Tag Archives: tax reform

Update – New upcoming tax measures – Program Act enacted

In our Newsflash of 7 November 2016 we already made reference to new upcoming tax measures. Certain of these anticipated changes have now been introduced by the Program Act of 25 December 2016, which was published in the Official Gazette on 29 December 2016. From a personal income tax perspective, the above Program Act introduces […]

nicolas-de-limbourg-author

In our Newsflash of 7 November 2016 we already made reference to new upcoming tax measures. Certain of these anticipated changes have now been introduced by the Program Act of 25 December 2016, which was published in the Official Gazette on 29 December 2016.

From a personal income tax perspective, the above Program Act introduces the following tax measures as of 1st January 2017:

  • increase from 27% to 30% of the withholding tax rate notably on interest and dividend income (paid or attributed as from 1 January 2017)
  • increase from 17% to 20% of the withholding tax rate on liquidation reserves set up as from 1 January 2017 and distributed within the first 5 years
  • withdrawal of the speculation tax (on capital gains realised as of 1 January 2017)
  • change in the tax treatment of internal capital gains when shares are contributed by an individual. In such case, there will no longer be a tax-free step-up. The difference between the fair market value of the shares and their acquisition value will be considered as a taxed reserve (and no longer as fiscally paid-up capital). As such, in the case where the reserves would be distributed to the shareholder, a withholding tax will apply. However, the sale of shares to a personal holding company is not in the scope of the Program Act.
  • as mentioned in our Newsflash of 12 December 2016, the formula for calculating the benefit in kind for the private use of a company car (by employees and company directors) was updated with the new CO2 reference, but no further changes were applied to the formula. From a corporate income tax perspective, the Program Act of 25 December 2016 now provides that disallowed expenses relating to (the private use of) company cars for which the company also covers fuel costs, equals 40% of the benefit in kind (not reduced by the beneficiaries’ own contribution). For cars provided by companies without fuel costs covered, the non-deductible amount equals 17% of the benefit in kind (not reduced by the beneficiary’s own contribution). The Program Act of 25 December 2016 does not yet include any provisions regarding the introduction of the so-called ‘mobility budget’, which would allow employees to convert their current company car into a ‘budget’ or to receive an ‘additional net salary’.

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

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 […]

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.

Draft law on the new Belgian Innovation Income Deduction

Today, the Council of Ministers approved the new Belgian Innovation Income Deduction (IID) which will be BEPS-compliant and will replace the abolished Patent Income Deduction. The draft law is now subject to recommendations from the Council of State. The important takeaways of the IID are: The taxable result of a Belgian company or branch will […]

Tom Wallyn

Today, the Council of Ministers approved the new Belgian Innovation Income Deduction (IID) which will be BEPS-compliant and will replace the abolished Patent Income Deduction. The draft law is now subject to recommendations from the Council of State.

The important takeaways of the IID are:

  • The taxable result of a Belgian company or branch will be reduced by 85% of the total net income related to intellectual property (IP) rights;
  • The net income will be determined by the modified nexus approach;
  • The IID will apply to income derived from patents and supplementary protection certificates. It will also apply to breeders’ rights, orphan drugs, data and market exclusivity and IP from copyrighted software;
  • Capital gains on the qualifying intangibles can also benefit from IID if they are included in the Belgian taxable basis of the company or branch, subject to a reinvestment requirement;
  • The deduction stays applicable in the framework of mergers and acquisitions;
  • The non-used IID can be carried forward;
  • A temporary exemption can apply when the request of the patent is still pending.

This IID regime will enter retroactively in to force as from 1 July 2016. More details will follow in a future PwC newsflash.

Transfer Pricing Documentation – Forms and guidance published

Today, the Royal Decrees that contain the various models of the forms Belgian entities need to use to submit the Master File, Local File and CbC Report were published in the Belgian Official Gazette. This is the closing stone of the formal introduction of transfer pricing documentation requirements into Belgian tax law. Together with the […]

Xavier Van Vlem

Today, the Royal Decrees that contain the various models of the forms Belgian entities need to use to submit the Master File, Local File and CbC Report were published in the Belgian Official Gazette. This is the closing stone of the formal introduction of transfer pricing documentation requirements into Belgian tax law. Together with the forms, guidance on how to use and complete the forms was published. A detailed tax insight is being prepared that will highlight the main aspects of the forms and the timing Belgian companies will need to adhere to.

