Author: galia

The worldwide coronavirus crisis allowed many self-employed and companies’ directors to benefit from the bridging right during the year 2020.

The Belgian Tax Authorities recently brought some clarifications on the tax and social impacts of those allowances.

In this article, we summarize the tax rate applied to these allowances as well as the impact on the social security contributions of free-lances and directors. They benefited under different conditions, either from the « crisis » bridging right or the “relance” bridging right.

The « crisis » bridging right for self-employed persons

 The crisis bridging right was granted :

• In case of partial or complete discontinuation of activities due to the government measures
• To persons who were not forced to close their business activities but interrupted it during seven consecutive calendar days due to the coronavirus crisis

The financial benefit received are taxable at a rate of 16,5%, to the condition that the allowance does not exceed the net taxable profits of the last four periods (the such called “4×4 rule”).

In the contrary, the allowances will be globally taxable depending on the normal progressive tax rates.

The taxable allowances of the bridging right are not taken into account for the calculation basis of

the independents social contributions.

The « crisis » bridging right for directors

 The allowances are taxable at the normal progressive tax rates and are not taken into account for the calculation basis of the independents social contributions.

As director, you do not have to pay social contributions on the received financial benefit.

The « relance » bridging right

 This allowance was granted to independents to support the resumption of their activities during the months of June until December 2020.

Both for self-employed people earning profits from their activities and for self-employed directors, the services granted under the bridging right are taxed at the normal progressive rates and will never be part of the calculation basis of social contributions.

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 (info@taxconsult.be) or directly your file manager in order to receive a tailor-made advice adapted to your situation.

Tax Consutl A&A

The European Directive (EU) 2018/822 of May 25th 2018, better known as « DAC6 » enforces tax authorities to exchange information regarding cross-borders tax-planning arrangements qualified as (potentially) aggressive.  To enable this, the Directive and the law of December 20^th, 2019 (Belgian Gazette dd. December 30th, 2019) implementing it, have foreseen the obligation for intermediaries as tax advisers, bankers, lawyers … to report such arrangements to their national authorities.  Should there be no reporting by an intermediary, the obligation and the related penalties are transferred to the taxpayers.

The reporting obligations must be complied with within the 30 days beginning as of the triggering moment occurring first:

• the day after the reportable cross-border arrangement is made available for implementation;
• the day after which the reportable cross-border arrangement is ready for implementation;
• the day when the first step of implementation of the reportable cross-border arrangement has been taken.

The reporting obligations has been postponed to the following due date :

• No later than on February 28^th, 2021 for the first reportable period, being the arrangements for which the first step was implemented between June 25^th, 2018 and June 30^th, 2020 ;
• No later than on January 31^st, 2021 for the cross-borders arrangements that, between July 1^st, 2020 and December 31^st, 2020, (i) either were made available for implementation, or (ii) were ready for implementation, or (iii) for which the first step of implementation has been taken. This due date is also applicable for the actors/intermediaries who provided, during this period, help, assistance or advices in designing, marketing, organizing or managing the targeted cross-border arrangements.
• As of January 1^st, 2021, the reporting obligations must be complied with within the 30 days delay as of the triggering moments described above.

However, on January 28th, 2021, the FPS Finance informed through its website of an administrative tolerance up until February 28^th, 2021 for the cross-borders arrangements which should have been declared during January and February 2021.

In the event of non-declaration or late filing by the tax payer or the intermediary which were subject to the disclosure obligation, a fine amounting between 5.000 and 50.000 EUR will be applied. In case of fraudulent intent or harm, a fine between 12.500 and 100.000 EUR will be applied.

Tax Consult remains at your disposal to analyse your cross-borders arrangements as of June 25th, 2018 in order to determine whether, within the conditions set up by the Belgian Tax Authorities, reporting obligations must be reported through a DAC6 declaration.

Do not hesitate to contact directly your file manager or our team using the address info@taxconsult.be in order to receive a tailor-made advice adapted to your situation.

Tax Consult A&A

Since January 1^st 2021, as a result of the Brexit, the VAT treatment applicable to trade with the United Kingdom has changed substantially. Many changes are taking place and have a significant impact on Belgian companies.

