Category: News

E-invoicing update – are you ready for 2026?

E-invoicing as the new norm

On January 1, 2026, structured electronic invoicing will become the norm in Belgium for transactions between regulated companies.

The objective of electronic invoicing is twofold:

  • On the one hand, to reduce the VAT gap, i.e., the difference between the VAT revenue the state should receive and what it actually collects;
  • On the other hand, to pursue a deep administrative simplification for both taxpayers and the state.

The transition period offered to the concerned taxable person aims to ensure that everyone has the opportunity to adapt to this new invoicing method.

Starting from January 1, 2026, all transactions carried out in a B2B context (service provisions or goods deliveries between businesses) and subject to VAT in Belgium will fall under the new electronic invoicing method. In other words, this obligation will not apply to B2C transactions (operations between a business and an individual).

Notably, taxable persons exempt under Article 44 of the VAT Code, foreign taxable persons (even if they are VAT-registered in Belgium), or taxable persons in bankruptcy will not be required to issue electronic invoices.

The same applies when the client is an exempt taxable person (under Article 44 of the VAT Code). In this case, as with individual customers or non-VAT-registered customers, the supplier will not be subject to these new regulations.

Additionally, transactions classified as B2G (Business-to-Government) are already governed by specific European regulations in this area (since March 1, 2024).

But what does "electronic invoicing" mean?

The new definition of this concept was introduced by the European Commission’s ViDA proposal and adopted by Belgium. A structured electronic invoice is an “invoice that is issued, transmitted, and received in a structured electronic format that allows for automatic and electronic processing.”

As a result, invoices issued in PDF format are not considered structured electronic invoices!

The authenticity of the origin, the integrity of the content, and the readability of an invoice must always be ensured from the moment it is issued until the end of its retention period. The rules regarding this requirement remain unchanged.

Furthermore, a structured electronic invoice can be issued by:

  • The supplier itself;
  • A third party (in the name and on behalf of the supplier);
  • The customer in the case of self-billing, if there is a prior agreement between the parties.

The PEPPOL network

To issue and receive electronic invoices, Belgium has chosen the PEPPOL BIS format, which defines the key elements of an invoice. It also recommends that electronic invoices be sent via the European PEPPOL network. “Pan-European Public Procurement On-Line” is an open network that enables taxable persons to send, receive, and process electronic invoices efficiently.

By joining this network, businesses and other organizations can easily and securely exchange invoices in a fast and efficient manner. The affected taxable persons can access the network through a single connection to a PEPPOL access point. This network is already in use in many member states.

However, taxpayers may, by mutual agreement, opt out of using the PEPPOL BIS format for invoices and choose an alternative system. In such cases, invoices must still comply with the European standard EN16931 to ensure harmonization.

Don't wait until it's too late

Electronic invoicing is driving businesses toward digital transformation. It is essential for companies to prepare as soon as possible for these changes.

That’s why it’s essential to begin this transition as soon as possible. Don’t wait until 2026, get ready now!

Our teams are at your disposal to answer any questions you may have on the subject, including legislative aspects, accounting tools and tax incentives.

Are you a MNE subject to Pillar 2?

What is it about?

Multinational enterprise groups (MNE Groups) subject to Pillar 2, introduced by the law of 19 December 2023, are now subject to a new mandatory notification requirement. MNE Groups must now be registered with the Crossroads Bank for Enterprises (CBE) separately, meaning that a specific number will be attributed to the group. This registration will be different from the specific Belgian entities’ numbers. 

When does it need to be filed?

This specific registration obligation has been organized by the Royal Decree of 15 May 2024 and the notification must be filed with the Belgian Tax Authorities by one of the following dates, whichever is the latest:

  • Within 30 days following the start of the financial reporting year for which the MNE group enters the scope of Pillar 2;
  • Within 45 days following the publication of the Royal Decree of 15 May 2024 in the Moniteur belge / Belgische Staatsblad. The Royal Decree having been published on 29 May 2024, it means that, as for the current period, this date is set for the 13 July 2024.

