Belgian Tax reform – Entities – Companies
Latest update: 18 January 2024
During the last quarter of 2023, the Belgian government proposed several new tax legislation which had been adopted by the Chamber and published at the end of December.
Here is an overview of the most important upcoming provisions from a corporate income tax perspective:
Law of 19 December 2023 introducing a minimum tax on multinationals (Official Gazette 28 December 2023) (listen to our podcasts)
This law introduces a minimum tax for multinational companies and large domestic groups. This is the Belgian transposition of Council Directive (EU) 2022/2523 of 15 December 2022 ensuring a global minimum level of taxation for groups of multinational enterprises and large domestic groups in the European Union. The law has been published in the Belgian Official Gazette and entered into force on 31 December 2023 (so for financial years starting on or after 1 January 2024). The law includes a coordinated system of rules designed to ensure that large (domestic/MNE) groups with a consolidated revenue exceeding EUR 750 million for at least two of the four previous years, are subject to a minimum effective tax rate of 15%.
The important aspects to remember are the following:
- The draft law is applicable to financial years beginning on or after 31 December 2023. The legislation does not yet include all the OECD administrative guidance. The intention of the Belgian legislator is however to stay as close as possible to the OECD guidance on Pillar 2, which may require further legislative changes or administrative guidance to incorporate the latest guidance (be reminded that even in December 2023 some additional guidance was published by the OECD);
- Belgium has introduced a qualified domestic minimum top-up tax, including the substance based income exclusion.
- The Belgian prepayment system for corporate income tax will also apply to top-up taxes in Belgium or payable by the ultimate parent of the group, meaning that Belgian companies subject to this legislation need to consider making upfront tax prepayments for any tax due under the Pillar 2 legislation.
- The Belgian ruling office will not grant advance rulings on questions with respect to global minimum taxation, but further administrative guidance is expected.
- The first Belgian compliance obligation is the QDMTT return to be submitted before the last day of the 11th month following the end of the financial year. For groups that follow the calendar year this means 30 November 2025.
- The Belgian R&D tax credit will be refundable within four years, making this a qualified refundable tax credit under Pillar 2.
- The Belgian government announced in the same Official Gazette in which the Pillar Two Law was published that the loss limitation rule (limiting the use of carried forward tax losses that may offset taxable income exceeding EUR 1 million) will increase again from 40% (applicable for FY 2023) to 70%.
For more details, see our newsflash of 15 December 2023.
2. Program law of 22 December 2023 (Official Gazette 29 December 2023)
This law includes some significant changes in the Belgian tax landscape.
The CFC regime Belgium introduced back in 2017 taxed non-distributed income arising from non-genuine arrangements which have been put in place for the essential purpose of obtaining a tax advantage (option B under the EU ATAD directive). Basically, this option required that the significant people functions generating the CFC income were located in Belgium.
The law foresees a change as the focus now is on the taxation of passive income – namely interest, royalties, dividend, income from disposal of shares, but amongst others also rental income and income from invoicing companies that earn sales and services income from goods and services with adding no or little economic value – subject to low taxation abroad (defined as half of the taxation that would occur under the Belgian rules), unless the taxpayer can prove that sufficient substance is available locally.
- A two-step analysis is to be followed to determine if a proportion of the income of a CFC should be allocated to the Belgian parent entity (subject to the normal Belgian corporate income tax regime).
First, the (Belgian) taxpayer needs to determine whether it has an (in)direct interest in (one or more) CFC(s). A foreign company qualifies as a CFC if both the participation and the taxation condition are met:
- A permanent establishment (“PE”) of a Belgian taxpayer is deemed to fulfill this condition;
- In general, in case the Belgian taxpayer by itself or together with associated companies holds a direct or indirect participation of more than 50% of the voting rights, or owns directly or indirectly more than 50% of capital or is entitled to receive more than 50% of the profits of that entity;
Taxation condition: Foreign entities or PEs that are not subject to income tax or subject to income tax that is less than half of the corporate income tax that would have been due if this foreign entity would be a Belgian taxpayer (for some countries, a rebuttable presumption applies).
Next, if the foreign entity (or PE) qualifies as a CFC, the amount of income/profit to be allocated to the Belgian taxpayer needs to be calculated/assessed according to Belgian accounting and tax rules (recalculation is thus necessary). The foreign profits are then allocated to the Belgian taxpayer taking into account the following parameters:
- The profits must be limited in proportion to the part of the profits that is not distributed;
- The profits are limited in proportion to the CFC’s income that qualifies as passive income;
- The profits are proportionally to be allocated based on the taxpayer’s direct controlling interest in the CFC.
For the additional taxable basis in Belgium, a tax credit of the foreign tax effectively paid will be available.
- There are also some exceptions (‘safe harbours’) foreseen that, when applicable, wil safeguard certain foreign income from taxation at the Belgian taxpayer’s level, more specifically when:
- the Belgian taxpayer can provide evidence that sufficient substance (‘substantial economic activity’) is available in the CFC;
- less than 1/3 of the total income of the CFC qualifies as passive income;
- the CFC qualifies as a financial undertaking (subject to certain conditions).
- In addition, from a tax compliance perspective, it is expected that more detailed information will need to be included in the Belgian corporate income tax return going forward. Note that all the companies qualifying as CFCs have to be reported (with direct and indirect participation) but that, considering the fact that to allocate an additional taxable basis to the Belgian tax resident takes into account direct controlling interests (cf. above), only CFCs through a direct participation are expected to give rise to an additional taxable basis.
