Personal income tax
Belgium
Rental income is taxed through the personal income tax (PIT).
Rental income is based on the indexed cadastral income (CI), increased by 40%.
This amount is added to the taxpayer's other income and is subject to the progressive PIT rates, ranging from 25% to 50%.
If the property is rented to a business or for professional activities, taxation is based on the actual rent received, after deduction of actual or flat-rate expenses.
Certain tax reductions or exemptions may apply, such as for energy-efficient renovations or investments in social housing.
Dubai
There is no personal income tax.
Rental income is therefore not taxed, which makes it a very attractive jurisdiction for investors.
Real estate capital gains tax
Belgium
The capital gain realized on the sale of real estate is generally exempt if the property has been held for more than 5 years.
If the property is sold within 5 years of its acquisition, a capital gains tax of 16.5% applies.
For land, this period is 8 years.
Capital gains made by companies are subject to corporate tax at the standard rate of 25%.
dubai
There is no capital gains tax on the sale of real estate, regardless of the holding period, which maximizes gains for investors.
Registration fees
Belgium
Registration fees apply to the purchase of real estate and vary depending on the region:
Flemish region: 12% of the purchase price (with a rate reduced to 6% for a first residence under certain conditions).
Walloon region: 12.5% of the purchase price.
Brussels region: 12.5% of the purchase price, with a possible reduction for a first residence on the first 175.000 €.
dubai
Land registration fees are set at 4% of the purchase price of the property (DLD).
Property tax
Belgium
The property tax is an annual tax based on the cadastral income of the property, indexed and multiplied by a regional coefficient.
It varies considerably depending on the regions and municipalities.
The effective rate can represent approximately 1 to 2% of the market value of the property per year.
dubai
There is no real estate withholding tax or similar annual tax on the ownership of real estate.
Value added tax (VAT)
Belgium
VAT applies to the sale of new real estate (less than 2 years old) at the standard rate of 21%.
Renovations of real estate may also be subject to VAT, sometimes at a reduced rate of 6% for private homes over 10 years old.
dubai
5% VAT applies to commercial real estate.
New residential properties sold within the first three years of completion are also subject to 5% VAT.
However, sales of existing residential real estate are generally exempt from VAT.
Corporate tax
Belgium
Income and capital gains made by a company are subject to corporate tax at the standard rate of 25%.
SMEs can benefit from a reduced rate of 20% on the first tranche of 100.000 € of profits under certain conditions.
dubai
There is no corporate tax applicable to real estate income for most businesses.
Some specific industries, such as the oil sector or foreign banks, are subject to taxes, but this does not apply to standard real estate income.
Inheritance and gift taxes
Belgium
Inheritance taxes are high and progressive, varying depending on the region and the relationship between the deceased and the heirs.
They can reach up to 30% to 65% for distant or unrelated heirs.
Real estate donations are also subject to taxes, but the rates are generally lower if the donation is made during one's lifetime, especially if the assets have been held for a long time.
dubai
There is no inheritance or gift tax.
However, inheritance is governed by Sharia law for Muslims, and non-Muslim expats must take steps to ensure that their inheritance wishes are respected (for example, by making a local will).
Miscellaneous charges and fees
Belgium
Condominium fees vary depending on the size, location and services associated with the property.
They cover the maintenance of common areas, insurance, etc.
Other costs may include home insurance, rental management fees, and various municipal taxes.
dubai
Condominium charges are applied by developers or owners' associations for the maintenance of common areas.
They vary depending on the residence and the services offered.
There is no specific annual tax on the property, but owners must pay for the maintenance and management of the property.
Exemptions and special regimes
Belgium
Rebates and reductions on registration fees are available for the purchase of the first residence.
Tax deductions can be obtained for investments in energy efficiency.
Certain zones benefit from more advantageous tax regimes to encourage investment.
dubai
Companies established in free zones benefit from tax exemptions on profits for a specific period (generally 50 years).
Dubai offers residency visas for real estate investors under certain conditions.
Conclusion
In summary, Dubai is significantly more tax-efficient for real estate investors compared to Belgium, offering greater net profitability and simplified tax management.
Real estate taxation in Belgium is complex and can be burdensome, with numerous taxes to take into account, particularly on rental income, capital gains, and inheritances. Although there are allowances and special regimes, the tax burden remains significant.
Dubai offers an extremely favorable tax framework for real estate investors, with no income tax, capital gains tax, or inheritance tax. Registration fees and taxes are low overall, making it a popular destination for international real estate investment.
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