Who must do that?

The notification must be made:

  • Where a single ultimate parent entity is established in Belgium: by that single ultimate parent entity;
  • Where several ultimate parent entities are established in Belgium: by the ultimate parent entity designated as the authorized representative;
  • Where there is no ultimate parent entity, and only one constituent entity is established in Belgium: by that single constituent entity;
  • Where there is no ultimate parent entity, and several constituent entities are established in Belgium: by the constituent entity designated as authorized representative.

Please also note that MNE Groups having chosen to opt in for the safe harbor rules must also comply to this registration obligation.

What should be gathered?

If you fall within the requirements of this decree, rather extensive information must be gathered and communicated to the tax authorities such as:

  • General group information, such as group name, fiscal year, address etc.;
  • Information on the type of consolidated financial statements;
  • Detailed information on the ownership structure, including the entities that are (an) ultimate parent entity/ies (UPE), intermediate parent entity/ies (IPE), partially-owned parent entity/ies (POPE) and their subsidiaries;
  • Information on the group point of contact.

If the notification form mentions all necessary information, the FPS Finance will register the MNE group with the CBE. The group’s company number will then be sent by e-mail to the entity that notified the group.

It is essential that you comply with those new tax regulations and that you gather the right information to submit your notification form before it’s too late.

Did you know you have to submit your rent as a professional expense for tax deduction?

Tax deduction for rents

A professional expense?

What is it about?

The law of 28 December 2023 (on various tax provisions) introduced a new reporting requirement for tenants who wish to deduct their rent as a professional expense and tightened the conditions for deductibility of the latter.

Two issues appeared

On one hand, the tax authorities apparently had difficulties detecting cases where tenants used the property for their profession. On the other hand, landlords sometimes were deceived by their tenants.

It was indeed not inconceivable for a tenant to use the property for their professional
activity and deduct (even partially) the rent as a professional expense – without the
tenant being aware of it and even though the lease contract prohibited it – resulting in
heavier taxation for the landlord.

Consequently, the landlord was then taxed based on the actual rents received and no
longer on the indexed cadastral income, increased by 40%.

The landlord then had no choice but to file a legal recourse to recover the additional tax
burden due to the tenant’s fault. A procedure often tedious and laborious, which was
anything but beneficial for the relationship between the tenant and the landlord, and
which did not prevent the tax from being due in the meantime.

Watch out for the prohibition of deduction!

If this new declaration is not respected, the tenant will not be able to deduct the rent paid as professional expenses under Article 53, 33° of the CIR 92. The penalty is therefore severe for tenants who do not comply with this new obligation.

When will you have to comply?

The new measure regarding the conditions of deductibility of rents as professional expenses comes into effect from the 2024 tax year. Rents paid in 2023 relating to the declaration to be submitted during this year 2024 are therefore subject to the new provision.

You’re not ready for this VAT update!

Electronic invoicing

Do you have what it takes?

What is it about?

On 1 January 2026, structured electronic invoicing will become the norm in Belgium for transactions between taxable businesses.

The amendment to the law was published in the Moniteur belge / Belgische Staatsblad on 20 February 2024.

What's the goal?

The aim of electronic invoicing is double:

  1. First, to reduce the VAT gap, i.e. the difference between what the State should receive in VAT receipts and what it actually receives;
  2. Second, to simplify administration for both taxpayers and the State.

The aim of the two-year transition period is to give every taxable person the opportunity to adapt to this new invoicing method.

Does it apply to you?

In 2026, all B2B transactions subject to VAT in Belgium will be covered by the new electronic invoicing method. In other words, this obligation will not apply to B2C transactions.

It should also be noted that exempt taxable persons, flat-rate taxable persons, foreign taxable persons or taxable persons in bankruptcy will not be required to issue electronic invoices.