- Entry into force
The new CFC rules are in practice set to apply retroactively, as they are already applicable for assessment year 2024, which pertains to accounting years ending on or after 31 December 2023. This means that this legislation already has an impact for many taxpayers for their tax position in the past months.
Tightening of the anti-abuse measures against international tax evasion (changes in art. 54 and 344, § 2 ITC)
The provision regarding the deductibility of the payment of interest, compensation or fees for granting use of patents, manufacturing processes and other similar rights or payments for supplies or service has been amended (art. 54 ITC). Article 344, § 2 ITC which renders unenforceable the transfer of assets to a legal entity located in a low tax jurisdiction has been extended to cover indirect transfers. Both provisions will now provide that Belgian tax authorities have to prove that the payment or the transaction has been done between directly or indirectly affiliated companies. The taxpayer will be able to bring counter-proof. The taxpayer will also have two options to avoid the application of these provisions: he can prove that the transaction:
- occurred with an entity subject to an effective income tax at least equal to half of the income tax that would be due if that entity were resident in Belgium, or
- that the payment or the transaction is part of an authentic transaction in the sense that it was carried out for valid business reasons reflecting economic reality.
This change has been proposed to update these provisions as a result of scrutiny on the application under the EU Freedoms. The changes thus aim to ensure that the tax authorities can continue to apply these specific anti-abuse provisions in an EU context.
Banking tax : increased contribution of the financial sector via (i) non deductibility of the banking tax, the tax on the credit institutions and the tax on the investment funds and (ii) a progressive rate of the banking tax envisaging a larger contribution of the largest financial institutions.
Real estate sector
- Increase of the registration duties rate applicable on the granting of long-lease rights or building rights from 2% to 5%
At this moment, the transfer taxes or taxes upon the establishment of a long-lease are 2%. The Belgian government decided to increase this rate to 5%.
The increased rate of 5% is applicable to authentic and private deeds in relation to long-lease or building rights drafted after 1 January 2024. For deeds executed before that date, the rate of 2% will still remain if the date of submission can be proven.
For completeness’ sake, we understand that no changes are currently envisaged to the registration duties due on the registration of regular lease contract which will remain subject to a registration duty of 0.2%.
- Additional tax of 10% for REIFs (FIIS/GVBF)
Upon entering the specific taxation regime of REIFs, an exit tax of 15% is due. An additional tax of 10% will be due due to the introduction of a new minimum five-year “standstill” period. This 10% additional tax will apply in case:
- the REIF is not listed anymore on the REIF-list as published by the FSMA within a period of 5 years since its registration on said list; or
- shares in the REIF, which were acquired following a contribution in the REIF, are sold within a period of 5 years since the shares were acquired.
This measure is set to take effect on 1 January 2024. Based on the reading of the law, the provision also extends to companies that transitioned to a REIF before 1 January 2024 but fail to meet the 5-year requirement after 1 January 2024. It should be mentioned that the triggering factor is the 5-year period, independent of the timing of the transition from a company to a REIF, whether it occurs before or after 1 January 2024.
- Non-deductibility of subscription tax or net asset tax
Under the provisions of the Program Law enacted on 26 December 2022, the subscription tax is incorporated into the taxable basis of a REIF/REIT. For Belgian tax purposes, only 20% of the subscription tax was eligible for deduction as a professional expense. In other words, 80% of the subscription tax is not considered as tax deductible expense and is consequently deemed a disallowed expense. Based on the new law, the reference to ‘80%’ will be eliminated, meaning the full exclusion of the subscription tax from tax deductible expenses as from 1 January 2024. This means that this new measure becomes applicable as of the assessment year 2025 (i.e. financial year starting on 1 January 2024).
- VAT changes
6% VAT rate on demolition-reconstruction of habitation in 2024 for developers: please see our newsflash for more details
3. Law of 28 December 2023 providing various tax provisions (Official Gazette 29 December 2023)
This law is part of the budget agreement. The most important measures from a corporate tax perspective are the following.
New annual tax on the non-profit sector
The non-profit associations, private foundations and non-profit international associations governed by the Code of companies and associations are subject to an annual tax.
The exemption for entities whose total assets do not exceed EUR 25.000 is replaced by the exemption on the first bracket of EUR 50.000 (exemption from filing a tax return (art. 151/1 of the Inheritance Tax Code).
Non-profit associations created before 1920 will be no longer exempted
The tax base is “on all assets wherever they may be located”. This means that even real estate properties located abroad will be included in the tax base. The tax paid abroad can be deducted provided the supporting documents referred to in the law are provided.
Provided certain conditions are met, the tax base will be reduced for healthcare institutions,taxpayers in charge of transportation of injured or sick individuals,taxpayer performing services closely related to social assistance, social security, and the protection of children and youth, school or university education, and taxpayers organizing theatrical, choreographic, or cinematographic performances, exhibitions, concerts, or conferences. Reduction is also made for the assets of adapted work enterprises, approved medical homes, and neighborhood health centers, institutions that manage shelters for animals, and private archive centers.
The rate of the tax will be gradually increased. It will go as follows:
- exemption between EUR 0 – EUR 50.000;
- 0,15% between EUR 50.000,01 – EUR 250.000;
- 0,30% between EUR 250.000,01 – EUR 500.000;
- and 0,45% above EUR 500.000.
The general anti-abuse rule will be applicable to the annual tax on the nonprofit sector. Along with these changes, also an administrative simplification is approved, by allowing an electronic filing of the tax declaration.
