Relocation from Israel to Belgium

In recent years, Belgium has become an increasingly popular destination for Israelis considering relocation, whether for employment, investment, studies, retirement, or improved quality of life. Advantages such as a good quality of life with strong social support, great schools and healthcare, and a diverse community where many people speak English well, attract many Israelis.

However, relocating to Belgium requires thorough planning and a comprehensive understanding of the legal, financial, and tax implications associated with the move. This article outlines the key considerations to address before making the move.

The 5-Step process for relocating from Israel to Belgium

1. Assess employment opportunities and living costs.
2. Consider terminating Israeli tax residency, taking into account matters such as exit tax.
3. Obtain an appropriate visa or residency.
4. Review your tax obligations under both Israeli and Argentine law, including potential double taxation and available reliefs.
5. Plan fund transfers and banking.

The following sections explain the main tax, legal, and financial considerations for Israelis relocating to Belgium.

Key Considerations When Relocating from Israel to Belgium

The relocation process consists of several essential steps.

First, a thorough review of employment opportunities in Belgium, cost of living, the local tax system, educational options for children, available healthcare services, and other important factors.

Second, consider whether you wish to terminate your Israeli tax residency and the numerous implications that come with it. It is important to plan how you will manage your finances and assets, as well as arrange for private health insurance. If you move to Belgium and live there legally, you must sign up for the country’s public health insurance system. Once you are registered as a legal resident, you choose a health insurance fund (called a mutuelle). You then pay regular contributions, and in return, the fund pays back part of your medical expenses, like doctor visits or hospital care.

In addition, you must arrange your legal status in Belgium obtaining a work permit, green card, residency, citizenship or visa.

In this regard, one of the main challenges in relocating to Belgium is obtaining the appropriate residence visa. Each visa type has different requirements, age, education, income, minimum investment, employment contract, health insurance, and more. It is essential to select the visa that best suits your circumstances and to arrange it in advance.

Tax Aspects of Relocation to Belgium

When moving to a foreign country, the question of post-move tax obligations in Israel arises. The answer usually depends on whether you have terminated your Israeli tax residency on not.

Termination of Tax Residency

One of the main issues in the relocation process is determining your residency for tax purposes. In Israel, Israeli residents are taxed on their worldwide income, while non-residents are taxed only on income sourced in Israel.

If you intend to settle in Belgium for the long term, it may be preferable to sever your residency from Israel (for both income tax and National Insurance purposes). Note that Israelis who sever their residency are required to pay an “exit tax” on certain assets.

According to Section 1 of the Israeli Income Tax Ordinance, residency is determined based on a the center of life test, and a rebuttable presumption based on the number of days you stayed in Israel, as follows:

• The center of life test – This is a substantive test, in which all personal, family, economic, and social ties are examined. These include permanent place of residence, place of economic activity, location of economic interests, and more.
• Days test – An individual is considered an Israeli resident if they spent 183 days or more in Israel during a single tax year. A person may also be considered a resident if they spent 30 days or more in Israel during the current tax year. This applies when their total stay in Israel is 425 days or more over the current and two preceding years. This presumption can be rebutted if the individual proves that, despite their stay in Israel, their center of life is not in Israel.

Anyone who meets the days test, i.e., is considered an Israeli resident under this test, must file Form 1348 – “Declaration of Residency”. This form is attached an annex to the individual’s tax report. Its purpose is to declare the termination of Israeli tax residency and to describe the circumstances demonstrating that the individual’s center of life is no longer in Israel.

It is important to note that terminating tax residency is usually not a one-time event but an ongoing process. The Israeli Tax Authority (ITA) may review your residency status even years after leaving. Therefore, it is recommended to keep detailed documentation of all actions indicating the transfer of your center of life to Belgium, and to avoid creating new ties to Israel.

These days, a dramatic bill to amend the Income Tax Ordinance regarding the definition of Israeli residency for tax purposes has been submitted to the Knesset.

According to the proposal, there will be absolute presumptions that determine the number of days defining an individual as an Israeli resident. These presumptions cannot be rebutted. The “center of life” test will serve only as a secondary tool in cases not covered by these presumptions.

As a result, there may be situations where an individual who has terminated their residency in Israel will still be considered an Israeli resident for tax purposes. This can happen when the number of days spent in Israel in subsequent years is high enough to meet the residency threshold.

To view the draft bill, click here.

Exit Tax

Israelis leaving Israel may be required to pay an “exit tax” on certain assets. This tax is intended to capture the unrealized capital gains of assets held by Israeli residents.

According to Section 100A of the Income Tax Ordinance, an individual who ceases to be an Israeli resident is deemed to have sold their assets on the day before terminating the tax residency (“Exit Day”). The tax is calculated on the notional gain between the original purchase price and the value on the exit day. Note that some assets, such as real estate, may be exempt from this tax.

There are various methods for calculating and paying exit tax liability, each with different implications for the taxpayer. The timing and structure of these payments can significantly impact the overall tax burden. It is highly recommended to consult with an international tax expert before departing Israel to develop a tax strategy that best aligns with your specific circumstances and financial goals.

How will Terminating Tax Residency Affect Income Taxation?

