Month: May 2021

How to optimize your personal tax return?

As the tax return period is fast approaching, we have identified a number of points of attention regarding the optimisation of your tax return :

– Regarding service cheques, did you know that in Flanders, Brussels and Wallonia, each taxpayer can deduct a maximum of 1,530€ service cheques. This means that if your husband or wife exceeds this maximum amount, it may be interesting to create an account for your partner;

– Mortgage loans taken out from 1 January 2020 (Flanders) or 1 January 2017 (Brussels) for your own home no longer give the right to the housing bonus (deduction of interest and capital repayments). To compensate for this, a reduction in registration duties is provided for;

– We would also point out that if you repay your mortgage loan early, you de facto lose the tax deduction for interest and capital repayments;

– To strengthen your statutory pension, you can rely on the supplementary pension, but you can also take the initiative to build up individual pension savings. Between 2020 and 2023, you may pay a maximum of 990 euros and benefit from a 30% tax break (maximum 297 euros);

– The “Tax shelter” for starters is one of the easiest ways to reduce tax liability. In order to help small business start-ups, a tax incentive has been developed for citizens. Citizens can get a tax reduction of 30 % or 45 % of the amount invested in the companies. Thus, for an investment of €20,000 in equity in a start-up company, you enjoy a tax reduction of €9,000 (20,000*45%). This measure is often used, for example, when a married couple decides to create a company, the two partners invest in the company and the only one who does not hold a remunerated mandate (condition for Tax shelter) in the company receives a tax reduction of 30% or 45% of the investment.

– For donations, the tax relief increases from 45% to 60%. For tax-deductible donations made in 2020, the tax reduction has been temporarily increased from 45 to 60% (law of 15.07.2020, MB of 23.07.2020). Note that the increase will benefit all donations made in 2020, retroactively. However, in principle, the total amount of tax-deductible donations cannot exceed 10% of the total net income, but this ceiling is raised to 20% for 2020 (Law of 15.07.2020, MB of 23.07.2020), with an absolute maximum of € 397,850 in deductible donations. Is there an automatic right to the tax reduction? No, the beneficiary of your donation must be a legally recognised institution.

– If your salary has changed, it may be advisable to inform your social security fund directly so that the social contributions can be adjusted.

– The system of advance payments is different according to the nature of the taxpayer. We distinguish between natural persons, the self-employed and companies. If you make prepayments, you can receive a bonus. A bonus is a tax reduction. If you pay enough in advance, you will get a discount on the tax you have to pay. This bonus applies to all individuals who, after deducting withholding taxes and other deductible expenses, still owe tax on their income. For income as a self-employed person or as a company director, you are not entitled to a rebate. You can even get more to pay on taxes if you do not pay enough in advance!

Please do not hesitate to contact our team at info@taxconsult.be or directly your file manager if you have any further questions.

Tax Consult A&A

The double solvability and liquidity test in case of dividend distribution

One of the major news foreseen by the new Belgian Companies and Associations Code (CAC) consists in the suppression of the minimum capital requirement for Private Limited Company (PLC) and Cooperative Companies (CC). One of the role of the previous minimum capital requirement was the protection of the interests of third parties linked to these types of companies.

Following the suppression of this minimum capital requirement, and in order to protect the financial interest of third parties, the CAC has introduced the obligation for the PLC and CC to perform a double liquidity and solvability test prior to any distribution to the shareholders (i.e. dividend, directors fees, capital reduction, buy-back of own shares – any distribution decided at the closure of the financial year). This double test requirement is applicable for distributions decided as from 1st January 2020.

I. What is the “solvability test”?

Following the solvability test (also known as the “net asset” test), the General Assembly cannot decide to distribute any amount in case the company’s net asset (i.e. total of the assets, minus provisions, debts and, except exceptional cases, the not yet depreciated part of constitution and expansion costs, as well as R&D costs) is negative prior to the distribution or would become negative after the distribution. This test should be based on the latest approved annual accounts or on a more recent financial statement. In case an auditor was nominated, the latter analyses the more recent statement and must join his report to his annual control report.

In the current state of the law, it is not mandatory to insert in the minutes of the General Assembly the quantified result of the solvability test.

II. What is then the “liquidity test”?

Following the result of the liquidity test, a decision to distribute taken by the General Assembly can only produce its effects after the Board of Directors would have demonstrated that, following the distribution, the company could still pay back its debt up to a period of 12 months. It is then the Director’s role to perform a financial analysis (consisting in the demonstration that the company’s short-term debts can be repaid from its current assets – “acid ratio” or “quick ratio”) in order to demonstrate that the liquidity test is fulfilled prior to the General Assembly’s decision to distribute proceeds.

If it can be demonstrated that the Board of Directors knew, or should have known, that the liquidity test would not be fulfilled prior to the distribution, the latter can be held jointly and severally liable towards the company or the third parties of the damages resulting from the decision to still perform the contemplated distribution.

The realization of this double test is phased. Indeed, the General Assembly must first perform the solvability test. In case the test has a negative result, no distribution can be decided upon, despite the potential result of the liquidity test. However, if the solvability test shows a positive result, the Board of Directors must then perform the liquidity test before the actual payment of the distribution.

Tax Consult follows the news of the new measures taken and applied by the Authorities on a daily basis and is regularly in contact with the (tax) Administration. In case of question, do not hesitate to contact our team at info@taxconsult.be or directly your file manager in order to receive a tailor-made advice adapted to your situation.

Tax Consult A&A