The end of the year promises to be eventful! (continued)
This third edition of our newsletter will focus on tax news for SMEs and the self-employed.
These active players in our economy have not been left out after the agreement reached by our leaders at the end of this summer ...
- The TC Team -
2018 Budget: What’s new for SMEs?
1. Lower rates
1.1. Decrease in the basic rate of corporation tax
The general corporate tax rate will fall in the coming months from 33% to 29% in 2018 and to 25% in 2020 (see table). In addition, the additional crisis contribution will decrease from 3% to 2% in 2018 before disappearing completely from 2020 onwards.
For small businesses (as defined by Article 15 of the Company Code), from 2018 the rate will be reduced to 20% for the first €100,000. This means that the effective tax burden of SMEs will drop to 20.4% for this first bracket. From 2020, a rate of 20% will remain applicable for this same bracket.
For anything over €100,000, companies will be subject to the standard corporate tax rate.
The good news is that the reduced tariff applies to all SMEs, including small businesses that generate more than €100,000 of taxable profit. The introduction of the new system means that the existing system of "progressive tax rate" for SMEs disappears.
1.2. Consolidation of the reduced rate
The minimum compensation that must be granted to at least one general manager of a company to benefit from the reduced rate will increase from €36,000 to €45,000.
If the compensation is lower than €45,000, a special contribution of 5% in 2018 and of 10% from 2020 onwards will be applied on the difference. On the other hand, this tax will be tax-deductible and an exception to this scheme will be provided for this purpose for newly-established companies during the first 48 months.
Although the rate reduction can only be welcomed, that which came before indicates that the legislator has strongly targeted small businesses that pay too little to their executives. They will face a double penalty: they will lose the reduced rate and will be subject to a special tax of 10% on the insufficiently paid amount.
2. Modification of deduction items
2.1. Increased investment deduction
As a reminder, a company that makes investments can benefit from an investment deduction under certain conditions. The company may deduct, from the taxable profit, a percentage of the purchase value of the investment. This investment deduction would be temporarily increased from 8% to 20% for the years 2018, 2019 and 2020.
Subsequently, this deduction would be reduced back to 10%.
2.2. Minimum tax
A minimum tax wil be levied for companies (SMEs and non-SMEs) that make more than €1,000,000 of taxable profit. This minimum tax will take place by limiting several deduction items, so that the taxable basis will be affected to a lesser extent. The "TLCF" and "deferred RTD" items will be, among other things, limited. An exemption scheme is provided once more for newly-established companies.
2.3. Limited deduction of notional interest
The NID will be maintained, but the regime would be reviewed using a system, where only the increase in equity over a period of 5 years would be taken into account.
The government has decided to keep the percentage higher for small businesses.
2.4. Capital gains on shares
Exemption from capital gains on shares will henceforth be aligned with the conditions of the DRD system. Specifically, in addition to the qualifying condition of ("retention of full ownership for an uninterrupted period of one year") and the condition of taxation ("actually subject to taxation"), it is now appropriate to meet the condition of participation ("a participation of 10% or at least €2,500,000").
If these cumulated conditions are not met, capital gains on shares would be taxed at the normal corporate tax rate.
2.5. Yearly depreciation
Under the current system, small businesses can incorporate their first depreciation in their entirety as business expenses, regardless of their actual usage time. From 2018 onwards, this principle will disappear. In order to harmonise small and large businesses, small businesses can now only write things off pro rata temporis. The writing off annuity must therefore - as it is for large companies - be taken into account according to its true duration of use.
2.6. Limitation of certain charges
The deductibility of certain expenses would be limited:
· any fine relating to direct or indirect taxes, as well as any "administrative" fine, would become non tax deductible;
· the distinct contribution on non deductible expenses (formerly, the contribution on secret commission) would become entirely non tax deductible;
· car costs would be more limited ("fake" electric cars would also be affected by this measure)
2018 Budget (continued): The Self-Employed
1. Increased investment deduction
Much like for SMEs, the self-employed will see the investment deduction reach 20%. From 2021 onwards, it should also fall to 10%.
2. Lump-sum professional expenses
Self-employed and employees lump-sum professional expenses, will be aligned. To support the self-employed, they will benefit from flat-rate fees equal to those of employees.
