Remark: The following announced measures will have to be formalised in draft legislation which should only be available as from September/October. Only then will full details be known.
On 26 July 2017, the Federal government reached an agreement on an important corporate tax reform, significantly reducing the corporate tax rate. More details will follow below.
On top of the tax reform, several extra measures will be taken to stimulate the creation of jobs and to increase investment in the active economy in Belgium. For instance, certain employment law rules are relaxed for the e-commerce sector. Also the PRICAF for asset management will be made more attractive.
In order to finance the reforms, the agreement contains some budgetary measures of which all details are expected to be made available as from September/October. More details will follow in a later stage.
The tax reform is built around three pillars: budget neutrality, simplification and fair taxation.
Corporate income tax
The corporate tax rate of 33,99% will be lowered to 29% in 2018 and 25% as from 2020. SMEs would even see a decrease in the rate to 20% as from 2018 for the first tranche of 100.000 euros. These rates are to be increased with the crisis tax, which will also be lowered for 2018 and abolished in 2020. See the below summary.
|SMEs (first tranche of 100.000 euros)||20%||20%|
|Crisis tax old||3%||3%|
|Crisis tax new||1,5%||0%|
Companies will also be encouraged to make more tax prepayments.
In addition, for the first time in Belgian income tax history, tax consolidation would be introduced as from 2020. This implies that Belgian companies of the same group could offset their tax losses against profits of another Belgian affiliated company. Only the consolidated tax base would then be subject to corporate income tax.
To compensate these new measures, a minimum taxation would be imposed on companies making more than one million euros profits. As from 2018, deductions (with the exception of the deduction for investment and innovation) could only be claimed on 70% of the profits exceeding the one million threshold. The remaining 30% would be fully taxable at the above mentioned new rate. With this measure, any company would always pay 7,5% tax on the profits exceeding one million euros. The deductions which can not be used can furthermore be carried forward.
The tax reform would also be financed by a limitation of other deductions, increase of fines and compliance. Furthermore, as from 2020 the European Anti Tax Avoidance Directive would be implemented, introducing rules on CFCs, EBITDA interest limitation, exit taxation and hybrid mismatches.
The separate 0,4% capital gains tax on shares would be abolished, while the conditions to benefit from the capital gains exemption would be aligned with the dividends received deduction. This implies the application of a minimum participation threshold of at least 10% or an acquisition value of at least 2.5 million euros in the capital of the distributing company. The dividends received deduction regime (notably the 95% deduction) would not be modified.
Notional interest deduction, although maintained, will be modified to stimulate the increase of equity. As from 2018 this deduction would be calculated based on the incremental equity increase (of the past five years) and no longer on the total amount of qualifying equity of the company.
At this stage the faith of the Fairness Tax remains unclear, the tax reform being silent on this topic.
Research & development
The wage withholding tax exemption for scientific research personnel would be extended, to include holders of a bachelor degree.
Furthermore, SMEs will be able to benefit from a temporarily increase of the investment deduction from 8% to 20%.
Taxation of savings
Much debated was the new annual tax on securities accounts. The government reached an agreement to tax portfolios of 500.000 euros or more at a rate of 0,15% on the full amount on the account. The assets in scope consist of quoted shares, obligations and investment funds. Pension saving accounts and life insurance are excluded.
Also the pension savings system would be slightly extended with more options.
To stimulate investment in shares, the government foresees a withholding tax exemption for dividends up to a threshold of 627 euros, the so-called Michel-De Croo measure.
On the other hand, the exempted threshold for savings deposits would be decreased from 1.880 to 940 euros.
The tax burden on investment income from funds is also expected to increase. The same can be said for the rates of the tax on stock exchange transactions. And finally, certain loopholes relating to the Cayman tax would be closed. However, few details are currently available in this respect.
Promotion of growth companies
The regulatory framework of the private PRICAF will be made more attractive by relaxing the control rules, the management activity and the temporary investment. Also the minimum investment threshold of 100.000 euros would be decreased to 25.000 euros.
Also the tax shelter for start-ups will be extended to growth companies under the same conditions.
In addition, to promote growth companies an ecosystem will be introduced.
VAT: option to apply VAT on immovable letting
The Belgian Government decided to introduce the possibility for landlords to apply VAT on immovable lettings. For years, investors and landlords in Belgium have been struggling with the cost of non-recoverable or hidden VAT on their real estate as most forms of lettings are VAT exempt. With the new optional regime, the cost of investing in real estate should decrease significantly as input VAT paid on construction and operating costs will become recoverable.
Clearly, the initiative of the Belgian Government is excellent news for both investors / landlords and end-users and helps raise our country’s and the markets’ competitiveness. Plans are to implement the new regime still in 2018. More information on scope and confirmation of exact timing of the new regime will come.
Don’t hesitate to visit regularly our tax reform website for more information when it is made public.
For any questions you can contact your local PwC contact, Patrick Boone or Philippe Vanclooster.
- Accounting and Tax Compliance
- Base erosion and profit shifting (BEPS)
- Belgian tax reform
- Corporate income tax
- Corporate law
- Customs & VAT
- Estate and succession planning
- Financial Services Tax & Regulatory
- Global employee mobility
- HR law
- Insurance banking
- International taxation
- Mergers & Acquisitions
- Personal income tax
- Real estate
- Risk & Compliance
- Tax Accounting
- Tax controversy and dispute resolution (TCDR)
- Transfer pricing