Do you live in Belgium and own a second home in Spain? Then you are obliged to declare this property for tax purposes, just like your Belgian home. How does this work and what are the possible consequences?

Cadastral income (KI)

The Belgian government allocates a cadastral income (CI) to foreign houses. You must declare this income in your tax return. To find out the CI of your property in Spain, you must declare it via this form within four months of becoming owner. A few weeks later you will receive the KI for the Spanish property. Do you disagree with the served KI? Then you have two months to object via registered mail.

How do you declare a second home in your tax return?

Do you use your second home exclusively for yourself or do you rent it to private persons? Then you must declare the non-indexed cadastral income. You are taxed based on the indexed cadastral income, increased by 40 percent. You declare your foreign residence in Box III of your tax bill. From the KI, you may no longer deduct the IBI or Suma (Spanish property tax). Suppose you own half of the property, you only have to declare half of the KI.

Tax implications of foreign property

Your Spanish property is not taxed in Belgium due to the double tax treaty Belgium has with Spain, as well as other popular vacation countries such as France, Italy, Portugal, the Netherlands, Switzerland, Austria and Turkey. As a result, no tax is levied in the country where the second home is located to avoid double taxation. Still, there may be tax consequences since Belgium provides an exemption with progression proviso. This means that the tax authorities take your foreign income into account to determine the tax rate applicable to your other income. The higher your foreign income, the higher the tax burden on your other income.

Are you interested in buying a second home abroad? Stop by one of our expos or contact us for more info.