The Belgian Accounting Standards Commission (BASC) was asked to provide guidance with respect to the accounting treatment of the Fairness Tax.
The Fairness Tax is a separate tax of 5.15% (5% increased by 3% crisis surtax). This separate tax applies to a Belgian company (non SME) if:
(i) the company has distributed dividends with respect to the taxable period; and
(ii) part or all of its taxable profit in that taxable period has been offset by either current year notional interest deduction or tax loss carryforwards.
The tax is effective as from tax year 2014 and may apply to Belgian companies (non SME) or Belgian branches of foreign companies.
According to the Accounting Standards Commission (ASC), the Fairness Tax should follow the general accounting principles applicable to Belgian Corporate Income Tax/Belgian Non-Resident Taxation. This implies the tax is subject to the rules as set forth in advice 128/6 (Accounting for Income Taxes) of the ASC for its accounting treatment.
The ASC points out that the exact amount of the Fairness Tax can only be determined after the relevant authorised body of the company has decided how to allocate the company’s result. In case of ordinary dividends, this allocation will be done during the annual shareholders meeting which is held during the following financial year (i.e. FY X+1). The Commission emphasizes in its draft opinion that although the amount of Fairness Tax cannot be determined at the balance sheet date of FY X, the Fairness Tax should be accounted for in FY X and may not be postponed until the following financial year (FY X+1). Hence, the Fairness Tax should be taken into account when calculating a company’s tax provision and tax prepayments for FY X even though the decision to distribute ordinary dividends is only taken at the annual shareholders meeting in FY X+1.
Note that this draft advice is only relevant for Belgian GAAP. Other GAAPs like IFRS and US GAAP have different accounting treatments in respect of the Fairness Tax.
Remarks on this draft opinion can be sent to the ASC until 23 May 2014, 17:00.