Belgium Becoming Europe's Newest Tax Haven

by Ulrika Lomas, Tax-News.com, Brussels

25 July 2001

Strange though it may seem, Belgium is being tipped for the top by experts as Europe's newest tax haven. The secret of the country's success, they say, is that it doesn't tax everything all the time. Anyone working for a pay cheque in Belgium can expect to pay a whopping 65% in income and social security taxes, and will also be obliged to pay a 21% VAT rate, plus a 16% tax for buying a house. Sounds like a nightmare, doesn't it?

However, not everything is taxed, and for the wealthy European, the absence of certain types of taxes can be a distinct advantage. For example: expatriates wishing to sell their high tech startups have been flocking to Belgium, where there is no capital gains tax on this sort of transaction, and well-off French citizens who have been stung by the country's 2% wealth tax are also finding that Belgium offers a welcome and protective haven.

Although exact figures are not available, local accountants believe that the majority of the tax exiles received into the country are Dutch citizens, and estimate the numbers that protect their wealth by living there at around 60,000. It is also believed that since France abolished the upper limit on its tax on assets, around 5,000 of the nation's wealthiest have decamped to Belgium. However, it is not just the Dutch and the French who are being attracted by the country's tax regime, as Rene Philips, tax partner at KPMG International in Brussels explains: 'Now we're seeing the Germans and the British, who have heard how attractive Belgium can be if you own a company and want to cash it in,' he said.

Belgium's newfound status as a haven for wealthy Europeans appears to have been a force for good, both within the country itself, and on a Europe-wide level. Earlier this month, the Belgian lower house endorsed a $3 billion tax cut, which phased out the top income tax rate of 55%. 'I would rather see all taxes come down than we impose a wealth tax,' Paul Willie, a Liberal Party senator explained at the time, clearly aware of the competitive advantage that this favoured status conveys on Belgium.

Elsewhere in Europe, other countries are also aware of the threat posed by Belgium, and are rolling back their own taxes in an attempt to compete. On January 1st of this year, the Dutch abolished a tax on stakes in listed companies, and France recently lowered its levy on stock options.

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