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Executive summary: The Belgian tax system is notably intricate, characterized by numerous tax brackets that determine the tax liability based on an individual's income. We take a look at the proposed changes to the tax brackets proposed by Bart De Wever in the latest version of the Super Nota (202410).
Tax brackets proposition
Introduction
The Belgian tax system is notably intricate, characterized by numerous tax brackets that determine the tax liability based on an individual's income.
In the latest version of the Super Nota of Bart De Wever, a proposal has been introduced to revise these tax brackets.
This analysis aims to provide a clearer understanding of the proposed changes to the tax brackets.
Quick explanation of taxation in Belgium
In Belgium, personal income tax (IPP - Impot sur les Personnes Physiques) is calculated progressively on an individual’s net taxable income.
- Starting from the gross salary, social security contributions are deducted, resulting in a net income.
- Then, a tax-free allowance, adjusted based on family situation (e.g., children), is subtracted.
- The remaining taxable income is taxed in progressive brackets (currenlty ranging from 25% to 50%).
- After calculating gross taxes, specific tax credits and reductions may apply. Monthly, a withholding tax, or "précompte professionnel," is taken directly from the salary as an advance on the IPP.
- At year-end, this is reconciled against the total tax owed, leading to a refund or additional payment if necessary.
Results
As observed, the changes are quite significant. Each income decile will experience a reduction in the tax rate. The most substantial tax decrease will benefit those earning 20k euros annually (+4.7%) and those earning above 65k euros, with a reduction of > +4.7%.