3. Subscription tax on securities accounts
From 2018 onwards, a new tax will be introduced: the "subscription tax on securities accounts". Investors (individuals) who hold securities accounts with a value of at least €500,000 will be taxed at the rate of 0.15%, applied from the 1st euro.
Will be submitted to this tax: listed shares, bonds, units in mutual funds, certificates of deposit and warrants.
It should be noted that the exclusion from the scope of this tax of unlisted shares, registered shares, trackers and certificates has been pointed out by the Conseil d'Etat (1). The final text will tell us if the legislator has finally taken this into account.
This tax, assessed by taxpayer, would however not apply to pension savings funds, life insurance and similar products.
4. Increase in the TOB (Belgian Stock exchange tax)
As from January 1rst 2018, the rate of this tax will increase as follow: for shares, the rate will rise from 0.27% to 0.35%, and for bonds, from 0.09% to 0.12%.
5. Pension savings
Pension savings are becoming more flexible. Choice would be left to the taxpayer between the current system (saving 940 EUR for a tax benefit of 30%, i.e. 282 EUR) and a new system that would allow savins of 1.200 EUR giving right to a tax reduction of 25%, i.e. 300 EUR.
The absolute tax benefit would remain pretty much the same, except that this new system would provide a larger saving amount.
6. Faster compensation in case of illness
From 1 January 2018 onwards, the period of absence in case of illness for the self-employed will be altered from 1 month to 2 weeks. A self-employed person who is sick for a long time can therefore already request an INAMI intervention after 2 weeks.
Given all these developments, the opportunity whether or not to work for a company will have to be considered afresh ...
(1) Camber, Doc 54, 2746/0001, pages 187 and subsequent.
Advance payments … not to be neglected in the future!
From the 2018 tax year, the increment for insufficient advance payments would always be at least 2,25%.
The absence of increase whilst it did not exceed 1% of the due tax or 25 euros is maintained for 2018, but the thresholds go to respectively 0.5% or 50 EUR (non indexed amount).
Also, in order to avoid an increase in 2017, the following payments should have been made during the year:
for VA1: 58.34% of the presumed amount of tax due;
for VA2: 70% of the presumed amount of tax due;
for VA3: 87.5% of the presumed amount of tax due.
If this has not been done, VA4 will have to pay more than 100% of the deemed amount of tax due to avoid an increment.
This was not the case in the 2016 and 2017 tax years where it was still possible to avoid the increment by making a fourth advance payment.
It should be noted that according to the current text of the corporate tax reform, it would be question of :
· abolishing the possibility of absence of increase when the latter is lower than the thresholds mentioned above;
· Maintaining the existing calculation of the increase, i.e. 2,25 times the reference interest rate, which could not be lower than 3% (instead of the current 1%). This would bring the increase to a minimum of 6,75%.
Starters companies would still not be subject to the increase during their fisrt three years.
Daily allowances: to be in place from 1 September 2017
From 1 September 2017, the daily allowance amount granted to civil servants is to increase from €20.00 to €16.73. The granting of these benefits is also subject to new conditions from that date onwards. Private sector employers will have to take this new system into account ...
A more detailed notification on this subject will be available on our website very soon ...
Tax Consult News
1. Tax Consult is expanding
Since one of our values is proximity, we are happy and proud to announce that we are opening an office in Antwerp (Uitbreidingstraat, 60-62 to 2600 Berchem) ... This will make us, more than ever, a partner who listens to our customers from the north!
We are already looking forward to meeting you in our new offices ....
If you came to visit us recently, you will have noticed that our offices are now accessible to people with reduced mobility ...
3. Transfer prices - News
In order to meet the transfer prices needs of our customers, Tax Consult is formed and informed ... Also, we were present and active during the training day, which was jointly organised by the Alliott Group and IBFD in Amsterdam on 15 September 2017.
4. Our VAT team is getting stronger...
Since the beginning of October, Mickael Tatayas has joined Sabine van Pelt at Tax Consult. These two people are now fully dedicated towards answering all your questions regarding VAT and indirect taxes ... their contact details are on our website. Do not hesitate to call them!