The same applies when the customer is an exempt taxable person. In this case, as in the case of private customers or non-taxable customers, the supplier will not be affected by these new provisions.

Furthermore, transactions classified as B2G transactions are already covered by specific European regulations in this area.

What does it really mean?

The new definition of this concept was introduced by the European Commission’s ViDA proposal and adopted by Belgium.

A structured electronic invoice is “an invoice issued, transmitted and received in a structured electronic form that allows it to be processed automatically and electronically”.

This means that invoices issued in PDF format will no longer be considered as structured electronic invoices.

By whom can it be issued?

Structured electronic invoices can be issued by:

  1. The supplier itself;
  2. A third party (in the name and on behalf of the supplier);
  3. The customer in the case of self-billing.

Ready to PEPPOL?

To issue the electronic invoice, the federal government has chosen the PEPPOL BIS format and recommends that it be sent via the European PEPPOL network.

“Pan-European Public Procurement Online” is an international standard for sending, receiving and processing electronic invoices.

By joining this network, governments, businesses and other organisations can quickly and easily exchange invoices in total security. Companies can access the network via a single connection to a PEPPOL access point. This network is already in use in many Member States.

However, taxpayers will be able to opt out of the PEPPOL BIS format and choose another system, by mutual agreement between the parties, provided of course that European standards in terms of semantics and syntax are respected.

Changes to the investigation and assessment periods for income tax

The Law of 20 November 2022 has made major changes to the tax assessment procedure, and these changes are not always in favor of taxpayers!

The Law introduces an extension of the investigation, audit and assessment periods for income tax. These periods can now extend up to 10 years, depending on individual circumstances, and this timeframe may change every year.

To ensure that rights of the taxpayers are not infringed upon, the time limit for filing a a claim has been extended from six months to one year. Additionally, there is more good news for taxpayers: any time limits that have not expired by 31 December 2022 will be extended by six months!

It’s worth noting that the retention period for books and records has been extended from 7 to 10 years to allow the tax authorities to carry out its audits.

The updated rules on tax procedures apply as from assessment year 2023 (i.e. income year 2022 or a non-calendar accounting year ending on or after December 31, 2022).

The revised tax procedures can make it challenging for taxpayers to determine when they will no longer be subject to tax audits and adjustments.
For the sake of clarity, the key points of the new system are outlined hereunder.

1. Absence of tax fraud

In the absence of tax fraud, the investigation and assessment periods will now be as follows:

  • The standard investigation and assessment period remains at 3 years.
  • In case of late or non-filing of tax returns, both the investigation and assessment periods will be extended to 4 years.
  • For the following specific international cases, the investigation and assessment period will be extended to 6 years:

For Belgian companies and foreign companies subject to taxation in Belgium that:

– are subject to transfer pricing reporting and required to submit a local file (form 275 LF) or comply with the country-by-country reporting obligation (form 275 CbC); or
– have made payments to “tax havens” (form 275 F).

for Belgian or foreign companies as well as for individuals (although the latter will be impacted less frequently) that:

– request an exemption, waiver or deduction of the withholding tax return on the basis of a double tax treaty or European directive; or
– request a foreign tax credit; or
– are required to declare cross-border arrangements and exchange tax information regarding these arrangements with foreign authorities (outside the EU) under the reporting obligations of DAC6 or DAC7, provided that the amount concerned for a taxpayer exceeds €25,000.

  • For “complex returns”, the investigation and assessment period will be 10 years.

For companies, a tax return is considered “complex” when it involves reporting on:

– a “hybrid mismatch”; or
– arrangements relating to controlled foreign companies (so-called CFCs).

A personal income tax return for individuals is considered complex when it includes the disclosure of “legal arrangements abroad.”