In this article, we provide you with a brief overview of some of the Brexit results with regards to VAT:

1. Supplies of goods between taxable persons

As the UK is now outside the VAT territory, shipments of goods between taxable persons (B2B) from an EU Member State to the UK or vice versa are no longer considered as intra-Community transactions exempt from VAT in the Member State of departure or as intra-Community acquisitions of goods taxable in the country of destination of the goods.

These transactions are now exports – exempt from VAT in the Member State of departure – or imports taxable on arrival under the VAT provisions applicable in that territory.

This change implies inter alia that:

• The legal provision relating to the export is mentioned on the invoice (i.e. Article 146 of the VAT Directive or Article 39 §1 or §2 of the Belgian VAT Code);
• The entry into or exit of goods from the territory of the European Union is proven by a set of documents and, in particular, by the customs declaration (on which the exporter of the goods will mention its EORI number) as well as other documents such as transport documents;
• The modification of the reporting of these operations in the VAT declaration: in box [47] (outgoing transactions) and in boxes [87], [56] and [59] (incoming transactions);
• The absence of reporting in the statement of intra-Community transactions.

2. B2B services

B2B services with the United Kingdom are now considered “extra-Community” services, not intra-Community services.

This change implies, among other things, that:

• These services must therefore be reported in the VAT return: in box [47] (outgoing transactions) and in boxes [87], [56] and [59] (incoming transactions);
• They will no longer be reported in the statement of intra-Community transactions.

3. The special feature of Northern Ireland

Within the framework of the “Protocol on Ireland and Northern Ireland”, it is provided – for VAT purposes – that Northern Ireland continues to be part of the “European Community”, as far as goods are concerned. The shipment of goods between the Member States and Northern Ireland will continue to benefit from the intra-Community regime.

However, for services, Northern Ireland will be treated as a third territory, in the same way as the rest of the United Kingdom.

4. Sending goods to private individuals in the United Kingdom

The “distance selling scheme” no longer applies to businesses selling goods to individuals in the UK. These sales are now considered as an export. Depending on the terms of the sale, the seller may be required to be VAT registered in the UK.

5. The Mini One Stop Shop system in B2C transactions

The MOSS scheme is no longer an option for supplies of electronic, telecommunications, radio and television services made by a Belgian taxable person for a particular customer established in the UK. In the event that UK VAT is due on the transaction, the Belgian supplier must refer to the VAT rules in force in the UK.

6. The refund of UK VAT

UK VAT incurred by an EU taxable person during the calendar year 2020 will continue to be eligible for refund under the VAT Refund procedure until 31 March 2021 at the latest.

For UK VAT incurred from 1 January 2021 onwards, the EU taxable person will have to follow the refund procedure prescribed by the UK VAT Authorities.

7. Financial or insurance services

Belgian taxable persons who carry out financial or insurance transactions as referred to in Article 44 §3, 4° to 10° of the Belgian VAT Code for customers established in the United Kingdom may benefit from a more interesting right of VAT deduction, as the charges relating to these transactions may be deductible pursuant to Article 45 §1, 4° and 5° of the VAT Code.

8. Conclusion

Brexit, as we might expect, imposes new VAT obligations or, at least, imposes special attention in order to comply with the VAT obligations related to the UK’s third country status. While, from a Belgian point of view, the Belgian VAT Authorities have published a relatively comprehensive set of comments, the potential new VAT obligations in the United Kingdom should not be overlooked.

A forthcoming article will be published on the question of VAT registration in Belgium or in the United Kingdom, taking into account the obligation (or not) to appoint a responsible representative.

Tax Consult in collaboration with the correspondents of its network in the United Kingdom is at your disposal for any question in this context.

For more details on these provisions, we invite you to read the FAQs published by the FPS Finance or to contact the VAT Department of Tax Consult at info@taxconsult.be. An appropriate answer to your situation will be sent to you.