As regards the local form (to be filed with the tax return), the following timing aspects need to be considered for the first filing:

  •  Section 1 in which general information on the enterprise needs to be provided applies to the accounting periods that started on or after 1 January 2016;
  • Section 3 in which optional documents can be provided that can help the Belgian tax authorities with the interpretation of information provided in parts 1 and 2 of the form applies to the accounting periods that started on or after 1 January 2016;
  • Section 2 in which detailed information on intra-group cross-border transactions per business unit will need to be provided (when a threshold of more than 1 million euros of cross-border intra-group transactions is exceeded) will only need to be filed for the reporting periods starting on or after 1 January 2017. As regards section 2, also an optional materiality threshold of 25,000 euros for inclusion of transactions has now been formally introduced.

Finally, together with the transfer pricing documentation forms, also the CbC notification form has been published that could be used to identify the reporting entity for CbC reporting purposes. Please note that the Belgian tax authorities have decided to postpone the first formal notification from 31 December 2016 to 30 September 2017 (latest) for the accounting period that started on or after 1 January 2016.

The Royal Decrees can be accessed here. The communication to the taxpayer can be accessed here.

Further information on the Belgian transfer pricing documentation and reporting requirements can be found here.

Belgium – corporate tax reform announced

In April 2016, the Federal government, in the framework of the agreement on additional budgetary and recovery measures following the 2016 budgetary control exercise, announced a reform of the Belgian corporate income tax (see our news flash on 11 April 2016). In July 2016, the ‘High Finance Council’ has published a report examining the different […]

philippe-vanclooster-author

In April 2016, the Federal government, in the framework of the agreement on additional budgetary and recovery measures following the 2016 budgetary control exercise, announced a reform of the Belgian corporate income tax (see our news flash on 11 April 2016).

In July 2016, the ‘High Finance Council’ has published a report examining the different options to reform the corporate income tax in a post-BEPS environment.

In August 2016, various articles in the press were published confirming that the Belgian government is currently working on a major corporate tax reform.

What are the ‘positive’ measures on the table?

Here are some measures that are currently under review, but still being discussed and hence subject to changes:

  • Progressive reduction of the Belgian corporate tax rate from 33.99% to 20% by 2020
  • Full exemption of capital gains on shares (currently taxable at 0.412% for non SMEs)
  • Decrease in the capital gains tax rate on shares realised within 12 months of the acquisition from 25 % to 20 % by 2018
  • Increase in the Dividend Received Deduction (DRD) up to 100 % (instead of 95% as is the case now)
  • Abolition of the fairness tax
  • Tax exemption for starting small businesses during the first five years under certain conditions

What are the ‘compensatory’ measures being discussed (again still in discussion phase)?

  • Increase in the withholding tax rate from 27% to 30%
  • Abolition of various deductions, such as:
    • notional interest deduction
    • investment deduction

However, the innovation income deduction (replacing the patent income deduction) and the tax shelter in the audio-visual sector would be maintained.

  • Limitation of the use of tax losses carried forward and dividend received deduction (e.g. limited to MEUR 1 + 60% above MEUR 1)
  • Less favourable depreciation regime
  • Limitation of the deduction of certain business expenses (reception costs, restaurant expenses or business gifts) up to 5% of the gross revenue
  • In the absence of corporate tax return, the minimum taxable lump-sum would amount to 40.000 € (instead of currently 19.000 €) from 2017
  • Fight against the use of companies only for tax purposes

Tax and accounting impact

If the above measures would be implemented, these could have a material tax and accounting impact. E.g.

  • What about the timing of transactions?
  • What about the impact on valuations (e.g. discounted cash flow on an after-tax basis)?
  • What about the accounting impact?

Companies reporting under US GAAP or IFRS must consider the reduced tax rate(s) effect on deferred tax balances when the amendments to the tax law will be (substantively) enacted. The effect of the reduced tax rates may require a detailed analysis to determine when the temporary differences existing upon the date of (substantive) enactment are expected to reverse.

Not only the tax rate change(s) should be considered for both deferred and current taxes but also all other changes in the tax legislation that are relevant for the legal entity/branch and the group (consolidated level) at hand.

Companies should also consider appropriate financial statement disclosures related to the changes in tax law.

