Belgian Tax reform

Philippe Vanclooster 8 February 2013


New withholding tax measures

Within the framework of the 2013 budget agreement, new tax measures with respect to the Belgian withholding tax on movable income have been enacted in the Program Act of 27 December 2012. The new tax measures are applicable to dividends, interests and royalties attributed or made payable as from 1 January 2013.

Please note that the new tax measures do not affect the current withholding tax exemptions that are available under Belgian domestic law, the Parent-Subsidiary Directive, the Interest-Royalties Directive and double tax treaties.

Dividend withholding tax

The current general withholding tax rate of 25% remains unchanged. Likewise, the exceptional withholding tax rate applicable to liquidation surpluses is kept at 10%.

However, as from 1 January 2013, the following changes to the withholding tax on dividends enter into force:

  • The exceptional withholding tax rate of 21% on redemptions of own shares no longer applies.
  • The dividends of residential real estate SICAFs / BEVAKs become subject to 15% withholding tax instead of 0% as was the case in 2012.
  • The reduced withholding tax rate of 21% applicable to certain dividends (e.g. dividends stemming from companies incorporated as from 1 January 1994 and whose shares are nominative and represent capital created via cash contributions) is abolished.

Interest withholding tax

The general withholding tax rate on interest attributed or made payable as from 1 January 2013 increases from 21% to 25%.

The exceptional interest withholding tax rates existing in 2012 remain applicable :

  • Interest from state bonds issued on 4 December 2011 and subscribed in the period 24 November 2011 – 2 December 2011 remains subject to 15% withholding tax.
  • Interest from ordinary savings accounts remains subject to 15% withholding tax to the extent it exceeds the first tax-exempt amount of EUR 1,250 (non-indexed amount).

Royalty withholding tax

The general withholding tax rate on royalties attributed or made payable as from 1 January 2013 increases from 15% to 25%. However, royalties resulting from copyrights and neighbouring rights are subject to 15% withholding tax to the extent they do not exceed EUR 37,500 (non-indexed amount).

Additional tax for private individuals

With regard to private individuals, the additional tax of 4% (on top of the withholding tax) applicable to the amount of interest and dividend income exceeding EUR 20,020 is abolished as from 1 January 2013.

Notional interest deduction

Within the framework of the 2012 and 2013 budget agreements, new tax measures with respect to the notional interest deduction (“NID”) have been proposed and/or enacted. The new measures relate to the rate of the NID as well as to the carry-forward of excess NID.

Rate

The NID rate for a given tax year is in principle based on the ten-year state bond interest rate for the calendar year two years prior to the tax year. However, the Act of 28 December 2011 has capped the NID rate at a maximum of 3% and no longer allows the government to increase the cap in a royal decree. Thus, the NID rate for tax year 2013 (accounting years ending between 31 December 2012 and 30 December 2013, both dates inclusive) is 3% (3.5% for small and medium enterprises).

The Belgian government is currently contemplating to adjust the calculation method of the NID rate, in order to align the NID rate more closely with the rate on the Belgian state bonds. The proposed calculation method would result in a NID rate for tax year 2014 (accounting years ending between 31 December 2013 and 30 December 2014, both dates inclusive) amounting to 2.742% (3.242% for small and medium enterprises), as the rate would be based on the average rate of the Belgian state bonds of July, August and September 2012.

Currently, the measures on the rate calculation have not been enacted, but it is expected that they will be applicable as from tax year 2014.

Carry-forward

According to the Act of 13 December 2012, new excess NID can no longer be carried forward as from tax year 2013 (accounting years ending between 31 December 2012 and 30 December 2013, both dates inclusive).

However, grandfathering rules exist for the stock of excess NID stemming from tax years 2012 and before. That is, the excess NID existing in the hands of a Belgian company or branch at the end of tax year 2012 can still be carried forward, though subject to certain limitations:

  • The stock of excess NID can only be offset against the profit remaining after applying all other tax deductions (dividends-received deduction, patent income deduction, current-year NID, carry-forward tax losses and investment deduction).
  • The stock of excess NID can be deducted from the first tranche of EUR 1 million of the taxable profit remaining after the deductions listed above have been applied. If the taxable profit exceeds EUR 1 million, the additional amount of stock of excess NID that can be applied will be limited to 60% of the taxable profit that remains after the first tranche of EUR 1 million has been used.
  • The stock of excess NID can be carried forward for maximum 7 years. However, the portion of excess NID that cannot be used due to the 60% limitation (i.e. 40% of the taxable profit remaining after all other tax deductions and after deduction of the first tranche of EUR 1 million of excess NID) can be carried forward indefinitely.