Historical Context
In ancient Egypt, each year, the boundaries of land plots were verified through surveying operations after the Nile flood. The height of the flood, as well as the surface area and quality of the land, determined the amount of land tax.
Today, tax authorities no longer survey the streets but use a notional value: the cadastral income (CI). It serves as the basis for calculating property tax and personal income tax.
The cadastral income corresponds to the average net annual rental income that a property would have generated in 1975. This CI is indexed each year. Until recently, it was only assigned to properties located in Belgium.
Thus, when an individual owned a property abroad and rented it out, they were taxed on the actual rental income.
It was therefore less advantageous for a Belgian resident to own a property abroad than in Belgium, since the cadastral income is, in almost all cases, significantly lower than the actual rental income. This discriminatory treatment was abolished, although its impact was limited because real estate income is almost always exempt in Belgium (subject to progressivity) and taxed abroad.
Indeed, since January 1st, 2021, Belgium has aligned the taxation of foreign properties with that of Belgian properties.
Determination of Cadastral Income
The method for calculating the cadastral income of foreign properties is based on several key elements. First, the base value corresponds to the property's sale price, that is, the purchase price excluding taxes and commissions paid by the Belgian resident.
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Next, a correction is applied using a correction factor specified in Article 478 of the Income Tax Code, which adjusts this value to a fictitious 1975 estimate. This correction factor, updated annually, is published by the Belgian tax authorities. The Belgian Official Gazette of January 17, 2025, announced that the correction factor for 2025 is set at 16.182.
After that, another 5.3% coefficient must be applied.
Finally, this cadastral income will be indexed and increased by 40% if the property is rented to a private individual.
Example:
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A Belgian resident purchases a house in France on January 1, 2025, for EUR 1,000,000 (excluding taxes and commissions). The Belgian tax authorities must then determine the cadastral income (CI) for this property.
The first step is to adjust the property's value to its estimated value in 1975, by applying the correction factor of 16.182. The reference value in 1975 is calculated as follows:
- 1,000,000/16.182= 61,798.77 EUR
Once this adjusted value is obtained, a 5.3% coefficient is applied:
- 5.3%×61,798.77= 3,275.24 EUR
Thus, the cadastral income (CI) for this property would be 3,275.24 EUR.
Practical Aspects
Since January 1, 2021, Belgian residents who acquire a property must complete a form and submit it to the Belgian tax authorities within 4 months following the acquisition.
This obligation also applies to individuals who become Belgian residents after this date. They must complete the same form within 4 months of their relocation to Belgium.
In the event of renovations or transformations that lead to a value change of at least 15%, a new cadastral income (CI) will be established. This revised CI will take effect the month following the completion of the work.
Failure to submit the required form may result in a fine for the property owner.
Finally, in the event of disputes regarding the CI assessment, an appeal is possible. In this case, an alternative CI must be proposed within 2 months from the notification date indicated on the tax authority's document.
Do you own property abroad? The determination of cadastral income may impact your taxation. Contact Vanbelle Law Boutique for assistance and to optimize your situation.
Walid Jaafari
Junior Associate
