Following the draft advice published on 2 April 2014, the Belgian Accounting Standards Commission (BASC) issued advice 2014/8 on the Belgian GAAP treatment of the Fairness Tax.
This advice confirms what was stated in the draft version of the advice.
In brief, the final version of the advice confirms that the Fairness Tax should follow the general accounting principles as applicable to Belgian Corporate Income Tax/Belgian Non-Resident Taxation as set forth in the previously issued advice 128/6 (Accounting for Income Taxes) .
The BASC points out that the exact amount of the Fairness Tax can only be determined after the competent 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 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 Belgian GAAP current 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.
This advice is only relevant for Belgian GAAP. Under IFRS and US GAAP, other rules apply.
As regards current taxes, depending on the nature of the dividend distribution, the timing of recognition of the current fairness tax impact may be different under IFRS/US GAAP as opposed to under Belgian GAAP.
Furthermore, under IFRS or US GAAP, the Fairness Tax may also trigger deferred tax consequences. The deferred tax treatment of the Fairness Tax may depend amongst others on (i) the applicable accounting framework (s) – e.g. IFRS versus US GAAP-; (ii) the position of the Belgian company or permanent establishment in the corporate structure of the group; (iii) management assertions with respect to dividend repatriations; (iv) the (projected) tax position of the Belgian company or Belgian permanent establishment.