Entry in to force will be on 1 January 2024
Gambling and betting sector: non-deductibility of regional taxes
Regional tax on games and gambling and the tax on amusement machines are no longer deductible. Instead, they will be added to personal income tax (new art. 53, 32° ITC) and corporate income tax (art. 198 ITC).
Entry into force: taxes due from 1 January.2024
Payments to tax haven: new anti-abuse rule
The law introduces an anti-abuse measure to counter debt splits over two financial years. The payments made during the taxable period, increased by the increase of the short-term debts will be taken into account when assessing whether the minimum amount has been exceeded or not.
Entry into force will be from Assessment Year 2024
Reporting obligation of professional rental payments (art. 53 and 307 ITC)
There is an obligation to add an appendix to the tax return when the taxpayer is
- a tenant of a real property or holder of a right to build on, a long lease or another right in rem to use a property and;
- a legal entity is subject to income tax or an individual who deduct the rent or the compensation as business expenses
If an invoice related to the rent or the compensation has been issued there is an exception to the reporting obligation.
The rental compensation will be non deductible when
- the reporting obligation is not met;
- the rent and rental benefits linked to an immovable property, registered without charge under article 161, 12°, a) or b), of the Registration Duties Code, or eligible for free registration for properties in Belgium. This excludes properties leased solely for housing workers, company directors, and their family members under a legal or contractual obligation.
According to the preparatory works, the concept of compensation of a right in rem to use a property is broadly interpreted.
Entry into force will be from fiscal year 2024.
Adaptation following the implementation of the Mobility Directive
Amendment of certain existing tax definitions for restructuring operations:
- introduction of simplified merger between sister companies without the issuance of new shares.
- non-proportional partial demerger: possibility of remunerating the operation by allocating shares of the spun-off company only, or of the spun-off company and the benefiting company(s).
- introduction of cross-border partial demerger by separation, in which the shares are allocated to the spun-off company (rather than to the shareholders of the spun-off company).
Entry into force was on 16 June 2023
Belgian insurance premium tax (IPT)
In order to prevent the situation where insurance-related services would not be subject to either the IPT nor the VAT, the government proposed to replace the concept of “charges” in the IPT legislation by that of “remuneration for insurance-related services” where they are exempt from VAT pursuant to art. 44, § 3, 4° VAT Code”.
The tax base will be the remuneration for insurance-related services” where they are exempt from VAT pursuant to art. 44, § 3, 4° VAT Code.
Belgian-resident intermediaries will be liable to pay and declare the tax in respect of separate insurance-related contracts they entered into directly with policyholders. They could opt to pay the IPT on insurance-related services to the Belgian insurance undertaking.
Non-resident intermediaries have no similar filing and payment obligation; the person liable to pay the IPT on insurance-related services provided by foreign intermediaries should then be the Belgian policyholder.
Entry into force: 8 January 2024
Amicable agreements and reorganization plans (art. 48, al. 2 et 48/1 ITC)
Art. 48, al. ITC concerns the exemptions of the write-downs and provisions related to claims with contractors for which amicable agreements have been established or reorganization plans have been approved. The application of article 48, second indent ITC is extended to the other amicable agreements or reorganization plans covered by the Directive 2019/1023* implemented by the law of 7 June 2023
Moreover, profits from amicable agreements or reorganization plans will be phased into the debtor’s taxable base over the 3rd to the 6th periods after execution or withdrawal, at a one-fourth rate per period. This gradual inclusion aims to support the debtor’s financial recovery. Any remaining balance will be included at the latest in the period of activity cessation. In case of total or partial debt relief termination, the balance is immediately included in the taxable base for that period.
In case of total or partial termination of a debt waiver, the balance will be included in the taxable base for the period in which the termination occurred.
Entry into force : 10 days after publication in the OG
New declaration deadlines will be incorporated into the tax law.
Corporate Income Tax (CIT) and legal entities income tax:
- No later than 30/9 of year X+1 for companies and legal entities whose fiscal year ends during a period between 31/12 of year X and 28/2 of year X+1.
Extension of the declaration deadline is possible in case of serious reasons or force majeure.
The 5-year investigation period is extended to the professional withholding tax.
Program law of 26 December 2022 (Official Gazette 30 December 2022)
On 22 December 2022, the Chamber of Representatives adopted the draft program law.
From a corporate income tax perspective, the relevant provisions of the draft law are:
A temporary reinforced minimum tax will be applicable until the law transposing the proposed Directive on minimum taxation for multinational groups in the European Union has entered into force.
- The draft law provides for a one-time measure that reduces the use of tax assets in the current ‘basket system’ from 70% to 40% (above the EUR 1 million minimum threshold).
- This measure will enter into force on 1 January 2023 and will be applicable to tax year 2024 which relates to a taxable period which starts on 1 January 2023 at the earliest.
- An anti-abuse rule has been included to counter any changes made to the closing date of the accounting year from 11 October 2022 and which cannot be justified by the taxpayer for reasons other than tax avoidance.
- This measure will have a significant impact on companies which have a stock of tax assets (CF DRD, CF NID, CF losses, CF ID).
Notional interest deduction
The notional interest deduction regime applicable to taxable periods ending on or after 31 December 2023 will be abolished for all companies. The same anti-abuse rule as provided for the basket (minimum tax) will also be applicable to the notional interest deduction.
Foreign tax credit
The lump sum foreign tax credit on royalties of 15% will be changed to a credit based on the actual foreign withholding tax which shall be limited to 15%. However, when the debtor of the income has borne the foreign withholding tax in discharge of the beneficiary, the denominator is equal to 100. These changes will apply to taxable periods ending on or after 31 December 2023.