The VAT Department of Tax Consult A&A

A recent circular from the tax authorities (Circular 2021/C/2 of January 7, 2021) aims at clarifying the provisions of Article 8 of the Inheritance Tax Code, in particular following the various legislative changes in matrimonial and inheritance law.

It results from the analysis of this circular that the preferential regime following which the holders of a life insurance policy benefited within the framework of a horizontal estate planning is now over.

I. TARGETED SITUATIONS

This circular mainly impacts situations where a married couple under the legal regime of community of property subscribed to a life insurance together, of which they are also the insured heads, and their common children the beneficiaries.

II. PREVIOUS REGIME

Previously, when spouses invested in life insurance, and in the event of the death of one of them, no inheritance tax was applied on the transfer of the cash surrender value of the policy from the deceased spouse to the surviving spouse.

Indeed, the Civil Code provides that the cash surrender value of the life insurance contract is considered the personal property of the surviving spouse. From a tax point of view, following this surrender, the surviving spouse is required to pay a reward to the estate assets. However, according to article 16 of the Inheritance Tax Code, this reward is exempt from inheritance tax.

III. REGIME ESTABLISHED BY THE NEW CIRCULAR

Through this circular, the tax authorities seek to clarify the scope of application of Article 8 of the Inheritance Tax Code. Indeed, the Administration stipulates that any sum received by the surviving spouse resulting from the conclusion of a life insurance policy under a stipulation made in his / her profit is considered as being collected as a legacy by this spouse, notwithstanding the that the surrender value is qualified by the Civil Code as belonging to the surviving spouse.

On this basis, the Administration therefore tends to consider that the surrender value is not transmitted via the prescription of the Civil Code but via a legacy within the meaning of Article 8 of the Code of Inheritance Rights. Inheritance tax would therefore be due on these amounts.

It should however be recalled that a circular does not bear the force of law and its purpose is in principle only to clarify the position of the Administration. The application of this circular could lead to numerous disputes between taxpayers and the Administration based on the violation of the principle of legality of tax.

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

Since their apparition a couple of years ago, the crypto-currencies (Bitcoin, Ethereum and some 2000 others) were recently the subject of conversations. These high-volatility products can lead to material capital gains, which raises the question of their tax treatment.

As it is the case for capital gains on shares, the Belgian tax administration distinguishes three different tax qualifications to the capital gains realized at the occasion of the sale of crypto-currencies:

• The capital gains are realized in the framework of the normal management of one’s private estate (good father’s management);
• The capital gains result from speculative operations; and
• The capital gains take place in the framework of a professional activity.

In case the capital gains are realized in the framework of the normal management of one’s private estate, i.e. with the objective of making one’s money grow on the long-term in a secure way, it should in principle not be taxed.

If the capital gains result from speculative transactions, i.e. when the tax payer is fully aware of the risky nature of the transactions, the capital gains is qualified as a miscellaneous income and is subject to a distinct 33% tax rate. Other criteria are relevant to qualify the capital gains as miscellaneous income, such as the use of credit, the small periods of time between the transactions, the regular monitoring of the exchange rates in order to sell at the higher rate possible, etc.

Finally, in case the transactions are performed with such a regularity that one can suspect that the transactions take place within the framework of a professional activity (i.e. the trader in crypto-currencies), the capital gains realized are qualified as a professional income and are taxed as such at the progressive income tax rates.

We can easily understand that capital gains realized in the framework of crypto-currencies transactions are analysed based on the factual background around the transactions. Faced with the raise of crypto-currencies transactions the Anticipated Decisions Services published a list of questions with the aim of helping the tax payer determining in which category he / she lies. This list is available on the website ruling.be.

Tax Consult follows 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

Since the adoption of the law relating to money laundering and terrorism financing prevention dated September 18^th, 2017, every company, non-profit (international) organization, foundation and trust must identify and register its beneficial owners via the platform known as the “UBO Register”, and this since September 30^th, 2019 (administrative tolerance until December 31^st, 2019).

Following the recent publication of a Royal Decree, a new documentation obligation was added to the existing one. Indeed, the Royal Decree in question provides that all information providers are now required to provide via the platform any piece of document demonstrating that the information recorded is “adequate, accurate and up to date”.

