Belgian Tax reform – Entities – Companies
Latest update: 4 January 2021
Law of 20 December 2020 laying down urgent provisions in tax matters and the fight against fraud (Official Gazette of 30 December 2020)
The draft law has been adopted by the Chamber on 17 December 2020 and has been published in the Official Gazette on 30 December 2020. It includes a.o. the following measures:
- adaptation of some provisions regarding the interest limitation deduction (the so-called “EBITDA-rule”), notably according to the comments of the European Commission;
- introduction of tax defensives measures vis-à-vis the non-cooperative jurisdictions which are part of the EU list (last updated list published in the Official Journal of 7 October 2020):
- Cayman tax : the draft law introduces a presumption that an entity meets the definition of “legal construction” covered by the Cayman tax if this entity is established in a jurisdiction included on the EU list. The scope of legal constructions covered by the Cayman tax is therefore extended to entities established, at the end of the taxable period, in a jurisdiction included in the EU list of non-cooperative jurisdictions. Entry into force: taxable periods closed as from 31.12.2020.
- non-deductibility of costs : extension of the reporting obligation to payments made to tax havens included in the EU list (if resident at the time of payment). Entry into force: payments made from 1.1.2021.
- CFC rules: taxation of undistributed profits of the taxpayer if they are received by a foreign company established in a jurisdiction which, at the end of the taxable period, is included in the EU list, whether or not the holding condition or the condition for taxation is met. Entry into force: taxable periods closed as from 31.12.2020.
- DRD: dividends distributed by a company resident in a jurisdiction which, at the end of the taxable period, is included in the EU list, are excluded from the DRD deduction. Entry into force: dividends allocated or attributed from 1.1.2021
- restore the provisions regarding the sharing economy and make some changes to it;
- provide a legal basis in respect of the exemption from payment of withholding tax for researchers holding a bachelor’s degree.
Program Law of 20 December 2020 (Official Gazette of 30 December 2020)
The most important tax measures introduced from a corporate tax perspective are the following.
Increased investment deduction
With the increased investment deduction, the Belgian government clearly intends to further encourage certain investments by small and medium sized enterprises. Under the normal investment deduction regime, small and medium sized enterprises can deduct 8% of their investment from their taxable income. Due to the COVID-19 crisis, this basic percentage has been increased to 25% for investments done in the period between 12 March 2020 and 31 December 2020. The program law now extends this measure to investments carried out until 31 December 2022.
Support for training of employees
The government wants to emphasize and encourage lifelong learning for employees. Therefore, employers are able to receive financial support if they organise at least 10 additional days of training for each employee (on top of what is legally required). More specifically, if all conditions are met, employers are able to benefit from a partial exemption for transfering Belgian wage withholding taxes. As a result, employers are entitled to a subsidy of 11,75% calculated on a part of the salary in the month during which the training took place. Note that the employee must work for at least 6 months for the employer and that not all training will qualify for this measure.
Law of 19 November 2020 regarding the reconstitution reserve published (Official Gazette of 1 December 2020)
On 12 November 2020, the Chamber adopted the draft law regarding the reconstitution reserve. It has been published in the Official Gazette of 1 December 2020.
In May 2020, the government introduced a mid-term measure that aims to enable companies to gradually restore their solvency position going forward.
To that end, a tax-exempt reserve can be recognized by a company at the end of the taxable period relating to the assessment years 2022, 2023 and 2024.
The exemption will be granted up to a maximum amount equal to the Belgian accounting operating loss over the financial year 2020, capped at 20 million EUR. For each assessment year, the amount of the exemption that can be claimed will be limited to the increase of taxable reserves in the financial year without considering the impact of the booking of the ” reconstitution reserve” in application of this specific tax measure, up until the cap is reached.
Specific rules will apply for companies with a year-end closing between 1 January 2020 and 31 July 2020.
The scheme will hence only be available, depending on the financial year’s closing date, for companies that realize an operating loss for Belgian accounting purposes during either financial year 2020 (or financial year 2021, in specific circumstances).