Contribution of the financial sector
Banking tax and insurance tax for credit institutions, collective investment undertakings and insurance companies will no longer be fully tax-deductible; 80% of this tax will become a disallowed expense.
Reform of the copyrights regime
The draft law also provides for a reform of the copyrights regime. It aims to reduce the scope of this regime (definition of the copyrights) and will likely only apply in situations of direct commercialisation of copyrights (see our newsflahs of 2 December 2022)
Law of 20 November 2022 on various tax and financial provisions (Official Gazette 30 November 2022)
This law contains substantial changes to the investigation, assessment and retention periods in direct tax and VAT procedures. This measure was first announced by Minister of Finance Vincent Van Peteghem – as part of the second action plan against tax and social fraud.
Besides the changes to the tax procedure, there are also some changes to the corporate tax.
Changes to the tax procedure
Here are the main aspects:
Extension of investigation, assessment and retention periods
The changes in the direct tax procedure include the following:
- For tax returns that are filed late or are not filed, the investigation and assessment period are extended to four years (instead of the ordinary three-year period);
- An extended investigation and assessment period of six years applies for specific cases, such as:
- transfer pricing investigations for companies that are subject to international reporting obligations, such as the local file 275LF (if one of the following thresholds are exceeded: >€1 billion balance sheet total, >€50 million operational and financial income, or annual average number of employees of >100 FTE) or Country by Country Reporting (for groups with consolidated revenue of > €750 million);
- investigations for companies that made payments to tax havens;
- companies that apply for an exemption, a waiver or a reduction of withholding taxes based on a double tax treaty or an EU directive;
- companies that apply Foreign Tax Credits;
- when information is obtained from foreign authorities (when it concerns a reportable arrangement under DAC6 or information from platform operators (provided that the amount concerned for a taxpayer exceeds €25,000);
- Ten years becomes now the standard investigation and assessment period for fraud (instead of seven years).The tax authorities will still have to notify the taxpayer of the intention to apply the extended period in case of suspicion of fraud. However, it is no longer required to state the precise indications of fraud at this stage.
- A period of ten years also applies for so-called ‘complex tax returns’. The law deems a tax return to be complex and in scope in the following cases:
- presence of hybrid mismatch arrangements;
- application of Controlled Foreign Country (CFC) rules;
- presence of a legal construction that is reportable.
As a consequence, the retention period for accounting and tax records is also extended from seven to ten years.
The VAT statutes of limitation are amended as follows:
- the three-year period is extended to four years for late or non-filing of the tax return;
- a ten-year period will equally apply for fraud in relation to VAT matters.
The provisions will enter into force as from assessment year 2023 (direct taxes) or VAT becoming due as of 1 January 2023 and only for the future.
Other measures included in the law impacting the tax procedure
- obstruction of a tax investigation can be punishable by a judge with penalty payments (dwangsom/astreinte) at the request of the tax authorities;
- the deadline for filing a tax claim / protest letter (administratief bezwaar/réclamation) is extended from six months to one year
Changes to the ITC
From a corporate income tax perspective, the changes are a.o. the following:
- Disallowed expenses: in order to clarify and to put an end to the controversial case law, article 197, first indent, ITC is amended so that non justified expenses (secret commissions) and hidden profits, subject to the distinct taxation of art. 219 ITC, are no longer considered as deductible expenses;
- Tax credit for increased flat-rate mileage allowance: following the fuel prices increase, the law provides for a temporary increase of the mileage allowance (1 March 2022 until 31 December 2022). In order to encourage employers to temporarily pay this increased mileage allowance to their employees who use their own car for professional journeys, the law provides for a tax credit.
Harmonisation in the interest regime in the VAT Code and Code of Miscellaneous Duties and Taxes
- harmonisation of the interest regime in the VAT Code and Code of Miscellaneous Duties and Taxes with the interest regime for direct taxes. In the direct tax provisions regarding the determination of the late payment interest and the default interest rate, the reference to the law of 5 May 1865 as legal basis is inserted without further substantive amendments. The law aligns the interest regime in the VAT Code and the Code of Various Taxes with direct taxes (4% late payment interest – 2% moratory interest). Regarding VAT, the law provides for the late payment interest an additional 4 percentage points (in practice, the current rate will be 8%) and the moratory interest rate will be 2% lower than late payment interest (6%). The starting point of the moratory interest is amended as well.
Law of 21 January 2022 regarding various tax provisions (Official Gazette 28 January 2022)
The draft law on various tax provisions has been voted in plenary session on 13 January 2022.
From a corporate tax perspective, the following provisions can be single out:
- Reporting obligation for copyrights: the draft law provides for a legal basis regarding the obligation to draw up forms and summary statements for copyrights and related rights income and the concession of these rights. Currently, this reporting was not mandatory. This extension triggers the following consequences from a corporate tax aspect:
- by default of forms and statements, the expense will be deductible but subject to the distinct taxation
- for a loss-making company, the whole tax base of the distinct taxation referred to in art. 219 ITC will be included in the minimum tax base.
