If You're Wealthy, This Must Be Belgium
Any office worker in Brussels who has ever cashed a paycheck can tell you: Belgian taxes are stratospheric. Most workers hand over 65% of their pay in income and social security taxes. Everyone also forks out 21% in value-added tax. There's even a 16% tax for buying a house or apartment. Sure, that Belgian beer is delicious, but who has money left to buy a round?
Yet unlike some of its neighbors, Belgium doesn't tax everything all the time. And that has led to an unexpected development: The land of chocolate and eurocrats is fast becoming Europe's most surprising tax haven.
Want to sell your high-tech startup company and retire early? Do it in Belgium, where there are no capital-gains taxes on such transactions. Want to avoid having your assets zapped by the French wealth tax? Move to Brussels, and you won't have to worry. In Belgium, even the tax on income from renting houses and apartments is small, so absentee landlords are proliferating. In short, if you're working for a paycheck, Belgium is a tax hell. But if you're wealthy, well, it's heaven.
DUTCH EXILES. The result is that Belgium has become a Cayman Island without the island. Although exact numbers are impossible to come by, local accountants estimate that more than 60,000 Dutch citizens alone protect their bank accounts by living in Belgium. Since France abolished the upper limits on its tax on assets three years ago, at least 5,000 wealthy Frenchmen have decamped to Belgium. All told, says Rene Philips, a tax partner at KPMG International in Brussels, about 100,000 tax refugees are living in Belgium. "Now we're seeing the Germans and the British, who have heard how attractive Belgium can be if you own a company and want to cash it in," he says.
Denis Payre, co-founder of French software company Business Objects, moved from Paris to Brussels three years ago after getting hit with a 2% French wealth tax. "I was shocked that my shares were being taxed even before I could sell them," he says. After moving, he sold his stake in the company for a tax-free $20 million and has since founded Growth Plus, an organization whose goal is to encourage startups by, among other things, lowering taxes.
For many of the tax exiles, Belgium is just a stone's throw from home. The Dutch tend to congregate in Antwerp's tony suburbs such as Schoeten and Braaschot. "You can live here in peace and be at the office in the Netherlands in less than an hour," says Nina Brink, founder of Dutch Internet company World Online International, who settled in Braaschot before selling her stake in the startup.
Meanwhile, the heirs to some of France's largest fortunes, including the owners of the Auchan retail chain, have moved just across the northern border from Lille. Wealthy Parisians prefer Brussels, which is only an hour and 20 minutes by high-speed train from Paris. One recent arrival is Paul-Louis Halley, who set off for the low country before offloading his Promodes retail chain in 1999 to Carrefour for more than $16 billion.
Within Belgium, the arrival of the foreign rich has stimulated efforts to reform the tax system. On July 5, the lower house overwhelmingly endorsed a $3 billion tax cut, phasing out the top income-tax rate of 55%. "I would rather see all taxes come down than we impose a wealth tax," says Paul Wille, a senator from the governing Liberal Party, who represents a border region with the Netherlands.
The Belgian haven has helped pressure neighboring countries into rolling back their taxes. On Jan. 1, the Dutch killed a tax on stakes in listed companies, and the Germans may do the same next year. France has lowered its levy on stock options, partly in response to the Belgian challenge. "My message that you have to encourage entrepreneurs is being heard," says Payre. But even he admits that regionwide tax reform is a long way off. Until then, successful entrepreneurs will prefer a rain-soaked pied-à-terre in Brussels to that sunny villa in Aix.
By William Echikson in Brussels