Tax loss carry-back system: administrative circular letter published


On 22 September 2020, the Belgian tax authorities issued a circular letter (administrative guideline) in relation to the tax loss “carry-back” system. Previously, a Royal Decree was published on 1 September 2020 which further clarifies the formalities to be fulfilled in order to apply the loss “carry-back” system.

In our newsflash of 2 July 2020, we discussed the temporary tax exemption of profits in anticipation of tax losses realized in the COVID-19 period in order to strengthen the liquidity and solvency of companies experiencing liquidity problems because of the COVID-19 pandemic (or other reasons), the so-called tax loss “carry-back” system. The application of this measure takes place via the tax return (or a request for modification of the tax return if the tax return was already filed in certain cases). The formalities to be fulfilled include the completion of Form 275 COV, which should be attached to the tax return. 

On 1 September 2020, a Royal Decree was published in the Belgian Official Gazette to specify in more detail how this form should be completed. The Royal Decree e.g. clarifies that, in case the tax return has been filed prior to the entry into force of the Royal Decree, the taxpayer has to submit the form to the competent authorities by 30 November 2020 at the latest. Hence, the form will be added to the filed tax return and will form an integral part of it. 

Despite the Royal Decree, some questions remained still open. In this context, the Belgian tax authorities published an administrative guideline on 22 September 2020 in order to tackle some of these outstanding questions. The circular letter e.g. confirms that in a situation where the assessment notice has already been received by the taxpayer, the tax authorities will grant an exemption provided the taxpayer complies with the appropriate formalities (i.e. file the completed Form 275 COV by 30 November 2020). Should the creation of a “carry-back” reserve also have an impact on other elements of the tax return, the taxpayer will have to provide a copy of the adjusted tax return as well. Furthermore, the administrative guideline provides more information regarding the calculation of the imposed penalty in case the “carry-back” reserve has been overestimated, the companies which are excluded from the measure and the maximum amount of the “carry-back” reserve.        

Next to the administrative guideline and the Royal Decree, during the holidays, an amendment has been made to the tax loss carry-back measure. More in particular, the so-called “pre-COVID period” has been shortened by the act of 15 July 2020 (Corona III). The pre-COVID period is the period in which the closing date of the financial year should take place in order to apply the tax loss carry-back measure and to exempt whole or part of the profit of that financial year. In the initial legislation this period ran from 13 March 2019 until 31 December 2020. The act of 15 July 2020 has shortened this period to 31 July 2020.

Any further questions? Don’t hesitate to reach out to Koen De Grave, Matthias Bastiaen or your regular PwC tax contact.