As expected – further to the Budget Control of March 2013 – a draft Program Law has been filed this week with the Belgian Parliament. The draft bill contains several important tax measures, especially regarding the withholding tax on dividends and liquidation bonus, as well as regarding the registration duties levied upon constitution of long-lease rights and building rights.
New withholding tax rate on liquidation bonus
One of the major changes brought by the draft Program Law is the increase of the current advantageous withholding tax rate of 10% on liquidation bonus to 25% (general withholding tax rate) as from 1 October 2014.
However, it is possible to anticipate this increase by distributing reserves (i.e. reserved profits which have been approved by the General Meeting of Shareholders on 31 March 2013 at the latest) at a reduced withholding tax rate of 10%, and contributing those immediately in the capital of the company before 1 October 2014 (withholding tax of 10% will be applicable). In case of subsequent capital decrease, those “incorporated reserves” will be taxed at a degressive rate: 15% (during the first fourth years), 10% (the 5th and 6th years), 5% (the 7th and 8th years) and 0% (as from the 9th year).
New withholding tax rate on certain dividends
To promote new capital injections in SMEs and to award the “loyalty” of the investor, the current dividend withholding tax rate of 25% will be decreased where those dividends relate to newly issued shares in SME’s.
The withholding tax rate on such dividends (currently fixed at 25%) will be decreased to 20% as from the 2nd year and to 15% as from the 3rd year.
This new regime is only applicable where the new shares are issued in exchange of cash contributions and where those shares have been held for an uninterrupted period since their issue.
Some anti-abuse rules are included in the new regime in order to avoid creation of fictitious “new” contributions.
Notional Interest Deduction : no double use of DRD and NID
Announced as an anti-abuse measure, the companies will not be able to benefit from the dividend received deduction regime and the notional interest deduction regime on the same shareholdings.
As from tax year 2014, the dividend received deduction will have priority, meaning that the eligible shareholdings will only be taken into account for the computation of the notional interest deduction in case they do not meet the conditions to benefit from the dividend received deduction, whereas for shares booked as financial fixed assets, they remain excluded from the NID basis, even if they would not qualify for the dividend received deduction regime.
New registration duties on the constitution of long-lease rights and building rights
It is also foreseen to increase, as from 1 July 2013, to 2% the registrations duties on the constitution of long-lease rights and building rights, currently fixed at 0.2%. The new increased rate is limited to 0.5% for non-lucrative associations.
At this stage, it appears that private agreements which would be registered before 1 July 2013 with the application of the 0.2% rate would still be subject to the increase of the registration duties, meaning that additional registration duties (i.e. 1.8%) would be levied upon the registration of the notarial deed which would occur after 1 July 2013, following the private agreement.
Finally please note that the fixed registration duties for a notary deed will be increased from EUR 25 to EUR 50.
