Belgium Modifies "Living Bonus" Tax Break

by Ulrika Lomas, Tax-News.com, Brussels

17 December 2013

The Belgian Finance Ministry has confirmed plans to replace the country's so-called "living bonus" (woonbonus or bonus logement) tax reduction with a tax credit. Furthermore, the regions will be accorded "exclusive" competencies for the tax break from July 1, 2014.

The living bonus has been in place in Belgium since January 1, 2005. The tax shelter benefits families who borrow to buy or to construct a house. Interest payments, capital redemptions, and debt insurance payments, can all be deducted from tax, up to a maximum of EUR2,260 (USD3,108), augmented by a further EUR750 during the first ten years of the loan, and by an additional EUR80 for families with three children. Last year, the maximum deductible amount stood at EUR3,090. The amounts are indexed every year.

From 2015, the living bonus will be modified into a tax credit. For contracts concluded after January 1, 2015, the tax credit will be fixed at a uniform tariff of 45 percent. This rate is intended to act as a "safety net", until such time as the regions have determined their own rates.

A draft law revising the special finance law, and providing that the regions in Belgium are to be given sole competency for the living bonus tax perk from July 1, 2014, is to be presented to the Belgian Senate shortly.

Ahead of the transfer of powers, the Government also intends to modify the country's tax code, ensuring that the provisions are in accordance with the new finance law, thereby creating legal certainty for both individuals and the administration. Moreover, this will guarantee automatic continuation of the tax shelter following the shift of competencies.

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