were only taxable in Belgium if they started before 2013.

Jun 18, 2020 15:13
wezembeekwanderer

Good news about +65 years.

I still have income from my business and have an old small UK pension that came in. It is less than £12,500 so I am not being taxed in the UK where I have no other income. My accountant explained that the value would be added to my Belgian income to calculate my tax rate but I would not actually pay tax on the pension. Just that the tax on the rest of my income would be higher if the pension pushed it to a higher percentage.. Very Belgian.
I'm not sure what will happen when my state pension starts next year and it is proving hard to get definite answers. It will push me over the 12,500 so I will start paying tax on the excess. And then I think same will apply here. Not taxed but added to my income to establish tax rate.
Let us know if you find out more!

Jun 18, 2020 17:18
becasse

From the current double-taxation agreement UK-Belgium:

ARTICLE 18
Pensions
Subject to the provisions of paragraph (1) of Article 19 of this Convention, any pension and other similar remuneration paid to a resident of a Contracting State in consideration of past employment shall be taxable only in that State.
(Paragraph 1 of Section 19 refers to pensions arising from government or local government service - which are taxed in the originating country provided that the beneficiary remains a citizen of that country.)

Therefore if you are a RESIDENT of Belgium then you pay tax on your state (and any company) pension in Belgium (as I and my wife do).

Jun 18, 2020 17:23
Nobbsey

@becasse
That is indeed the wording of the earlier agreement but the amendment in 2013 ...
https://assets.publishing.service.gov.uk/government/uploads/system/uploa...

states...

ARTICLE XI
The text of Article 18 of the Convention is deleted and replaced by the following:

“Subject to the provisions of Article 19,

(a)pensions and other similar remuneration arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in the first-mentioned State;

(b)however, where pensions and other similar remuneration under a pension scheme were first credited or paid before 1 January in the calendar year next following that in which the first Protocol to this Convention entered into force, all payments under that scheme shall be taxable only in the other State.”

which I take to mean my future state pension will be taxable in the UK

Jun 18, 2020 20:54
becasse

Well my wife and I split completely between old and new, not least because she (who is the younger of us) receives a local government pension and that IS taxed in the UK. Our pension taxation arrangements have been reviewed by the Belgian fisc since 2013 and my(our) declarations (my state and occupational pension and my wife's state pension all taxed in Belgium) have been declared correct. Furthermore the UX tax inspectorate made no attempt to change the tax code on my wife's occupational pension once she became eligible for it, which would have happened automatically had it been taxable in the UK since the state pension itself is paid net of tax whether the payment is in the UK or Belgium.
Furthermore the reference to Article 19 (which refers to the taxation of government and local government pensions in the originating state) only makes sense if that DOESN'T apply to other pensions.
Incidentally even those pensions which are taxed in the UK are subject to "additional centimes" taxes in Belgium which go to local government (in the same way that a Belgian would have to pay Council Tax in the UK).
The French, Dutch and German texts of the agreement will be on the Belgian Federal Government website, try reading those because that is what the Belgian fisc will apply.

Jun 18, 2020 21:20
Nobbsey

@becasse

Forgive me. I didn't fully read the revision to article 19. The last paragraph (article xii 2b) is the catch which states...

"However, such pension and other similar remuneration shall be taxable only in the other Contracting State if the individual is a resident of, and a national of, that State."

I'm assuming therefore that you have Belgian nationality and so fall into this category.

This looks like the difference in tax treatment that I was wondering about.

Jun 19, 2020 09:55
becasse

I am a Belgian national now but wasn't at the time that our tax payments were reviewed, but anyway Article 19 refers only to pensions resulting from government or local government service, not to other pensions and certainly not the UK state pension.

Jun 19, 2020 10:21

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