On 13 February 2020, a circular letter on the group contribution regime has been published (Dutch and French version). The group contribution regime, applicable as of financial year 2019 (assessment year 2020), enables Belgian companies and Belgian branches of entities located in the EER to transfer taxable profits to other affiliated Belgian companies/branches with the aim to offset these profits against current-year tax losses.
The circular letter summarizes the current provisions of article 205/5 BITC92 and preparatory works and provides clarifying examples on the application of the group contribution regime in view of eligible companies, excluded companies, minimal holding period, application after a business restructuring, final foreign PE losses and the mandatory compensation to be paid.
Specifically with regard to the compensation to be paid by the transferring company, the circular letter states that the amount of the remuneration should be equal to the amount of tax which would normally be charged on the group contribution and is therefore due at all times. Even if, for example, carried-forward tax losses are available in the hands of the transferring company, and e.g. no corporation income tax would be payable without a group contribution, the compensatory remuneration would still need to be paid. Note that the circular also requires the compensation to be effectively paid and that the mere recording of a debt is not sufficient.
Furthermore, a template version of the group contribution agreement has been published simultaneously (Dutch and French version). Taxpayers need to include such an agreement to their tax return in order to confirm that the conditions, to justify the application of the group contribution regime, have been fulfilled.
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