Flemish government votes in changes to legacy tax rules

Changes to the tax rules for legacies in Flanders (Belgium) are to come into effect from July this year, following voting by the Flemish government last month.

The government has voted to abolish the duo legacy tax advantage in Flanders and bring in a zero tax rate for donations and legacies. Currently in Flanders, a tax rate of 5.5% applies on charitable donations, while for a bequest, charities pay a flat tax rate of 8.5%. This new zero rate is being introduced with the intention of making charitable donations and legacies even more attractive to the public.

The current duo legacy system enables people to lower the tax burden on legacy gifts to friends and relatives by including a charitable donation in their will, which requires the charity to pay the inheritance tax due on both legacies. The system has been abused in the past for tax optimisation purposes and can leave charities facing hefty tax duties.

The new zero rate system is designed to be more transparent and will apply to all deaths after 30 June 2021, regardless of when the will was made.

Jeroen Brugge, board member of the Fundraisers Alliance Belgium, says:

“The fact that the government wants to make the altruistic character of a testamentary donation more central again and wants to replace the fiscal construction of the duo legacy by a zero tax rate for gifts to good causes is undoubtedly a good thing in the long run. Nevertheless, the question remains as to how exactly to proceed with many, mainly unregistered, duo bequests that have already been made. My fear is that in the short term, many charities will be damaged by this and will therefore once again have to look for alternative financing.” 

People who currently have a duo legacy in their will are being advised to speak with their notary about changing it before the new system is introduced. From July, should a duo legacy remain, there will be no tax advantage and the designated charity is likely to have to pay more inheritance tax to receive it than the legacy may be worth – which could result in it being rejected and the money not reaching its intended source.