This documentation formality must be complied with by April 30^th, 2021 at the latest. An administrative fine of EUR 250 to EUR 50,000 may be applied to the directors of the concerned companies, non-profit (international) organizations, foundations or trusts in the event of non-compliance with their disclosure obligation but also in the event of poor quality of the data disclosed.

As a reminder, we would also like to point out that any change of beneficial owner must be reported in the “UBO Register” within one month of such change.

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 directly your file manager or our team using the address info@taxconsult.be in order to receive a tailor-made advice adapted to your situation.

Tax Consult A & A

Belgian withholding tax obligations

April 27, 2020

In a previous newsletter, we have drawn the attention to new legal provisions according to which any Belgian taxpayer subject to Belgian company income taxation, Belgian individual income taxation, or Belgian non-resident income taxation will be fictively considered as having paid or attributed remunerations paid by a related foreign company to an employee who performs professional activities to the benefit of the Belgian taxpayer.

In an administrative circular dated 7 April 2020, the Belgian tax authorities have provided guidance on the scope of application of the above-mentioned fiction.

According to the Belgian tax authorities, it is not necessary that the employee has an employment contract with the Belgian taxpayer subject to Belgian income taxation. It is necessary and sufficient that the remunerations relate to professional activities falling within the daily activities of the Belgian taxpayer as set out in its bylaws. The fiction may therefore apply to remunerations paid in accordance with a secondment contract.

This position is in clear contradiction with the ratio legis of the new provision, as set forth in the travaux préparatoires of the law. Nevertheless, it does generate new withholding tax obligations – and hence individual tax form (« Fiche 281.10 » or « Fiche 281.20 »)  obligations – within international groups of companies.

Should this new position be applied as it stands by the Belgian tax authorities, we recommend to do a case-by-case study and, more particularly, to look at the intra-group allocation of salary costs as well as re-invoicing methods.

We are currently in contact with the Belgian tax authorities to get confirmation of their interpretation.

Secondment of staff: The Court of Justice of the European Union takes a position on VAT matters

April 27, 2020

 According to a judgement published on March 11, the Court of Justice of the European Union confirmed that the re-invoicing of the costs of an employee that a company places at the disposal of one of its subsidiaries in capacity of “manager” has to be considered as a transaction subject to VAT.

In accordance with the VAT legislation, the secondment of a director to a subsidiary in return for payment of an amount of money is considered to be a legal relationship in which reciprocal services are exchanged. The Court consequently states that this transaction is taxable from a VAT perspective, first, even if local VAT or local tax legislation might suggest a different rule and, second, even if the amount of the amount paid is equal to, greater than or less than the costs incurred.

Limited to the request of the applicant, the Court does not rule on the question of the retrocession of remuneration of a member of the boards of directors. This is the case when, for example, an individual is appointed director in another company or subsidiary. Although similar in appearance, the situation is nevertheless (totally) different since the legal relationship is no longer between two companies but between an individual and a company. The retrocession of the remuneration of the members of the boards of directors would therefore not be subject to VAT, considering this transaction as outside the VAT scope. Based on the legal doctrine, arguments exist to defend the position that such a retrocession is not subject to VAT.

Furthermore, even if the question is not covered by the judgment either, the Court seems to defend de facto the existence of fixed establishment for subsidiaries and, potentially, for foreign branches. In other words, such entities should have their own existence from a VAT perspective in the countries where they are located.

In conclusion, this judgment, which is by no means insignificant, suggests important consequences in terms of optimization and more particularly in terms of cash flow. On the one hand, the secondment of a person within a subsidiary, in an appropriate manner, could make it possible to avoid pre-financing VAT by considering this transaction outside the scope of the tax. On the other hand, the existence of a permanent establishment abroad could also avoid pre-financing of VAT on cross-border transactions.

As with any optimization measure, a study of the context and the situation in each individual case is necessary to define as accurately as possible the advantage which the company could enjoy.
We therefore remain at your disposal to foresee any measure that could be valuable to your company’s cash flow.