New legislation impacting 30% EBITDA rule


In order to address criticism of the European Commission on inter alia the Belgian implementation of the “EBITDA interest limitation rule”, the Belgian legislator has published new legislation to address those. This might impact the financing of real estate, entities that perform factoring activities or entities active in “long-term public infrastructure projects”. The scope of grandfathered loans might also be affected by these changes.

What’s new?

On 2 July 2020 the European Commission sent a formal notice of default to the Belgian government regarding the implementation of the Council Directive (EU) 2016/1164 of 12 July 2016 laying down rules against tax avoidance practices that directly affect the functioning of the internal market (“ATAD I”). The European Commission concludes that the Belgian definitions of “financial undertakings” and “public private cooperation” – that are exempted from the rule – are not compatible with the ATAD I directive. In order to address these incompatibility issues, the Belgian legislator has published new legislation on 20 December 2020.

The legislation introduces three changes:

  • Revision of excluded “financial undertakings”;
  • Replacement of the notion “public-private partnerships” with the term “long-term public infrastructure projects”;
  • Technical corrections in order to better align article 198/1 ITC92 with the objective of ATAD I.
(i) Revision of excluded “financial undertakings”

The European Commission has commented that the exemptions as currently implemented in Belgian tax law are broader than the definition of ‘financial undertaking’ in ATAD I. The European Commission states that the list of financial undertakings in this definition should be interpreted as an exhaustive one. In order to address this, the legislation removes the two following exemptions from article 198/1, §6 ITC92.

  • Companies whose sole or main activity is the financing of real estate through the issue of real estate certificates; and
  • Companies whose main activity consists of factoring and this within the financial sector and insofar as the borrowed capital is effectively used for factoring activities.
(ii) “Long-term public infrastructure projects”

ATAD I states that the excess borrowing costs incurred on loans used to fund a long-term public infrastructure should be excluded from the 30% EBITDA rule.

The transposition in Belgian tax law is different in the sense that it mentions “public-private cooperation” instead of “long-term public infrastructure projects”. In this respect, the European Commission commented that the Belgian exemption could potentially also be applied to other than public infrastructure projects. Since the scope of both terms is not identical, the legislation replaces the term public-private cooperation with long-term public infrastructure projects.

(iii) Technical corrections

Finally, the legislation foresees three technical corrections to better align the Belgian 30% EBITDA rule with the objective of ATAD I.

  • The first correction clarifies that financing costs of which the deductibility is not permitted on the basis of any article of the ITC92, must not be taken into account when determining the exceeding borrowing costs. This is broader than the previous provision that only referred to non-deductible interest on the basis of the articles 49, 52, 2 °, 54 and 55 ITC92. Hence, this correction solves situations of potential double non-deductibility (e.g. in relation to payments to tax holidays which are still subject to the old thin cap rule);
  • The second correction clarifies that not only “interest”, but also “income and costs economically equivalent to interest” can be subject to the grandfathering regime provided that these instruments have been issued before 17 Juni 2016 and have not been substantially modified since that date (e.g. financial leases, guarantees, etc);
  • The final correction inserts a new indent to paragraph 6 which explicitly gives the King the power to determine how taxpayers can prove that they are within the scope of the exemptions of paragraph 6.

Groups having Belgian entities that are active in the financing of real estate or entities that perform factoring activities, should carefully review the impact of this new legislation. The same applies for Belgian entities who have income and costs economically equivalent to interest arising from financial instruments (other than loans) from contracts concluded before 17 June 2016. Alternatively, the broadening of the definition of PPS projects to long term public infrastructure projects could create opportunities to reduce the exceeding borrowing costs.

The changes to the 30% EBITDA rule have entered into force on 31 December 2020 and apply to the taxable periods closed from that date.

How can we assist you?

Understanding the struggle of multinationals trying to assess and deal with the impact of the measures, PwC has developed a web-based solution, named ILIA (Interest Limitation Insights & Analytics), that enables clients to perform these complex underlying calculations and assess optimization opportunities in-house. ILIA not only automates the calculations and makes estimations of cash tax effects, but also allows real-time EBITDA capacity transfers and group contributions transfers. In addition, it allows for certain modelling features to assess the impact of new financing structures, updated business plans etc. As ILIA is web-based, the simulations can be performed and stored efficiently in a user-friendly environment.

We would be happy to give you a live demo to show how ILIA can help you and your organisation to manage the impact of these new rules. Feel free to contact us to schedule a live demo, via David Ledure or via the following email address

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