Company cars, internal capital gains, withholding tax, … What are the new tax measures for the year end?

philippe-vanclooster-author


Last October, the Federal Government reached an agreement on the budget and, in this framework, on several tax measures. The most important ones relate to the taxation of company cars and the end of the tax-free step-up in the case of a contribution in capital of shares by an individual (commonly referred to as “internal capital gains”). The relevant draft Program Act (“Bill”) has just been tabled at the Chamber of Representatives.

With regard to company cars, a lump-sum taxation of fuel cards had been announced in a first stage. Finally, it will be an increase in the disallowed expenses relating to the company cars.

Basically, the company that grants its employees a company car is taxed on 17% of the taxable benefit in kind. In this respect, the Bill would entail two changes:

  • a broadened taxable basis: the benefit in kind would no longer be reduced by the beneficiary’s contribution to calculate the disallowed expenses;
  • an increase of the non-deductible amount to 40% of the taxable benefit in kind (excluding the beneficiary’s contribution) if the company covers the fuel costs (relating to private use).

This would also apply to legal entities and companies subject to non-resident income tax.

With regard to internal capital gains, as previously announced, in the case of a contribution in capital of shares by an individual, there would be no tax-free step-up: unrealised capital gains would be considered to be tax reserves in order not to avoid the dividend withholding tax. This would also apply in the case of gifts or inheritance. However, sales of shares would remain outside of the scope because they can be taxable on the basis of other provisions of the Income Tax Code. Contributions in capital of shares to non-resident companies would also fall within the scope of this measure.

The other upcoming tax measures would also include:

  • the abolition of the speculation tax;
  • an increase in the withholding tax rate, from 27 to 30%, on investment income;
  • an increase in the withholding tax rate, from 17% to 20%, on liquidation reserves created as from 2017 and distributed within the five years;
  • a recovery procedure for state aid derived from excess profit rulings granted;
  • changes to the tax on stock exchange transactions: the maximum tax amount due would be doubled and the tax would be extended to include transactions realised by Belgian residents through non-resident intermediaries;
  • the reduced VAT rate of 12% applicable to social housing would be extended to include the private sector.

The above tax measures are still subject to change.

For any questions, please don’t hesitate to contact your local PwC contact.