Pension Advice For Expats In Belgium

Spanish Specific Pension Information

All pensions originating from the UK are subject to tax (IPP) in Belgium unless they are pensions being paid in respect of service to the government (eg civil service) or local government (but not teaching). These exceptions are taxed in the UK instead. KEY POINT: Pensions - UK pensions can be paid without deduction of UK tax if you are resident in Belgium and don't spend too many days a year in the UK. If you go to the UK Revenue and Customs site (www.hmrc.gov.uk), you will be able to find both an English language version of the current UK-Belgium Double Taxation Treaty (www.hmrc.gov.uk/taxtreaties/in-force/belgium-dtc.pdf) (Articles 18 and 19 refer to pensions). You can find a down-loadable DT-Individual form (www.hmrc.gov.uk/cnr/dtindividual.pdf) enabling you to claim exemption from UK tax (ie be tax-coded "NT") and to obtain a refund of UK tax already paid (within the last 4 tax years). You will have to get the form certified by the Belgian tax authorities. KEY POINT:  Trusts do not exist under Belgian civil law. However, trusts governed by foreign law are generally analysed by applying conflict of law rules. As a result, in Belgium, trusts can be subject to both income tax and gratuitous transfer taxes. Some pensions are not regarded as Trusts!  

Belgium Tax considerations

Belgium only recognises investments, investment providers and insurance bonds that are registered to be sold in Belgium. There is a suggestion that the sale of non-compliant insurance bonds (whether outside a pension or not) will not enjoy any tax benefits and should be declared on tax returns, but certainly non-regulated investments do not come under any form of protection. KEY POINT: Trusts do not exist under Belgian civil law. However, trusts governed by foreign law are generally analysed by applying conflict of law rules. As a result, in Belgium, trusts can be subject to both income tax and gratuitous transfer taxes. The legal and tax consequences of a foreign trust are complex and uncertain. Case law is scarce. For an expat living in Belgium, or returning to the UK they have to consider personalised bond rules to avoid taxation in the UK, and they have to consider trust implications and income tax in Belgium. KEY POINT: For those expats who were advised to take out a trust in the UK and put the investment into an Investment Bond for tax efficiency reasons – you must review this arrangement through a combined UK and Belgium wealth adviser who has Inheritance Tax specialities (such as ourselves), especially if the expat intends to return to the UK. For more information go to our Tax Hub

Belgium specific Investment Strategies

There is a saying ‘Don’t let the tax tail wag the investment dog’. Investors should be interested in the best strategy to get the highest net return after tax AND fees. KEY POINT: If the fees for a tax strategy are higher than the tax saved, then it would be sensible to look at taxed options with lower fees. When we review existing products often recommended in Belgium, we discover in 95% of cases that the clients would have been better off not taking out the supposedly “tax-efficient” investment bond! The adviser should look at alternative strategies, suggest options to discuss with you, finalising a best solution for you, the client, based on investment, fees and the overall tax liability. There is a suggestion that the sale of non-compliant insurance bonds (whether outside a pension or not) will not enjoy any tax benefits and should be declared on tax returns, but certainly non-regulated investments do not come under any form of protection. KEY POINT: If the fees for a tax strategy are higher than the tax saved, then it would be sensible to look at taxed options with lower fees.

Key issues / concerns 

Trusts do not exist under Belgian civil law.  However, trusts governed by foreign law are generally analysed by applying conflict of law rules.  As a result, in Belgium, trusts can be subject to both income tax and gratuitous transfer taxes.

Investments not regulated under EU rules will not be protected under the Financial Services Compensation Scheme. If these investments go bust then the client will lose all their money and have no protection.

Investment bonds, when sold in a QROPS or International SIPP, are to be avoided. Some investment bonds can be helpful but only with EU regulated investments inside and a “clean” structure (no commissions).

The main consideration should be the balancing of tax efficient advice which takes into account future plans, and charges of products.

If the fees for a tax strategy are higher than the tax saved, then it would be sensible to look at taxed options with lower fees. When we review existing products often recommended in Belgium, we discover in 95% of cases that the clients would have been better off not taking out the supposedly “tax-efficient” investment bond!

The vast majority of expat advisers (differ from regulated Belgium advisers), providing investment or pension investment advice to UK expats, do not have investment licences and are circumventing this by selling insurance wrappers that are expensive and commission laden.

What should you be considering?

1. If you are confident enough, then do your research, and place investment directly.
2. If you need assistance, then seek advisers who are regulated themselves in the UK for pensions advice, and / or regulated for INVESTMENT advice in Belgium.
3. Consider not only tax efficiency, but also costs!
4. Point 4 – is, make sure the costs are accurate! If you are told the costs are 1% or 1.5% per annum in total and there is no fee up front, then you are probably being lied to in 95% of cases.

Some advisers, providing investment or pension investment advice, do not have investment licences and are circumventing this by selling insurance wrappers (investment bonds) that are expensive and commission laden.

5. Don’t get taken in by the great claims over QROPS and Insurance bonds or investment platforms that are really investment bonds. These add layered charges and are usually not the best outcome for clients (although we accept that in around 15% of cases they are).
6. Don’t be a sheep. Just because your best friend was advised to do something, never assume this is the right thing. Each person is an individual and requires individual solutions. If your friend were to walk off a cliff, would you follow them?

Our Empirical evidence from clients we have spoken has shown us that many expat sales advisers in Belgium, just sell a product to their clients for commission and do not provide financial solutions. The product is often a QROPS or an International SIPP or an investment bond, which may or may not be the best advice but this is not really considered. Don’t listen as 85% of the time you would be better off doing something else with your hard earned money or pension.