If the move to Belgium is temporary, you remain an Israeli tax resident and cannot terminate your residency status. This means you are liable for Israeli tax on your worldwide income and must report all income, including income earned in Belgium, to the ITA.

If tax residency is not terminated, you may still be able to claim a tax credit in Israel for taxes paid in Belgium.

If the move to Belgium is permanent and you have terminated your Israeli tax residency, you will only be liable for Israeli tax on income sourced in Israel, while all other income will be subject to tax in Belgium.

For more information on the termination of residency, click here.

 Double Taxation Treaty between Israel and Belgium

Israel and Belgium have a double taxation treaty. This treaty is intended, among other things, to prevent a situation where a person is taxed twice on the same income. It defines how residency is determined in dual residency cases and sets withholding tax rates for dividends, interest, and royalties. The treaty also outlines how employment income is taxed between the two countries.

The treaty allows Belgium, in certain cases, to tax salaries earned by Israeli residents who work from the country. If an individual spends more than 183 days in the country, or has a permanent base for their operations, they will be taxed in Belgium. Israel can provide tax credits for taxes paid in Belgium.

If a person is resident under the laws of both States, determine in this order:

1. Permanent home.
2. Centre of vital interests (closest personal/economic ties).
3. Habitual abode.
4. Nationality.

To view the Double Taxation Treaty between Israel and Belgium in English, click here.

National Insurance

An Israeli resident staying abroad is required to pay reduced National Insurance (Bituach Leumi) contributions, but if tax residency is terminated, there is no obligation to pay National Insurance, and you are not entitled to health or social security benefits in Israel.

The original social security agreement between Israel and Belgium was signed in 1973. In 2022, Israel and Belgium signed an amended agreement, which went into effect from June 1, 2017.

The agreement coordinates the two countries’ social security systems and allows individuals who have contributed in both to more easily claim pensions, retirement benefits, and other entitlements.

Tax System in Belgium

Tax Residency

You are regarded as a Belgian tax resident if Belgium is your primary place of residence (domicile). If you do not maintain a formal home in Belgium, you may still be considered a resident if your main economic interests are located there. Individuals registered in the population register of a Belgian commune are generally treated as residents. For married couples and legal cohabitants, tax residency is determined by the location of the family home.

Income Tax

The income tax in Belgium is divided into the following tax brackets.

• Up to EUR 16,320 – 25%
• From EUR 16,320 to EUR 28,800 – 40%
• From EUR 28,800 to EUR 49,840 – 45%
• Over EUR 49,840 – 50%

Corporate Tax

Corporate income tax in Belgium is 25%.

Capital Gains Tax

The capital gains tax rate in Belgium depends on the type of gain. Most capital gains that individuals realize are exempt from taxation. Capital gain will be taxed at the income tax rate and up 30% if the gains are from the individual’s regular course of speculative transactions. gains realized from the individual’s professional activity are taxed at 30%-60%. Corporate capital gains are taxed at 25%.

Inheritance/Estate Tax

Belgium imposes an inheritance tax payable by the heirs. The tax rates vary by region, but the family home often gets special exemptions. A surviving spouse or legal partner usually pays no tax on the family home, and in Flanders, this also applies to partners who lived together for more than three years. Belgian property left by non-residents is taxed according to its gross value at standard inheritance tax rates.

Gifts made through a notary are taxed, while small manual or indirect gifts are not. Gift tax rates are rather low. If a gift was made within the five years before the death and wasn’t taxed, it is added back to the inheritance.

Transferring Funds from Israel to Belgium

You should review the different options for transferring funds abroad, such as bank transfers and international credit cards. Each option has its own advantages and disadvantages regarding fees, transfer times, exchange rates, amount limits, and regulations. Pay close attention to reporting requirements for authorities and banks, in accordance with anti‑money‑laundering laws and international regulations (FATCA, CRS). It is also advisable to open a bank account in Belgium in advance.

According to Section 170(a) of the Ordinance, when a payment from Israel to a foreign resident constitutes taxable income, withholding tax applies. Therefore, transfers of funds that do not constitute taxable income may not be subject to tax but could still require prior approval from the ITA.

For more information, see the article “Transferring Funds from Israel Abroad.”

Opening a Bank Account in Belgium

To open a bank account in Belgium, you generally need a valid ID (passport or Belgian ID card) and proof of address. Additional documents, like a rental contract or proof of employment, may also be required. The exact requirements can vary depending on the bank.

Returning to Israel

When returning to Israel, it is important to carefully assess the potential implications. If you have terminated your tax residency, you may qualify for benefits as a regular or veteran returning resident, depending on the duration of your stay abroad. These benefits can include tax exemptions on income and capital earned outside Israel.

You should also take into account the waiting period of up to six months for the renewal of National Insurance (Bituach Leumi) health coverage, as well as possible benefits available through the Ministry of Aliyah and Integration.

In short, relocation to Belgium offers many opportunities, but it is a complex process that requires professional planning, personal guidance, and a thorough understanding of all legal and tax aspects. It is recommended to consult with international tax experts to ensure early and comprehensive planning for a smooth and successful transition to your new life in Belgium.

The firm of Nimrod Yaron & Co. has extensive experience advising on international relocation and Israeli tax residency termination. For an initial consultation, click here.

Questions & Answers