Entry into force: income paid or attributed from 1 January 2021 in a taxable period that relates at the earliest to the FY 2022
- The limitations on deductions which are still currently provided by art. 207 ITC (no compensation with certain deductions such as DRD, innovation income deduction, investment deduction, etc) will be included in a single article (206/3 ITC). Moreover, the entire tax base subject to the distinct taxation is now part of the minimum tax base (and not only specific elements as in the former version of this provision). Consequently, hidden profits and copyrights not mentioned on the forms will be included in the minimum tax base. Entry into force: applicable from FY 2022
- Recharging of costs: the existing administrative tolerance for the full deductibility of certain costs (restaurant and reception expenses) which are on-charged will be introduced in the law and extended to clothing, business gifts, hunting, fishing, yachting, etc. Those will be fully deductible when they are re-invoiced to a third party (and mentioned expressly and separately in the invoice) even if this third party is not subject to the limitation. Applicable from FY 2022.
- Tax credit for R&D: the draft law will provide for the suspension of the tax credit for research & development as long as the profits from maritime navigation are determined according to tonnage. Entry into force: applicable from FY 2022.
- Order of deductions: the so-called “pot-pourri law” of 27 June 2021 had introduced the provisions regarding the order of deductions in the Belgian Income Tax code (instead of the Royal Decree). But the present draft law removes these provisions from the BITC and re-introduces these ones under another article. Entry into force: applicable from FY 2022 relating to a taxable period beginning on 1 January 2021 at the earliest).
- Purchase of goods and services are professional expenses (52, 13° ITC): following the judgment of the Supreme Court which refused to apply article 49 ITC to expenses related to the purchase of goods, a clarification is provided in the draft law. Art. 49 ITC will indeed be applicable to these expenses. According to the preparatory works, the notion of “goods and services” must be understood in the broadest possible sense. This provision applies to all companies, associations and entities that are not subject to art. 3:90 of the RD/Company and Associations Code. Applicable from FY 2022.
- A legal obligation to draft and file a 281.50 form will no longer be required when an invoice (in accordance with VAT regulations) or a document in lieu thereof (credit note or simplified invoice within the meaning of art. 13 Royal Decree No. 1) has been issued by a taxable person located in the EEA territory. Moreover, the King will have the power to set a cap below which no record shall be made. The threshold may not exceed EUR 1,000 per year per supplier. Applicable to income (commissions, brokerage, occasional fees, benefits of any kind, …) attributed from 1 January 2021.
- Deductibility of donations to disaster funds (art. 200 ITC): concerning the deductibility cap, the draft law provides for an increase of the 500,000 EUR cap to 2,500,000 EUR of donations made during the year 2021 by resident companies and Belgian establishments of non-resident companies in favour of disaster funds or to their administrative bodies. The date of payment has to be taken into account and not the date of the pledges. Applicable to taxable periods related to the year 2021.
- Reduced rate VVPRbis: according to the VVPRbis regime, companies can distribute dividends to private individuals at a withholding tax rate of 15% (subject to conditions) instead of 30%. The law includes several clarifications.
- According to the modified regime, it is more explicitly mentioned that the shareholders must fully pay up the initially subscribed contribution. Although not strictly mentioned in the law, it seems to be sufficient that the contribution is subscribed at the time of the attribution or payment of the dividend.
- Transitional measure: following the reform of the company law, a minimum nominal capital is no longer required in most types of companies. Various companies have decided to reduce the contribution by waiving the payment of the subscribed amounts. However, the reduced VVPRbis rate only applies to fully paid-up shares. In order to avoid uncertainty, the law provides that for companies that have decided in good faith to waive the requirement to pay up between 1 May 2019 and 15 December 2021, shareholders will be able to benefit from the reduced rate if they proceed to a (fiscal) capital increase which brings the contribution back to the level it had before the exemption from payment and if the shareholders pay up the shares in cash before 31.12.2022 (and if the other conditions are met). This capital increase may, “where appropriate”, “not be accompanied by the issue of new shares or units”.
- During the discussion in the Finance commission, the Minister of Finance confirmed that “it is indeed necessary but sufficient that the amounts have been fully paid up in cash. A subsequent reduction in the amounts actually paid up does not prevent the subsequent application of the so-called VVPRbis regime” (Report, no. 55-2351/004, p. 34).
- According to the new article 269, § 2, 10, ITC: if a company that has issued shares or units or increased its capital under the VVPRbis regime “subsequently reduces its capital, such reductions shall be deducted in priority from the capital paid up in execution of the incorporation or increase in question”.
- No extension of the waiting period (“délai d’attente”/”wachttermijn”)
- Regarding the “preferential shares” and due to ambiguity in the current system, the prohibition on the creation of ‘preferential’ shares or units is replaced by a prohibition on giving the shares or units concerned a ‘preferential right in respect of participation in the capital or profits or in respect of the distribution of the assets’.
- Entry into force: dividends allocated or paid from 1 January 2022
- European long-term investment funds (ELTIFs) provide finance of lasting duration to various infrastructure projects, unlisted companies, or listed small and medium-sized enterprises (SMEs) that issue equity or debt instruments for which there is no readily identifiable buyer. By providing finance to such projects, ELTIFs contribute to the financing of the Union’s real economy and the implementation of its policies. ELTIFs have a legal framework which is organised by Regulation (EU) 2015/760 of the European Parliament and of the Council of 29 April 2015. This European regulation, which by its legal nature is directly applicable in all Member States, nevertheless requires certain implementing measures at national level, in particular with regard to the ELTIF tax framework, given the exclusive competence of Member States in tax matters in this area. Unlike other European countries (France, Italy, Luxembourg, etc.), Belgium does not yet offer an adapted tax regime for ELTIFs. The Government aims to address this need by providing for a suitable tax framework both at the level of the ELTIF and at the level of the investors. The project aims at ensuring the corporate tax neutrality of the investment company and the avoidance of economic double taxation for both resident and non-resident corporate investors.
