On 9 October, the Belgian Federal government reached an agreement on the federal budget.
The current budget round was an important one, as the economic climate is deteriorating and this has an impact on the budget of the government. This budget needed to find additional funds. The total effort is 1.7 bln EUR, of which one third was found in new sources of income (the other parts from savings and one offs).
When looking at the new receipts, the following combined measures have been announced:
- Change to the Belgian Controlled Foreign Companies (hereafter “CFC”) rules:
The Anti-Tax Avoidance Directive (hereafter “ATAD directive”) obliges countries to introduce a CFC rule. The directive provides for 2 options to do so.
In 2017, the Belgian government opted for the taxation of the non-distributed income arising from non-genuine arrangements which have been put in place for the essential purpose of obtaining a tax advantage (option B). Basically, this option required that the significant people functions in respect of the CFC income were located in Belgium.
The Belgian government decided now to change position and implement option A of the ATAD directive. This means that the new CFC rule would envisage taxing passive income, namely interest, royalties, dividend, income from disposal of shares, which is subject to low taxation abroad (defined as half of the taxation that would occur under the Belgian rules), unless the taxpayer can prove that sufficient substance is available locally.
- Banking tax : increased contribution of the financial sector via (i) non deductibility of the banking tax, the tax on the credit institutions and the tax on the investment funds and (ii) a progressive rate of the banking tax envisaging a larger contribution of the largest financial institutions.
- Tightening of the anti-abuse measures against international tax evasion:
- The provision regarding the deductibility of the payment of interest, compensation or fees for granting use of patents, manufacturing processes and other similar rights or payments for supplies or service would be amended. The new measure would provide for a reversal of the burden of proof, notably that Belgian tax authorities have to prove that the payment has been done between affiliated companies. The taxpayer would be able to bring counter-proof.
- Changes to article 344, §2, of the Belgian Income Tax Code: this provision (which renders unenforceable the transfer of assets to a legal entity located in a low taxed jurisdiction) would be extended to also cover indirect transfers.
- Changes to the investment deduction: significant increase regarding the deduction for sustainable and socially-responsible investments
- Strengthening of the Cayman Tax based on the report of the Court of Audit (Rekenhof / Cour des Comptes)
- Registration duties on long lease (erfpacht/emphytéose) would be increased from 2 to 5% from 1.1.2024
- Strengthening of the tax audits on the non-profit organizations (legal entity income tax), special regimes in the corporate income tax, sport sector and brokers
- The VAT rate of 6% for demolition and reconstruction would apply everywhere in Belgium from 1.1.2024 provided certain conditions are met.
Next steps
In a next step, the measures agreed upon have to be put into law and go through the required parliamentary procedure before they will be published into the Official Gazette (Belgisch Staatsblad / Moniteur belge) and enter into force.
For more insights on the impact of these announced measures, reach out to your regular PwC contact or Pieter Deré.
