The European Commission has asked Belgium to amend its legislation regarding two tax classifications.
The first request concerns property transfer tax in the Brussels Capital region. The legislation allows for a tax-based reduction of the property transfer tax when buying a primary residence in the Brussels Capital Region on the condition of staying resident in the Region during the next five years.
The second request is with regards to tax credits for investing in venture capital. Belgian legislation grants a personal income tax credit to individuals investing in shares and units of ARKimedes funds. This tax credit is only granted on the condition that these investors are resident in the Flemish region.
Residents of other member states cannot benefit from the mentioned tax credit even if they are completely taxable in Belgium, because they derive all or almost all of their personal income in the country.
Because both pieces of legislation discourage the free movement of persons, workers and self-employed persons, the Commission considers them to be incompatible with the Treaties.
Taxpayers who settle in newly purchased property are discouraged from leaving the property for the next five years or else they would lose the tax advantage and would have to retroactively pay the tax to the region.
Likewise, the provisions pertaining to the venture capital tax incentive go against the case-law of the EU’s Court of Justice that taxpayers who are tax residents of other member states of the EU or EEA but derive all or almost all of their income in Belgium should be entitled to the same tax benefits as Belgian residents.
The Commission’s requests take the form of a reasoned opinion, the second stage of an infringement procedure. If the rules are not brought into compliance within two months, the Commission may refer the matter to the European Court of Justice.