Belgium, as the host country for a significant number of international institutions, employs a differentiated tax approach regarding pensions paid by these organizations. Below is an overview of the tax treatment of pensions originating from the United Nations (UN), the European Union (EU), and the North Atlantic Treaty Organization (NATO) for residents of Belgium.
United Nations (UN)
Pensions paid by the UN or its specialized institutions to former officials residing in Belgium are considered taxable income. These pensions are subject to Belgian tax legislation, meaning they must be reported within the Belgian tax declaration. It is important to note that these pensions should not be declared in Section C of Section V of the tax return, indicating a specific treatment within Belgian tax practice.
In this context, the Court of Appeal of Antwerp ruled on September 15, 2020, regarding the tax treatment of pension payments received from the United Nations Joint Staff Pension Fund (UNJSPF). The court determined that these pensions are not exempted under both the Agreement on the Privileges and Immunities of the Specialized Agencies and the Agreement on the Privileges and Immunities of the United Nations. It also confirmed that these payments should be classified as pensions, in accordance with Article 34 of the Income Tax Code 1992 (WIB92), and not as movable income.
European Union (EU)
The tax treatment of pensions paid by the EU to its former officials residing in Belgium is significantly different. These pensions benefit from complete tax exemption in Belgium, without progression reserve. This means that such pensions are entirely exempt from taxation and therefore do not need to be declared in Section V of the tax return. This arrangement illustrates the unique tax status of EU pensions within the Belgian system.
Furthermore, pensions paid to former members of the European Parliament, or their beneficiaries, subject to European Community tax, are also exempt in Belgium but with a progression reserve.
The North Atlantic Treaty Organization (NATO)
Unlike the EU, pensions paid by NATO to its former officials residing in Belgium are subject to Belgian taxation. This stems from the interpretation that no provision in the Agreement on the Status of NATO, signed in Ottawa on September 20, 1951, specifically provides for an exemption from taxation on pensions. As a result, such pensions are treated in accordance with Belgian legislation and are taxable.
The underlying logic
In this context, the minister's response to a comment by Mr. Luyckx on the draft law of May 31, 2018, approving the Agreement between the Kingdom of Belgium and the North Atlantic Treaty Organization, is noteworthy. The minister outlines the historical context and rationale behind the tax exemption for international civil servants, focusing on the complexity and inconsistency resulting from the diverse tax treatment of UN officials worldwide. This complexity arose because officials were working globally and thus faced various local tax regimes, leading to different net salaries for officials performing the same work.
This situation prompted the adoption of the Agreement on the Privileges and Immunities of the United Nations in 1946, exempting UN officials from taxation on salaries and emoluments in the countries where they are employed. The goal was to prevent unequal treatment and diverse net salaries.
The minister explains that international organizations then chose to impose internal taxation as compensation for this exemption, a practice incorporated into double taxation treaties. These privileges and immunities are granted to enable officials to perform their duties independently, not as personal benefits.
Therefore, it is not logical to exempt pensions received after retirement from taxation, as retired officials are free to choose where they reside, unlike when they were employed, for example, by the UN and were obligated to work at a specific location.
The exception to this is EU officials, whose pensions are tax-exempt because the European institutions themselves tax these pensions, preventing taxation in the country of residence. However, this is a unique case.
Furthermore, the minister notes that NATO, like some other international organizations, compensates its retired officials for the taxes they must pay in their country of residence, which is an internal arrangement of these organizations.
Christophe Romero
Senne Verholle
Comments