Program law of 27 December 2021 (Official Gazette of 31 December 2021)
In the framework of the Budget, the Government decided to introduce a range of measures covering different areas such as energy, labour and tax and social contribution. This draft law has been voted on 23 December 2021 and published in the Official Gazette of 31 December 2021.
From a corporate tax point of view, the following changes are introduced:
- tax shelter start-ups & scale ups: doubling of the amounts that these companies can raise (EUR 500,000 for start-ups and EUR 1 million for scale-ups) is provided. Entry into force: the day of publication of the law in the Official Gazette and applicable to sums allocated to the acquisition of shares from 1.1.2021
- brokerage fee for athletes :
- deductibility is limited to 3% of total gross annual salary
- brokerage fee exceeding the 3% becomes a disallowed expense and forms a minimum taxable basis
- entry into force: 1.1.2022
- the deductibility of the payments in the framework of fiscal and social amnesty is excluded (entry into force: 10 days after the publication of the law in the Official Gazette)
- amounts paid leading to the forfeiture of the criminal proceeding is not deductible anymore (entry into force: 10 days after the publication of the law in the Official Gazette)
- withholding tax on dividends distributed by regulated real estate companies will remain limited to 15%, if at least 80% of the real estate is invested in real estate intended for residential care or healthcare facilities. A new provision will determine how to calculate the 80% threshold (entry into force: income paid or attributed as from 1.1.2022)
Law of 25 November 2021 organising the fiscal and social greening of mobility (Official Gazette 3 December 2021)
- Introduction of an increased investment deduction for carbon-free trucks and fueling infrastructure for blue, green and turquoise hydrogen and electric charging infrastructure. The purpose is to stimulate the acquisition of new green trucks and fueling infrastructure as soon as possible. The total investment deduction is limited to MEUR 60, to avoid qualification as illegal State Aid. In some cases, the company will not be entitled to benefit from the increased investment deduction. It will be the case if the company has overdue social security debts, is a company in difficulties, has an outstanding recovery from the Commission for illegal State Aid or has requested regional aid/subsidies (exceptions possible). The increased rate will apply for investments made between 2022 and 2026 (+ 21,5% in 2022 and 2023, 16 % in 2024, 10,5% in 2025 and 5% in 2026).
- Various modifications upcoming on the deductibility of car costs: various modifications are upcoming on the deductibility of car costs, with the purpose to evolve to a carbon-free car fleet. Costs related to non carbon-free cars are no longer tax deductible as from 1 January 2026. Various (quite complex) transitory measures will apply.
- Increased deduction (up to 200%) for depreciations of investments in publicly available electric charging stations
Budget agreement: new measures announced
On 12 October, the Belgian Government reached an agreement on the Belgian budget. The budget agreement combines a number of measures to transition the Belgian economy after Covid in an environmentally balanced manner. Some points will need further agreement with the social partners, and some measures are taken explicitly in view of the recent surge of energy prices.
Transitioning an economy after the Covid pandemic, and whilst there is significant pressure on the energy market which could in the end backfire for the economic recovery, is a challenge. Some of the most important tax related measures include (i) the increase of resources for the transfer pricing team of the Belgian tax authorities (ii) the gradual transition to E-invoicing for B2B transactions, (iii) a number of environmental taxes aiming to stimulate the use of greener sources of energy (e.g. the introduction of an airplane tax for short flights) and also a number of measures aiming to support the economic weakest in society and to reduce the taxes on labour.
Beyond taxation, the agreement puts forward a number of new measures covering a variety of areas such as energy, labour and tax and social contribution.
From a corporate tax point of view, the most important changes would be the following:
- Airline tax on short flights
- Gradual abolition/phasing out of the tax benefit on the “professional diesel” (in this regard, there is a draft law on the greening of the mobility providing an increased deduction for investments in zero-emission trucks and recharge infrastructure)
- Reform of the wage withholding tax system (notably for shiftlabour and nightlabour)
- Amendments to the expat tax provisions
- The amount paid in relation to certain settlements will no longer be tax deductible
- Increased efforts in the fight against tax fraud
Law of 18 July 2021 containing temporary support measures (Official Gazette of 29 July 2021)
The law on temporary support measures in the light of the covid-19 pandemic has been published. Existing measures are extended until the end of September 2021.
- Waiver of rent: taking into account that a number of companies are still forced to close their business, the tax benefit (tax credit) is granted for the month June, July, August or September 2021 provided that the tenant has been obliged to close down all or part of his business in the rented building for at least one day in the month or months for which rent and rental benefits are waived. The mandatory closure must then take place in the month for which the rent is waived. The other terms and conditions remain the same as for the tax benefit granted by the Law of 2 April 2021 (see below).
- Exemption for overtime: the tax exemption for remuneration of overtime in the critical sectors (including the care sector) is extended until 30 September 2021. Therefore, 120 additional voluntary overtime hours can be worked during the period from 1 January to 30 September 2021.
- VAT: the lower interest rate for late payment also applies to the third quarter of 2021
- Extension of relaxations regarding the tax shelter for audio-visual and performing arts works
- Extension until 30.9.2021 of measures already extended last year until 31.3.2021 and until 30.6.2021 by the Law of 2 April 2021:
- the non-inclusion of remuneration for student work for the calculation of the resources (“bestaansmiddelen”/”ressources”) without being limited to specific sectors;
- the reduction of the VAT rate to 6% for mouth masks and hand gels (however, according to a decision of the European Commission, full exemption applies on the import until 31 December 2021 and this exemption takes precedence over the rate reduction)
- the exemption for notarial powers of attorney.
