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The pros and cons of retiring in Belgium

Although most of us face retirement at a certain point in our lives, it’s surprising how little time we spend preparing for it.

Expats face the additional challenges of not necessarily knowing which country they will retire in and having to keep track of their pension – often in more than one country, resulting in different taxation systems.

Brussels-based international tax lawyer Marc Quaghebeur says remaining in Belgium can make financial sense, “because the tax climate’s not bad if you don’t have to work. Many expats retire here and invest in insurance policies or stocks with no capital gains tax. Moreover, dividends and interest on bonds are liable to a fixed income tax rate of 30% that is usually deducted by the bank.”

In addition, Belgian occupational pensions with a group insurance are normally paid in the form of a lump sum with a tax rate as low as 10% when paid out at 65, 66 or 67, says Quaghebeur, as earlier retirement means higher rates: 16.5% at 62 to 64, 18% at 61, and 20% at 60. Retirees who withdraw the full pension capital and buy an annuity that covers the rest of their lives will be taxed at a rate of 0.9% of the capital they surrendered.

Ed Read Cutting of the The Fry Group agrees: “Rental income from property is taxed favourably and the capital gains tax regime is indeed advantageous. So retiring in Belgium has significant tax benefits.” However, Marc Quaghebeur warns, “the tax regime of investments changes constantly and makes continual planning important.”

How are state pensions calculated? Based on earnings over a career of minimum 45 years, a married couple can receive 75% of their (inflation-adapted but capped) gross annual salary, and an individual 60%. In 2017, the maximum state pension is €2,966 per month for families and €2,373 for individuals before tax (the minimum is €1,515 and €1,196, respectively).

Expat retirees who have worked in more than one EU country need to provide their entire career record, via their local commune, to the National Pensions Office, which arranges for each country’s pension office to pay its part directly to the retiree. Crucially for retirees, expats who receive a pension and pay social security are entitled to health care.

Self-employed people without their own company will be able to set up their own retirement scheme soon. At present they can only contribute to a ‘free additional pension scheme’; contributions are tax-deductible (although limited to a few thousand euros per year) and payout at 65 is taxed favourably.

Additional pension saving at a bank or insurance company entitles a retiree to a tax credit with a limit of €940, which gives tax savings of 30% or €282.

Inheritance tax rates for partners and children range from 3% to about 30%, says Quaghebeur, who is the author of Rest in Peace: A Guide to Wills and Inheritance Tax in Belgium. Anyone else pays much higher rates. Brussels and Flanders exempt the partner from inheritance tax on the family home.

Beware the inheritance law is based on forced heirship: your estate is divided between your surviving spouse and children. You can change by opting for your national law to decide who inherits. You cannot opt for your national inheritance tax, though.

Read Cutting adds: “The world of pensions is shifting and shifting quickly. While it may not affect the ultimate decision as to whether to retire in Belgium or not, those building up state and/or occupational pensions need to keep themselves informed. Increases in the pension age, changes to the way in which pensions are calculated and changes in tax, means feathering your nest is nowhere near as straightforward as it once was.”

Five reasons to retire in Belgium

  • Property prices
  • Healthcare
  • Quality of life – social, cultural, parks, general standard of living
  • Favourable pension and investment taxation – but beware the inheritance law and tax
  • A multicultural country, and good travel hub for other European destinations

Five reasons not to retire in Belgium

  • Climate
  • Lack of family support locally
  • Relatively high cost of living
  • Inheritance laws and high taxation
  • Transitory nature of expat population
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