Finance Minister Vincent Van Peteghem launched his proposal for a first phase in the Belgian tax reform. This proposal was already announced several months ago and is now being put formally on the table. What we are looking at today is still a proposal that will now go into the legislative process. The aim is to land on a reform by the beginning of April, with a formal vote in the summer.
Overall objective of the tax reform
The tax reform proposal comprises various measures aiming to realise a reduction on the taxation of labor income via an increase of the tax free (lump sum) amount (the first part of the income that is not taxed) and a widening of certain tax brackets in the progressive income tax scales. Overall, the reform proposes a significant tax shift.
This tax reduction would be funded via the introduction of the Global Minimum Tax in Belgium (Pillar 2), an increase of the Belgian security tax, changes in the VAT rates and a reform of the tax regime for stock option plans. In addition, the reform seems to support the green transition by proposing additional tax incentives for green investments.
What is on the table?
Based on the information available at this moment, the following topics are part of the tax reform proposal of the Minister of Finance:
- a reduction of the personal income tax on employment income via an adjustment of the (progressive) personal income tax rate brackets and an increase of the tax free (lump sum) amount;
- increasing neutrality of the tax position of families via e.g. a reform of the tax treatment of alimony payments;
- the harmonization of benefits in kind with social security;
- reform of the tax system for option plans, carried interest structures and management incentives schemes;
- reform of the tax treatment of pension provisions via a revision of the so-called 80% rule;
- an increase of the security tax rate, which is a tax on holding certain security investments;
- changes to the participation exemption (so called ‘dividend received deduction (DRD)’), including more strict conditions to qualify for the regime (e.g. additional condition for participations of min EUR 2.5 mio, but lower than 10%, have to qualify as financial fixed assets), a move to a true exemption mechanism and the abolishment of the DRD BEVEK. The withholding tax rules will be impacted in this respect as well;
- introduction of certain new incentives for green investments;
- changes to the innovation income deduction regime by introducing the requirement for large enterprises that patents only qualify for the regime if they are EU or international patents (and no longer e.g. Belgian patents only). For small entreprises, Belgian patents would still qualify provided no negative search report or opinions are available;
- the integration of the Ruling Office into the tax administration;
- reform of VAT rates: the current 6% and 12% rates will become 9%; additional goods will qualify for the 0% VAT rate and the current 6% rate for electricity, gas and water supply will be maintained;
- a general obligation for e-invoicing and reporting will be implemented in a phased manner;
- an increase of excise duties on professional diesel.
What is next?
The above is only an initial overview of the measures which will now be the subject of in-depth discussion within the government.
For more insights on the impact of these possible changes, please do not hesitate to reach out to your regular PwC contact, or contact Pieter Deré or Stefaan Belon