The above corporate income tax reform has not yet been drafted and is still subject to further changes.

For any questions, don’t hesitate to contact your local PwC contact, Philippe Vanclooster or Koen De Grave.

Belgium – budgetary control 2016: reform of corporate tax regime announced

On 9 April 2016, the federal government reached an agreement on additional budgetary and recovery measures following the 2016 budgetary control exercise. To keep the budget on track, among others the following tax measures have been agreed: Reform of the Belgian corporate income tax regime. The corporate income tax regime will be reformed in order […]

philippe-vanclooster-author

On 9 April 2016, the federal government reached an agreement on additional budgetary and recovery measures following the 2016 budgetary control exercise. To keep the budget on track, among others the following tax measures have been agreed:

  • Reform of the Belgian corporate income tax regime. The corporate income tax regime will be reformed in order to (i) strengthen the competitive position of the Belgian market and (ii) become increasingly fair for small and medium sized companies.
  • Fight against fiscal fraud. Following among other developments the “Panama papers”, extra measures will be taken to combat fiscal fraud, and greater efforts will be made with regard to the so-called “Cayman tax” or “transparency tax”. The Minister of Finance announced that a package of anti-fraud rules has already been drafted but still has to be refined and made watertight by a taskforce of experts shortly.
  •  Real estate. Measures will be introduced to make the Belgian real estate market more attractive for foreign investors. For example it has been announced that new real estate investments funds (“fonds d’investissement immobilier spécialisé”/“gespecialiseerd vastgoedbeleggingsfonds”) dedicated to institutional investors would be introduced.
  •  Excise duties. Excise duties on tobacco and diesel would further increase.

Important to note is that the government reconfirmed the previously announced reduction of social security contributions on labour.

At this time, only the basic principles of the new measures have been agreed whilst the details are not yet clear and are still subject to change. The measures will now have to be translated into legislative texts.

If you have any questions, please contact your regular PwC tax consultant.

 

New budget measures following agreement of 30 June 2013

On 30 June 2013, the Belgian government has reached an agreement on the budget 2013-2014. The most important new tax measures that are announced in this respect are as follows: “Fairness tax” A “fairness tax” will be introduced for companies not paying any income taxes (due to tax deductions) while they distribute dividends. The rate would be […]

olivier-hermand-author

On 30 June 2013, the Belgian government has reached an agreement on the budget 2013-2014. The most important new tax measures that are announced in this respect are as follows:

“Fairness tax”

A “fairness tax” will be introduced for companies not paying any income taxes (due to tax deductions) while they distribute dividends.

The rate would be 5% on the amount of distributed dividends i) stemming from the profit of the year and ii) stemming from profit that has been compensated with notional interest deduction or tax losses carried forward. These conditions should be simultaneously met. Hence, the origin of the dividends needs to be identified to correctly apply this measure.

The part of distributed dividends that stem from (i) dividends received (ii) income which has been exempt under a double tax treaty, (iii) exempted gifts (iv) application of the patent income deduction (v) application of the investment deduction (vi) application of the stock of notional interest deduction would not be subject to the new minimum tax.

The new minimum tax is not tax-deductible and is not applicable to SMEs.

Please note that the currently existing profits carried forward which will be distributed as a dividend in future years, would not be subject to the minimum tax.

An anti-abuse measure would be introduced, stating that profits (as from 2013, related to tax year 2012) will be distributed via the “LIFO” principle.

VAT and lawyers

Lawyers will become subject to VAT. Hence, lawyers’ fees will be subject to 21% VAT, while these are currently not subject to VAT.

Excise duties

Excise duties on tobacco and alcohol would be increased.

SICAVs/BEVEKs

The 25% withholding tax on sale/repurchase of shares of certain accumulating bond funds will be/is extended to the sale/repurchase of shares in accumulating bond funds which do not have a European passport. In this respect an official statement by the Belgian government published on 1 July 2013 mention that this new rule is applicable as from 1 July 2013 (although not yet enacted).

Notional interest deduction

No changes are announced with regard to the notional interest deduction system, which will continue to exist as it is currently applied. For SMEs however, the NID rate might be increased.

Please note that the full details of the above measures are not yet clear and could still be modified, as no draft texts of the law are published yet. Once more information is available, we will let you know (or you may consult www.taxreform.be).