Good news: these extensions to 6 and 10 years do not apply to “normal” non-deductible expenses for which the tax authorities can only conduct control measures within the 3 or 4-year time limit:

– Regional taxes, charges, or fees;
– Fines, penalties, or confiscations of any kind;
– Non-deductible car expenses;
– Non-deductible hospitality and business gift expenses;
– Non-deductible restaurant expenses;
– Non-specific professional clothing expenses;
– Social benefits (including meal vouchers, sports/culture vouchers, and eco-vouchers).

2. Existence of tax fraud

The tax investigation and assessment period for cases of suspected tax fraud, which was previously limited to 7 years, has now been extended to 10 years.

Regarding the investigation period, tax authorities are no longer required to provide evidence of tax fraud to justify extending the investigation period. Instead, they are only required to notify the taxpayer of their intention to extend the investigation period based on the suspicion of tax fraud.

Likewise, the Belgian tax authorities are required to specify the number of years they are investigating for suspected tax fraud.

If you would like us to analyze your situation, please don’t hesitate to contact your tax consultant or tax advisor, or send us an email at info.tcaa@taxconsult.be.

The new legislative amendment to the “VVPRbis” regime

On January 21, the Belgian government voted a new amendment to the “VVPRbis” regime.

The regime allows small companies, incorporated as from 1 July 2013, to distribute a dividend at a preferential withholding tax rate of 20% (as from the second accounting year) or 15% (as from the third accounting year).

One of the conditions of this regime is that, on the day of the distribution of the dividend, the subscribed capital is fully paid up. Companies without minimum capital were (previously) excluded from the regime. It was assumed that the shareholder(s) had paid up the entirety of the subscribed capital. Therefore, although from a corporate law point of view, the capital of a limited liability company only had to be paid up to up the amount of 6.200 or 12.400 EUR, depending on whether there were one or two shareholders in the company; from a tax point of view, the capital had to be fully paid up, with a minimum of 18,600 euro, at the time of the payment of the dividend.

The entry into force of the CSA, had changed the deal for the SPRL (now transformed into SRL). Since 1st  May 2019, SRL are no longer required to have a minimum capital. At the same time, the provision excluding companies without minimum capital from the “VVPRbis” regime was removed.

Some SPRL – whose capital had not yet been fully paid up and which were being transformed into a SRL – therefore proceeded to a reduction of their equity capital by cancelling the payment of subscribed but not paid-up capital in order to be able to benefit from the reduced withholding tax rate on distributed dividends without having to receive additional funds from their shareholders.

Unfortunately, the legislator intervened. As a result of this new legislative amendment, the contribution initially subscribed must be fully paid up to the amount historically subscribed in order to benefit from the “VVPRbis” regime. Companies that have reduced their capital by waiving the payment of the contribution are therefore excluded from the “VVPRbis” regime.

However, a transitional regime was put in place for companies having performed a capital reduction between 1st May 2019 and 15th December 2021. These companies will be able to proceed, before 31st  December 2022, to a capital increase, which will have the effect of increasing the amount of paid-up capital up to the amount initially subscribed before the waiving of payment.

These measures will apply to dividends distributed as of January 2022.

If you have any further questions, we invite you to contact us at the following e-mail address: info@taxconsult.be or to contact one of our managers directly, who will provide you with advice tailored to your situation.

Permanent establishment: A key concept in international taxation and VAT

At a time when companies’ activities and mobility are constantly increasing, the notion of permanent establishment often appears to be misunderstood or misrepresented, whether in international tax or VAT matters.

This incomprehension, which is easily excusable, is essentially due to two reasons.

On the one hand, the concept of permanent establishment in direct tax matters is often confused with the concept of permanent establishment in VAT matters.

Although these concepts have a common objective, namely to determine the place of taxation, they have their own scope and, above all, distinct legal bases.

Furthermore, the concept of permanent establishment lacks precision in the various European and national legal frameworks, whether in the European Directives or in the various national tax and VAT codes.

