Tax compensation

Arlon receives over €8m from Luxembourg

Of all the municipalities in Belgium, the city of Arlon will receive the largest amount. (Photo: Didier Boseret/Maison Moderne/Archives)

Of all the municipalities in Belgium, the city of Arlon will receive the largest amount. (Photo: Didier Boseret/Maison Moderne/Archives)

Belgium has 581 municipalities and 553 of them will receive money from Luxembourg in 2022 by way of tax compensation. Only eight of them will receive more than €1m. Arlon is set to collect the lion's share of the disbursement with €8,657,412.45.

The Belgian municipalities have now been informed of the sum they will receive by way of tax compensation next year from Luxembourg. The Belgian minister of finance, Vincent Van Peteghem (CD&V) provided the information in an answer to the deputy and mayor of Attert, Josy Arens (CDH).

This was eagerly awaited, especially by the border municipalities as the amount of the retrocession weighs heavily on their municipal budgets. Arlon, for example, will receive €8,657,412.45 in 2022, whereas its ordinary annual budget is around €54m. In Etalle, a smaller municipality, the annual ordinary budget is around €9m and Luxembourg will pay a little over €1.3m next year.

This compensation mechanism, first called the Reynders Fund, has existed since the early 2000s. It aims to compensate Belgian municipalities that lose tax revenue because some of their residents receive income in Luxembourg that is taxable in Luxembourg but exempt for individuals on the Belgian side.

The basic amount has been increased to €48m according to the new agreement signed on 31 August 2021 and will be increased by 5% per year. Each municipality receives compensation in proportion to its loss of tax revenue. As logic dictates the municipalities that receive the most are those with the most cross-border workers.

This agreement sometimes inspires jealousy, especially on the French side where some locally elected representatives have been campaigning for years to benefit from the same mechanism, but without success for the moment.

This story was first published in French on Paperjam. It has been translated and edited for Delano.