As increasingly tight international regulations affect offshore investments, HNW investors are keen to relocate to protect their portfolios. Belgium is their dream target, as its favorable tax regime is making wealthy expats even wealthier.
Belgium’s generous tax regime is making the country an increasingly attractive wealth haven for HNW investors around the world. In fact, Belgium doesn’t have a wealth tax, which has persuaded neighboring French and Dutch citizens to cross the borders and enjoy the kingdom’s chocolates and waffles . According to our 2016 Global Wealth Managers Survey, 77.6% of HNW expats in Belgium originate from France or the Netherlands.
Tax-exempt capital gains on shares (with a few exemptions), the lack of inheritance tax in the Flanders region, and a convenient gift tax – which allows movable goods to be passed on to lineal descendants at a very low rate of 3% – are just a few of the perks offered by Belgium’s legislation. Real estate investment trusts benefit from a particular legal status as well, making them exempt from the EU tax regime on alternative investment funds. No wonder Belgium has seen a surge in citizenship requests from UK citizens following Brexit.
But it doesn’t stop there. Non-resident individuals are the luckiest, as they benefit from a ‘special tax status.’ They are only taxed on their Belgium-sourced income, meaning that personal income from non-Belgian sources (including interest, dividends, and passive income) is not taxable at all. Furthermore, expatriate allowances and other company benefits are not considered taxable income. To qualify for non-resident status, expats should be appointed to work in Belgium for activities which require special knowledge and responsibility, and on a ‘temporary basis; however, in practice, Belgian tax legislation doesn’t set a limit on the ‘temporary’ appointment.
Although companies are now being audited in order to verify whether their long-term foreign employees still qualify for the special tax status, things are not likely to change as Belgium is looking to encourage international investments by minimizing salary costs for expatriate executives. According to our 2016 Global Wealth Managers Survey, more than 6% of the HNW client base in Belgium is made up of expats, which largely surpasses UK figures.
High-income foreign executives in Belgium find a considerable amount of their income freed from tax charges, and potentially, in need of investment advice. In the wake of recent tax scandals HNW individuals globally are less inclined to look for tax efficiency outside their country of residence. However, Belgian tax reliefs on various investment vehicles open up opportunities to diversify HNW portfolios. Wealth managers will do well to leverage these options to increase the ultimate rate of returns, as financial markets remain volatile. Given the above, the Belgian wealth market has a much brighter future ahead than most Western European countries, as figures from our latest Wealth in Belgium: Sizing the Market Opportunity report indicate.
By Silvana Amparbeng, Wealth Management Analyst