  • In international taxation: The concept of permanent establishment is primarily a connecting factor for taxing profits generated in a given jurisdiction. It is defined in Article 5 of the Model Convention established by the Organization for Economic Co-operation and Development (“OECD”) on which the Double Taxation Conventions are based. As a reminder, the main objective of these conventions is to distribute the taxation power between two jurisdictions when they perform their activities in several territories. The Belgian Income Tax Code (Article 229 CIR92 et seq.) also contains a definition of “Belgian establishment” and refers to foreign companies performing activities on Belgian territory via a fixed place of business, the presence of employees or via the provision of services. The main criteria for assessing the presence of a permanent establishment are fixity, dependence and productivity. For many years, the concept of permanent establishment has been continuously expanded by the OECD through various projects and conventions. The tax authorities of OECD member jurisdictions obviously take account of these developments which – in practice – make activities performed abroad taxable, whereas they were not necessarily taxable before. Examples include the “commissionaire” structure, the independent agent structure and the problem of contract splitting. The concept of permanent establishment is also closely linked to the issue of transfer pricing as it is required to attribute profit to the locally taxable permanent establishment. To this end, the OECD has produced various reports detailing how the attribution of profits should be calculated.
  • In VAT matters: The determination of a permanent establishment remains central for a company. The existence or not of a permanent establishment will determine the place of supply of services, the person liable to pay VAT, the possibility of deducting VAT and the rules on invoicing.
    For this purpose, the real source of useful clarification of the concept of permanent establishment is the case law of the Court of Justice of the European Union. The Court, because of its mission, is confronted with specific cases and applies general principles to concrete cases. According to this case law, a permanent establishment is understood to be an establishment with a sufficient degree of permanence and a sufficient structure in terms of human and technical resources to be able to provide services and/or supplies of goods or to be able to receive and use the services rendered to it. For a company, when these elements are met, there may be the existence of a permanent establishment. This factual situation must be studied in order to correctly understand the VAT obligations that arise from it.

As business leader, you are strongly advised to consider whether your company has a permanent establishment abroad.
– Do your employees visit customers abroad from time to time?
– Do you have a computer server abroad?
– Do you have a subsidiary or a representative office in another country?
– Are your warehouses located in a cross-border area?
– Do you have construction sites abroad?
– Do you have dependent agents abroad who can commit your company to local contracts?

If so, contact the Tax Consult team! Anne Georges (VAT specialist) and Laurie Bourgys (Transfer Pricing specialist) will explain to you how to deal with this matter in order to manage your business in a appropriate manner.

How the OECD guidance on the transfer pricing implications of the COVID-19 pandemic can impact the closing year-end 2021?

This is already the one-year anniversary of the  “Guidance  on  the  transfer  pricing  implications  of  the COVID-19 pandemic” (hereafter “the OECD Guidance”) issued on 18 December 2020.

As a reminder, the OECD Guidance represents  the  consensus  view  of  the  137  member states regarding transfer pricing issues that may arise in the COVID-19 context. Many factors may affect transfer prices and the amount of profits accruing to associated enterprises within a multinational enterprises group. COVID-19 pandemic was definitely one of those factors and led to practical challenges for the application of the arm’s length principle. The Guidance is helpful both for taxpayers and tax administrations[1].

The Guidance provides many clarifying comments on the practical application of the arm’s length principle in four priority issues in a 34 pages document:

  • Comparability analysis;
  • Losses and the allocation of COVID-19 specific costs;
  • Government assistance programs;
  • Advance pricing agreements (APAs) or ruling decisions.

As many enterprises are still in the closing process of reporting period ending on 31 December, we choose to take few examples out of the issues linked to losses and the allocation of costs[2].

There is a conclusive evidence that many MNE groups have incurred losses due to a decrease in demand, inability to obtain products or provide services or as a result of exceptional costs.