The exemption will be subject to two conditions. The reserve will have to be recorded on one or more separate liabilities accounts and will be subject to the so-called intangibility condition. Moreover, it will not be available for companies with a shareholding in a company located in a tax haven country and companies that have made payments to tax haven companies unless these payments can be justified based on specific grounds (period between the 12 March 2020 and the end of the taxable period during which it benefits from the reconstitution reserve).
The “reconstitution reserve” will become partially or fully taxable in a given year to the extent the company will distribute dividends, execute share buy backs or make capital reductions or will in such year record material lower (“62 account”) salary, social liabilities and pension expenditures compared to the last financial year prior to the COVID-19 period (exceptions apply).
As for the loss carry back measure, similar companies are excluded from this measure. Companies that execute between 12 March 2020 and the date of filing of the tax return related to the financial year during which the reconstitution reserve is created a capital decrease, share buy back or dividend distribution are also not entitled to this measure.
Certain formalities will need to be applied to benefit from this measure.
Entry into force: ten days after the publication in the Official Gazette.
Draft bill introducing a new annual tax on securities accounts
On 31 October 2020, the Council of Ministers approved a draft bill introducing a new annual tax on securities accounts in the Code of Various Duties and Taxes (CVDT). The Council of State is being requested to give its opinion on the draft bill. The Government intends to submit the bill to Parliament by year-end.
In a nutshell, the tax is an annual tax on the holding of a securities account, levied at the rate of 0.15% on the average value of the account in excess of EUR 1.000.000.
Scope of Application
The tax would apply to securities accounts as such and therefore in principle would concern all securities accounts, whomever the account holder is – natural person, company, legal entity, “legal arrangement” in the meaning of the Cayman Tax or de facto association – whatever its tax residency status – resident or non-resident – and its legal rights on the account (full ownership, bare ownership, usufruct).
However, the tax would not be due on securities accounts held by specific types of financial institutions in the course of their own business activities, i.e. (sic) “exclusively for their own account”.
Residents would be taxable on securities accounts held in Belgium or abroad; non-residents would be taxable on securities accounts held in Belgium only (and provided the double tax treaty concluded with its country of residence allows such wealth taxation)
The tax would be levied on securities accounts with an average value of taxable financial instruments in excess of EUR 1 million.
The nature of the financial instruments held on the securities account is irrelevant, only the total value of the securities account is.
To compute the “average value” of the securities account, the reference period would be a period of twelve successive months beginning on 1st October and ending on 30th September of the following year. The tax would be due on the first day following the end of the reference period. Specific rules apply for securities account closure and tax residency changes:
- The reference period would end early if the securities account is closed. Consequently, the deadlines for declaration and payment woulb be triggered upon closure of a securities account.
- The same would apply if the sole account holder, who is resident in Belgium, would become resident in a Country with which Belgium has concluded a double tax treaty with the effect that the power to tax an asset is attributed to the other Country (e.g. the Netherlands). Consequently, the deadlines for declaration and payment would be triggered upon a tax residency change.
The last day of each quarter of the reference period would be a benchmark and the taxable base would be the sum of the value of the financial instruments at the benchmarks divided by the number of such benchmarks.
Tax Rate and Ceiling
The tax rate would be set at 0.15 p.c.
Where applicable, the amount of the tax would be limited to 10 p.c. of the difference between the tax base and the threshold of EUR 1,000,000. In this way, the government wishes to prevent the collection of the tax from causing the assets to fall below the threshold of EUR 1,000,000.
Declaration and Payment
The tax would be collected indirectly, i.e. through a financial intermediary (i.e. any intermediary which offers securities accounts: credit institutions, brokerage firms, investment firms).
Belgian intermediaries must levy the tax, i.e. intermediaries constituted in accordance with Belgian law, intermediaries established in Belgium, and intermediaries not established in Belgium which have appointed a responsible representative.
- Belgian intermediaries shall file a declaration with the competent office, and shall pay the tax, no later than the 20th day of the 3rd month following the end of the reference period.
If the intermediary would not declare and collect the tax, this obligation would fall back on the account holder. If a securities account is held by several holders, each holder would be jointly and severally liable for the declaration and payment of the tax.
- In the cases where the holder is liable, the latter shall file an electronic declaration, no later than the last day provided for the submission of the personal income tax return. A paper filing can be accepted in specific cases.