Law of 27 June 2021 containing miscellaneous tax provisions and amending the Law of 18 September 2017 on the prevention of money laundering and terrorist financing (so-called “pot-pourri law”) (Official Gazette of 30 June 2021)
From a corporate tax perspective, the major changes are the following:
- Cayman tax
On 28 January 2021, the Constitutional court ruled in favour of an annulment of a modification of article 18, al. 1, 3° BITC by article 89, 1° of the Program Law of 25 December 2017 which, in the context of the Cayman Tax, had aligned the tax regime of distributions made by the legal constructions without legal personality (“type A constructions”) with the tax regime applicable to distributions made by legal constructions with legal personality (“type B constructions”). The Court has indeed considered that the modification at hand was discriminatory (see our newsflash of 12 February 2021).
Following this judgment, the legislator had to amend the law or keep it unchanged but justify the difference of treatment by means of an explicit reasonable justification included in the explanatory statement of the law.
The legislator chose the second option and justified the difference of treatment in the explanatory statement.
Furthermore, the legislator has adapted (i) articles 5/1, §3, a) BITC to provide for an exemption from the tax regime applicable to legal constructions in case a legal construction has a legal personality according to the Law that governs it (vs previously, only type B legal constructions could benefit from the exemption) and provided it is subject to an income tax rate, computed according to Belgian tax rules, of at least 15% and (ii) article 18, (1), 3°, BITC which will provide that a distribution made by a legal construction having a legal personality according to the Law that governs it and being subject to an income tax rate, computed according to Belgian tax rules, of at least 15% (i.e. legal construction benefiting of the exemption from the tax regime applicable to legal constructions according to article 5/1, §3, a) BITC) do not qualify as dividends in the meaning of article 18, (1), 3°, BITC. These adaptations will enter into force retroactively i.e. on 17 September 2017 and apply to income attributed or paid by a legal construction from that date forward and on income attributed and paid from 1st January 2018 for Belgian withholding tax purposes.
- Costs proper to the employer – Reimbursements based on supporting documents
Reimbursement of costs proper to the employer by the company to the employee based on expense notes must be reported on individual salary slips and summarising statements in order to be tax deductible for the company. This applies to reimbursements paid as from 1 January 2022 and obviously also to reimbursements paid by a company to its managers as a reimbursement of “expenses proper to the employer”. According to the Memorandum of Explanation, the reimbursements based on supporting documents will not fall within the scope of article 219 of the BITC if the obligation to provide a fact sheet is not fulfilled.
- Secret commissions
In its judgment of 26 September 2019, the Constitutional Court ruled that art. 219, al. 7 BITC, which has since become alinea 6 following the amendments made to art. 219 BITC by the Law of 25 December 2017 on the reform of corporate taxation violates the principle of equality and non-discrimination insofar as the non-application of the distinct taxation is only limited to cases where the recipient of the benefit in kind was unambiguously identified within 2 years and 6 months, and does not apply in cases where the recipient was unambiguously identified outside that period, but was effectively taxed within the statutory assessment periods. Art. 219, al. 6 BITC is supplemented to clarify that in the latter case, the separate assessment does not apply either. According to the explanatory statement, it can also be added that, if the secret commissions tax has nevertheless been levied, it can be waived afterwards if the taxpayer (company) submits an objection within the time limits referred to in articles 371 and 376, §1 BITC, in which it demonstrates that a final assessment has indeed been made on behalf of the taxpayer beneficiary.
- Order of deductions
According to the opinion of the Council of State, the order of deductions should be organised by the Law and not by RD (the King can only specify how the deductions are calculated). Subject to some changes (notably order of certain provisions), the text of art. 74 to 79 of the RD/BITC has been introduced in the BITC under new sections (art. 207/1-9 BITC).
- Notional interest deduction
The basic rate for the NID is currently negative (-0.092%); the law provides that the deduction is not applicable when the rate determined by the provisions of the BITC (art. 205quater, §§ 2 to 6 BITC) is negative. For small companies, the basic rate will increase by 0.5% and will then still be applicable. For the tax year 2021, this rate is 0.408%. A new alinea has been added to specify that where the rate determined is negative, the notional interest deduction is not applicable and, for the application of the other provisions of the BITC, the rate is deemed to be zero for the corresponding tax year.
- Previous losses
As from 2020, the tax reform Law of 25 December 2017 modified the rules on the deductibility of PE losses so that losses incurred in a state with which Belgium has concluded a double tax treaty could no longer be deducted from the taxable base of the Belgian head office, unless these concern definite losses as defined in Belgian legislation. The law redrafts these rules by correcting or clarifying certain aspects (e.g. the recapture rule) without, however, thoroughly revising the philosophy behind them. For instance, the recapture rule now only comes into play if in any taxable period these losses were set off against Belgian profits or against treaty-exempt profits. The amendments will enter into force as from assessment year 2022 onwards, but due to an additional interpretative provision they will apply from the reform that took place in 2020.
The law also includes the definition of “losses” in the Income Tax Code. This definition was previously included in the Royal Decree implementing the BITC.
- Innovation Income Deduction
The remunerations derived from the transfer of intellectual property are, under certain conditions, part of the innovation income. The law specifies that these remunerations are taken into account insofar as they are included in the taxable result in Belgium during the taxable period.