Three main issues are pointed out by the OECD:

  1. Allocation of losses between associated parties based on analysis of risks incurred in commercial / financial transactions

 The Guidance states that in determining whether or not a “limited-risk” entity may incur losses, the risks assumed by an entity will be particularly important. The Guidance gives an example, where there is a significant decline in demand due to COVID-19 (e.g. value of sales is insufficient to cover fixed costs), a “limited-risk” distributor (taking flash-title of the goods) that assumes some market risk may at arm’s length earn a loss associated with the playing out of this risk[3]. It’s crucial to keep consistence and coherence between the risk assumed and the loss incurred. Related parties should also consider to renegotiate their intercompany agreements where required.

  1. Allocation of exceptional, non-recurring operating costs arising as a result of COVID-19

The Guidance states that the allocation of operating or exceptional costs would follow risk assumption and how third parties would treat such costs. It should be noted that certain operating costs may not be viewed as exceptional or non-recurring in circumstances where the costs relate to long-term or permanent changes in the manner in which businesses operate[4].

  1. Option to apply force majeure clauses, revoke or otherwise revise intercompany agreements

The Guidance states that force majeure events arising in the context of COVID-19 could be the prohibition of activities by a governmental body, for example, through the enforced closure of retail facilities. Thus, a party may invoke that the extreme circumstances justify the non-performance of a contract and this may be achieved through the playing out of a force majeure clause (if any in the agreement). Tax administrations will also review the agreements and verify whether the transfer pricing outcome is appropriate taken into account the related transaction and circumstances[5].

***

We remain at your disposal to discuss how to apply those guidance to your particular situations. Those Guidance are bringing opportunities but also challenges and our best advice is to act carefully and document as much as possible any change to related intercompany transaction.

Do not hesitate to contact the person in charge of your file or to mail at info@taxconsult.be for more information.

Tax Consult A&A

 

[1] It should be regarded as an application of existing guidance under the OECD Transfer pricing guidelines to fact patterns that may arise commonly in connection with the pandemic, but not as an expansion or revision of those guidelines.

[2] See full comments on p. 12-18, OECD Guidance. https://www.oecd.org/ctp/transfer-pricing/guidance-on-the-transfer-pricing-implications-of-the-covid-19-pandemic.htm

[3] See point 40 of the OECD Guidance.

[4] See point 40 : OECD states that certain costs relating to teleworking arrangements may become permanent as a result of the pandemic. If teleworking costs are centrally borne by one entity of the MNE group, it may be appropriate to charge out such expenses to parties that benefit from the underlying product or service to which the expense relates.

[5] See point 55-59 OECD Guidance.

Payments made to so-called “tax havens” – Important update to take into account when preparing tax returns for assessment year 2021!

Principles and legal background

Article 307 §1/2 of the Belgian Income Tax Code (“BITC92”) foresees that taxpayers subject to corporate income tax are obliged to declare, on a 275 F form, all payments which they have made, directly or indirectly, to persons established in a state that:

  1. has been assigned by the OECD Global Forum on Transparency and Exchange of Information, after a thorough assessment of the extent to which the state applied the OECD standard of tax transparency, as a state that does not effectively or substantially applies the said standard. Those “non-compliant” states are listed on the so-called “OECD list”, or;
  2. has been included in a list of states – “Belgian list” – applying no income taxation or a low level of tax (typically a corporate tax levied at a nominal rate lower than 10% or effective tax rate on foreign income is lower than 15%). This Belgian list contains 30 states[1] (article 179 of the Royal Decree implementing the BITC92).

As a reminder, the obligation to declare payments only applies to payments exceeding in total EUR 100.000 per taxable period. It applies to all kind of payments, i.e. payments made in cash, by bank transfer or payments in kind.

Regarding the tax consequences, the article 198 §1, 10° BITC92 foresees that above-mentioned payments are only deductible as business expenses payments provided that they have been declared and, that the taxpayer is able to provide evidence that they have been made in the framework of “real and genuine” transactions and to persons other than artificial constructions.

