The latest on declaring a second residence abroad

If a Belgian resident owns a property abroad, he or she must include it in his or her tax return, just like a Belgian property. If the property is located in a country with which Belgium has a tax treaty (such as France, Spain, Portugal or Italy), the real estate income from this property is exempt in Belgium, but it is taken into account in determining the rate that applies to the taxpayer's other income. This "progressivity reserve" may result in other income being taxed in higher tax brackets.

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What to report on your tax return in the future

As of the 2022 tax year (2021 tax return), real estate abroad will be taxed on the basis of cadastral income, as is the case for real estate located in Belgium, and no longer on the basis of the gross rental value. Belgium thus complies with a ruling of the Court of Justice of the European Union.

It is therefore a matter of determining a cadastral income for property situated abroad. The cadastral income for a property located in Belgium is based on its rental value in 1975.

Since in most cases this information is not available for properties located abroad, it was decided to determine the cadastral income of the property on the basis of its market value and two correction factors:

  • The first factor gives the value of the property in 1975. The value provided by the taxpayer must then be divided by a factor that varies from one for the year 1975 to 15,018 for the year 2021.
  • The second is to determine the rental value of the property in 1975. To do this, the value obtained previously must be multiplied by 5.3%.

For example, if you have a residence abroad with an estimated value of 400,000 euros in 2020, it will be assigned a cadastral income of 1,409 euros (400,000 divided by 15,036×5.3%).

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How will this cadastral income be determined?

The tax authorities contacted taxpayers who declared income from real estate abroad in 2020 and/or 2021 to provide the information necessary to establish the cadastral income in question. These taxpayers received in June 2021 a form to be completed before December 31 in 2021. In the case of built-up property, they must provide, among other things, the following information: a brief description of the property, its location (country, address), its market value or, if not known, the price and year of purchase, as well as the cost and date of execution of any renovation work.

On the basis of this information and applying the formula set out above, the tax authorities will notify each taxpayer of the newly established cadastral income. In principle, the cadastral income will be notified by March 1st 2022 at the latest.  This new cadastral income will then have to be reported in the tax return to be filled in 2022, which concerns the 2021 income.

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Mention of the capital gain of the declaration in case of sale of a building located abroad

If a private individual sells his or her second residence abroad, it is very likely that he or she will make a capital gain on this occasion. To find out how this is taxed, it is important to check whether Belgium has signed a double taxation treaty with the country in which the property is located. Belgium has signed this type of agreement with a very large number of countries.

These conventions systematically give the right to tax the capital gain in the country where the real estate is located. In the case of a Belgian resident selling his second residence located abroad, he will not be taxed on it in Belgium. This capital gain will also not be taken into account when determining the tax rate on the taxpayer’s other income. As a result, the taxpayer will not have to declare it in Belgium in his personal income tax return.

However, he must find out about the tax system applicable in the country in which the property is located, as the latter will be competent to tax the capital gain and each country has its own tax system.