Sanctions and procedures for tax audits would be foreseen.
A general anti-abuse rule (GAAR) would be introduced in the CVDT.
Specific anti-abuse rules would also be introduced with respect to the tax on securities accounts which covers, among others, the following situations:
- the split of securities accounts by which securities are moved between securities accounts with the same financial intermediary or to securities accounts with another financial intermediary in order to prevent the total value of the securities on an account from exceeding the threshold of EUR 1.000.000;
- the opening of securities accounts by which securities are distributed between accounts with the same financial intermediary or with another financial intermediary in order to prevent the total value of the securities in an account from exceeding the threshold of EUR 1.000.000;
- the conversion of shares, bonds or other financial instruments into registered securities so that they are no longer held on a securities account, in order to avoid the tax;
- the placement of a securities account subject to tax in a foreign legal person which transfers the securities to a foreign securities account, in order to avoid the tax;
- The placement of a securities account subject to tax in a fund in which the units are registered, in order to avoid the tax.
These anti-abuse rules would retroactively apply as from 30th October 2020 so as to counter restructuring of portfolios to avoid the tax before the law enters into force (“effets d’anticipation”/”anticipatieve effecten”)
A refund procedure would be foreseen in case of overpayment.
These features are likely to evolve during the legislative process.
Belgian tax reform: new measures announced
On 30 September, 7 political parties reached an agreement on the formation of a new Belgian government (the so-called Vivaldi government). The agreement mentions the intention for a relance and investment plan of 4.7 bln EUR including measures with important social accents. To provide the necessary budgetary room for this plan, some important tax measures have been announced:
- an important measure relates to the taxation of digitalised companies and the introduction of a minimum tax for businesses. Belgium will constructively support the international initiatives at EU and OECD level in respect of the Pillars and taxation of the digital economy. International agreement is preferred but if no action is taken at international level by 2023, the intention is to proceed with the necessary measures unilaterally.
- During the term of the government, a significant tax reform (with a particular focus on the personal income tax side) would be prepared which should be realised in 2024. In combination, the fiscal amnesty procedure would be terminated by the end of 2023.
- The tax reform does not seem to include a capital gain tax or securities tax but include a fair share of contribution from the wealthiest – with respect for entrepreneurship. We learned that this refers to a potential securities tax for securities held in excess of 1 mio EUR.
- Organisational measures would be taken to combat social and tax fraud, such as the creation of multidisciplinary investigation teams, and an action plan against tax fraud would be put in place;
- measures would also be taken to reduce the VAT gap, including the introduction of e-invoicing systems;
- transparency and preventive measures would be taken, therefore the saldo of Belgian bank accounts will be shared to the PCC, combined with rules when the PCC can be consulted ;
- introduction of a tax charter and code of conduct in the framework of tax audits;
- all new company cars should be carbon-neutral by 2026 ; tax rules dealing with company cars would be impacted;
- the government would put in place a framework allowing workers who do not have company cars to receive a mobility budget from their employer. This would stimulate sustainable mobility alternatives (public transport, cycling, carbon-neutral cars, etc.) and the willingness to live or move close to the workplace.
- In the framework of the recovery and transition plan, the introduction of the reconstitution reserve would be provided.
- In order to stimulate productive investment, the increased investment deduction would be extended by two years. The current investment criteria would be evaluated and, if necessary, adjusted.
- As part of the social housing policy, the reduced VAT rate of 6% for the demolition and reconstruction of buildings would be extended to the entire Belgian territory.
- The government would also draw up tax benefits for companies which grant their employees more hours of training than is provided for in the regulations, while avoiding deadweight effects as far as possible. The aim is to support those companies which currently do not offer sufficient training.
Further details will come in the next weeks and months. The announced measures are, of course, subject to change.
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Impact of COVID-19 : Belgian federal measures to support the economy
For the latest news regarding the tax measures taken by the Belgian government in the framework of the Covid-19 crisis, please visit our websites :
- the PwC report including tax measures from 108 countries : Navigate Tax, Legal and Economic measures in response to COVID-19 and select Belgium
- PwC Belgium Covid-19 website : Helping firms mitigate the potential impact of COVID-19