Points of attention with respect to the OECD list – Administrative position updated

In the circular 2020/C/112 on the temporary COVID-19 measures, tax authorities have specified that jurisdictions having received a “partially compliant” rating from the Global Forum on Transparency and Exchange of Information are also in the scope of the article 307 §1/2 BITC, and not only the “non-compliant” jurisdictions. This has been also confirmed in a parliamentary question on 30 June 2021 by the Minister of Finance.

In practice, the Global Forum of the OECD assess on regular basis the standard of exchange of information on request (so-called “EOIR”) and allocates compliance ratings to its the Forum members (161 jurisdictions).

Four types of ratings can be allocated:

  • Compliant and largely compliant : EOIR is implemented completed or to a large extent;
  • Partially compliant : the EOIR is only partly implemented;
  • Non-compliant : when there are fundamental deficiencies in the implementation of EOIR.

Partially compliant jurisdiction represent around 12% of the rated jurisdictions and non-compliant jurisdiction represent around only 3%. By extending the reporting obligation to partially compliant jurisdictions, tax authorities have then substantially enlarged the scope of targeted jurisdictions.

 Concretely, this means that the OECD list of jurisdictions (non-compliant and partially compliant) to be taken into account is the following: Andorra, Anguilla, Antigua & Barbuda, Austria, Barbados, Botswana, British Virgin Islands, Costa Rica, Curaçao, Cyprus, Dominica, Ghana, Guatemala, Indonesia, Israel, Jamaica, Kazakhstan, Liberia, Panama, Seychelles, Sint-Maarten, Trinidad and Tobago, Turkey, Vanuatu. We strongly advise to proceed to a regular check to the OECD list.

Please note that British Virgin Islands, Anguilla and Vanuatu are also mentioned on the Belgian list.

[1] Abu Dhabi, Ajman, Anguilla; Bahamas, Bahrain, Bermuda, British Virgin Islands, Cayman Islands, Dubai, Fujairah, Guernsey, Jersey, Isle of Man, Marshall Island, Micronesia, Monaco, Montenegro, Nauru, Uzbekistan, Palau, Pitcairn Islands, Ras al Khaimah, Saint-Barthélemy, Sharjah, Somalia, Turkmenistan, Turks-and-Caicos’ Islands, Umm al Quwain, Vanuatu, Wallis-et-Futuna.

The corporate income tax at the third stage of its reform

The law of December 25th, 2017 enacting the corporate income tax reform provides an entry into force of its measures into three phases.

  • Phase n°1 : Measures entering into force as of the tax year 2019 (taxable period starting at the earliest on January 1st, 2018)
  • Phase n°2 : Measures entering into force as of the tax year 2020 (taxable period starting at the earliest on January 1st, 2019)
  • Phase n°3 : Measures entering into force as of the tax year 2021 (taxable period starting at the earliest on January 1st, 2020)

The tax year 2021 (2020 revenues) marks the launch of the third phase of this corporate income tax reform.

All of the phase 3 measures are applicable as of the tax year 2021 for taxable periods starting at the earliest on January 1st, 2020.

  • Corporate income tax rate

The corporate income tax rate continues to decrease from 29% to 25%.

The complementary crisis contribution disappear while going from 2% to 0%.

The SME tax rate remains at 20%.

  • Company cars

The calculation for the tax deductibility of the company cars costs has been modified as follows :

120% – (50% * coefficient * CO2 rate)

The coefficient varies depending on the type of the fuel of the vehicle (1 for diesel, 0,95 for benzine and 0,9 for the CNG).

The minimal deductibility rate is 50%. However, the vehicles with a higher CO2 emission than 200gr/km will only be deductible at 40%.

Another new measure is for the fuel expenses which were previously deductible at 75% no matter which rate of CO2 emission of the car. These expenses will be deductible following the same percentage as determined for the other car expenses.

