Brussels, may 27, 1999

The tax circular of august 1983 granting a favourable regime to the expatriates transferred temporarily in Belgium:

What kind of reimbursements of expenses by the employer may be treated as non taxable in the hands of the expatriates ?

To avoid any misunderstanding when transferred the expatriate should read my comments on this matter so to be able to raise the appropriate questions with his employer before the transfer.

The first type of expenses that may be reimbursed by the employer upon the transfer in Belgium are the expenses directly linked to the relocation in Belgium which includes essentially the moving expenses. One use to include in the concept of relocation the hotel's costs of one up to two months where the expatriate will stay while looking for a house or appartment.

In case the employer prefers to allocate a lump sum allowance to cover the relocation allowances I suggest everybody be extremely cautious as this allowance must cover expenses effectively incurred and properly documented. Such a documentation must obviously be in the hands of the employer as well of the employee.

I have been raised the following question: assuming an expatriate decides his family will stay abroad are the rental expenses of a flat incurred after the second month of stay in Belgium included in the expenses linked to the relocation ?. My understanding of the Circular which is supported by unofficial comments from the tax administration is that such type of expenses are not linked to the relocation.

The second type of expenses that may be reimbursed by the employer upon the transfer without being taxable in the hands of the employee are the expenses linked to the fittings of the house. In french we use the word "aménagement". This word is understood by the administration as covering all the expenses incurred to set up the household .... which can not be sold upon the departure of the expatriate. This include the paintings, cleaning of the house, cost related to the electrical installation, curtains (considered as being difficult to sell) ... etc, but never the purchase of furniture, TV set ... etc. All these expenses must be properly documented. In such a case I understand that an amount of up to one month gross salary paid by the employer may be treated as non taxable in the hands of the employee. Again it is advisable that the documentation be kept by the employer as well as by the employee.

In case the expatriate is unable to support at least partially that the amount given to set up the household has effectively been used to cover duly documented expenses I understand the tax people will accept that 62,5% of one month base salary (which is not equal to one month gross salary paid upon transfer) will be treated as non taxable,  the balance with the lump sum amount paid by the employer will be taxable.

So here are outlined the general rules which might well be seen differently by your local tax office ( there are five offices with five tax inspectors in charge of the expatriates: Anvers, Gand, Liège, Namur et Bruxelles).

In any case the general framework as above explained should help you to raise the appropriate question when transferred.

Stephen G Hürner