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 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’.