How changing your nationality can significantly reduce the tax on public service pensions and other pensions

It is common for Belgian residents who have their career in Belgium to emigrate to France when they retire or when they approach the age of retirement. Often, they already have a second home that then becomes their main residence.

The question arises as to which state taxes their pensions at the time of actually retiring. In the case of a public service pension - a pension that is built up over the course of the retiree's career either with the Belgian government or a subdivision of it (e.g. teaching staff) - this is normally taxed by the Belgian State. In accordance with Article 10, §1 of the double tax treaty between Belgium and France, public pensions are taxable in Belgium even if the recipients live in France.

This allocation rule constitutes an exception to the general rules stipulating that pensions are taxable in the country of residence of the taxable person (Article 12 of the French-Belgian double tax treaty).

The fact that Belgium has the power to tax is not a pleasant thought for beneficiaries of a public service pension, knowing that in Belgium, tax on pensions is usually much higher than in France.

However, the French-Belgian double tax treaty offers a solution for escaping high Belgian tax rates and the obligation to file a tax return in Belgium. If the Belgian retiree renounces his or her Belgian nationality and acquires French nationality, then France will have the power to tax the public service pension accrued in Belgium (Article 10, §3 of the double tax treaty).

Consequently, taxpayers who find themselves in this situation may consider changing their nationality.