In addition, the optional spread of the historical costs has been slightly modified. If not all historical costs are deducted after the maximum depreciation period (of seven taxable periods) or earlier, the taxable base and the balance of the historical costs must be restored as if the company had not opted for the spread. In this respect, the law clarifies that this correction should occur in the last year of the period chosen and not in the following year.
- Exempted innovation income
As long as an intellectual property right has not been granted, the innovation income is exempted by means of an exempted reserve. The computation of the maximum amounts of this reserve are now aligned with the fact that the tax reform Law of 25 December 2017 modified the order of the deductions (introduction of the basket rule).
- Liable for withholding tax: abusive exemption of the withholding tax
This article reformulates the provision in article 262, §2, 3° BITC in order to make the intended objective as described in the explanatory memorandum of the Law of 28 April 2019 (DOC 54 3528/006, p. 3-4), which last amended this provision, more evident in the legal text. Only in the case of an unlawful exemption from withholding tax must it be demonstrated that this was done either on the basis of an incorrect statement, or on collective or individual savings accounts that do not meet the requirements of article 21, al. 1, 8° BITC, in order to designate the beneficiary of the income as the debtor of the withholding tax. In the case of an unjustified withholding tax refund, it is always the beneficiary of the income who is designated as the withholding tax debtor.
The law also introduces changes in tax procedure:
- Tax increase in case of late tax return: art. 444 BITC now specifies that the tax increase also applies to the part of the income declared late. Up to now, the current text explicitly provides for the calculation of the tax increase only on the part of the income that was not declared.
- Currently, the only document available electronically is the assessment notice. In the future, and in the framework of the modernisation of the FPS Finance, the aim is to make all the “communications” related to audit of the tax return (such as a notice of adjustment, notice of ex officio assessment, …) available electronically. The King will determine the date of entry into force in order to allow the tax authorities to adapt their working method. The BITC is being mended in order to provide that the taxpayer may opt to receive all the communications electronically.
- Extended taxable period and audit delay for taxpayers not keeping their annual accounts per calendar year: the assessment period has been extended for companies not keeping accounts per calendar year to wage tax and withholding tax (rather than just corporate income tax). The audit and tax assessment delay will be extended by the period between 1 January of the tax year and the date of closure of the accounting year in the same year.
- Communication of books and documents via a secured platform: books and documents will have to be communicated via the secure electronic platform of the FPS Finance. This only applies to documents available in an electronic format and to individuals and legal entities using a computer system or other electronic device to keep, prepare, send or retain all or part of their books and documents.
- Making tax data available to local governments: the tax authorities are allowed to communicate to the administrations of the Communities, Regions, provinces, agglomerations, federations of municipalities and municipalities, the information which is necessary to those services in order to ensure the execution of the legal or regulatory provisions for which they are responsible.
Law of 2 April 2021 on temporary support measures in the light of the Covid-19 pandemic (Official Gazette 13 April 2021)
On 1 April 2021, the Chamber adopted the draft law on temporary support measures in the light of the Covid-19 pandemic. Existing measures are extended until the end of June 2021. Additional tax and economic support measures have been also approved notably in favor of companies and workers.
- Waiver of rent :
- Tax reduction of 30% for lessors who waive the rent and rental benefits of tenants who were forced to close their business due to the corona measures. The system is available if the tenant is an individual self-employed, a small company according to art. 1:24, §§1 to 6 of the Company & Association Code or a small association. The tax reduction is subject to a number of conditions.
- The measure is valid for the rent of the months March, April and May 2021.
- The tax reduction is equal to 30% of the amount of the rent and rental benefits that have been waived. A maximum of EUR 5 000 per month per lease can qualify for the tax reduction, and a maximum of EUR 45 000 per month per lessor.
- For corporate tax purposes, the benefit is granted in the form of a non-refundable tax credit
- VAT, customs and excise duty:
- lower interest rates for late payment (only for Q2 2021)
- The law aligns the rates for late payment and moratorium interest in VAT and customs and excise duties with those in income taxes. This means that the rate will drop drastically from 9,6% to 4% and 2% respectively.
- The interest rate adjustment will only apply to the second quarter of 2021.
- Definite abolition of the December advance payment for VAT (extension 2020) and for wage withholding tax (new).
- Reactivation of the tax shelter SME: in order to strengthen the equity capital of companies and to encourage taxpayers to subscribe to capital increases of companies facing a significant negative impact on their turnover, this measure is reactivated until 31 August 2021. This offers subscribers a temporary tax reduction of 20%. Companies facing a loss of turnover of more than 30% in the period from 2 November 2020 to 31 December 2020 are eligible.
- Exemption of regional corona premiums (allowances granted by the regions, communities, provinces or communes in relation to the Covid-19 pandemic) until the end of 31.12.2021.
- Exemption for overtime: The tax exemption for remuneration of overtime in the critical sectors (including the care sector) is extended until the second quarter of 2021. The number of exempted voluntary overtime hours is kept at 120 hours for the first and second quarter of 2021 together.
- Extension until 30.6.2021 of measures already extended until 31.3.2021 at the end of last year:
- the non-inclusion of remuneration for student work in the care and education sectors for the calculation of the resources (“bestaansmiddelen”/”ressources”);
- the arrangement whereby no wage withholding tax is deducted from the salaries for student work in the care and education sectors is extended to the salaries for services in the second quarter in these sectors;
- the reduction of the VAT rate to 6% for mouth masks and hand gels;
- the exemption for notarial powers of attorney.
Entry into force: 1 April 2021