As the greener vehicles market has been growing fast in the last few years, a distinction must be made among hybrids vehicles :

  • Non-rechargeable hybrids non-rechargeable (which should be considered as « classic » car)
  • Rechargeable hybrids that meet the conditions
  • Rechargeable hybrids that does not meet the conditions and are commonly called « fake hybrids » (which should also be considered as « classic » car)

Regarding the latter category, the Tax Authorities are developing a list of fake hybrids with the corresponding non-hybrids (latest update of February 1st, 2021).

Is considered as « fake hybrids » » :

  • A plug-in hybrid vehicle (rechargeable);
  • With a heat engine and a rechargeable electric battery through an external energy source;
  • Purchased, leased or rented as from January 1st, 2018;
  • Having :
    • Either an electrical battery with an energy capacity of less than 0,5 kWh/100kg of the total weight of the car;
    • Either a CO2 emission of more than 50gr/km;
  • Falling under the flat-rate estimation of the benefit in kind for the personal use of a company car.

However, some of the models as listed in the FPS Finances are vehicle to be considered as hybrids from a tax point of view as they simultaneously meet the following two criteria :

  • An electric battery with an energy capacity of at least 0,5kWh by 100 kg of the total weight of the car, and
  • A CO2 emission of maximum 50gr/km

If the two abovementioned conditions are not met, the CO2 rate of the classic version (equivalent heat engine) must be applied. In case no equivalence exists, a coefficient of 2,5 must be applied to the CO2 rate of the vehicle.

  • Depreciation

The declining depreciation method is abolished.

For SMEs, when acquiring a fixed asset, depreciation must be done on a pro rata basis for the first depreciation period.

These changes are applicable for fixed assets acquired or constituted as from January 1st, 2020.

  • Secret commission

The deduction of the secret commission is abolished as of January 1st, 2021.

  • Administrative fines

All administrative fines must be considered as non-deductible.

  • Interests requalification into dividends

A shareholder or a company director can grant a loan to his company on which interests are claimed.

In order to avoid the requalification of the advance interests as dividends, the conditions and limits as imposed by the legislator must be respected.

Exceeding these limits entails, to the extent of the exceeding, a reclassification of the advance interests as dividends with all the tax consequences that it implies.

These limits concern in one hand the rate applied for the calculation of the interests (article 55 ITC92). The rate varies depending on the type of loan. The distinction is made between interests on non-mortgage loan without definite period (rates applied by the Monetary Financial Institution (MFI)) and all other loans (market rate).

The limit is also applied when, on the other hand, the total amount of interest-bearing advances granted to a company exceeds the taxed reserves of the company at the beginning of the taxable period and the paid-up capital at the end of the taxable period.

  • Release of tax-exempt reserves (temporary measure)

This measure is temporarily applicable during tax years 2021 and 2022.

Subject to a preferential payment of 15%, certain tax-exempted reserves can be converted into taxable reserves.

This rate can be reduced to 10% to the extent that the amount is reinvested during the taxable period in depreciable (in)tangible fixed assets (only if the assets are not intended to serve as reinvestment (deferred capital gains taxation regime).

This system does not apply to all tax-exempted reserves and is only available for reserves existing at the end of the last taxable period closing prior January 1st, 2017.

This taxation will result in a minimum taxable basis on which no tax deduction nor tax attributes could be offset.

  • Loss deduction from a foreign permanent establishment

The amount of losses incurred abroad by a foreign permanent establishment or abroad assets will not be deductible anymore, and even though these losses are not deducted abroad.

In the case the losses are definitive and incurred within the EEA, it will be deductible in Belgium.

A specific anti-abuse rule targets situation in which, within the three years following the deduction of the foreign losses, the Company decides to relaunch its activities abroad, the definitive losses previously deducted in Belgium must be recaptured and included in the taxable basis in Belgium.

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.

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