The end of the year promises to be eventful!
New budgetary measures for 2018 : Main measures
At the end of July 2017, the federal government announced a series of measures to structurally reform the Belgian tax system.
Subject to the bill that will be debated at the opening of Parliament, you will find below the main stated tax measures, which may impact large companies and multinational companies.
These measures are to be read with caution; to date, none of these texts have been approved ....
1. Reduction in corporate income tax
The normal tax rate of 33.99% would decrease to 29% from 2018 and will reach 25% in 2020. The additional crisis contribution of 3%, in force since the 1994 tax year, would initially be reduced to 2% (2018), and is to disappear completely in 2020.
These rates would be adapted for SMEs (see our brief on this subject).
Beside, the "Fairness tax" would be abolished.
2. Minimum taxable threshold
From 2018, a limit would be introduced for the use of the following tax deductions:
· Tax losses carried forward;
· Excess Dividend Received Deduction (DRD);
· Innovation income;
· Cumulative notional interest (from previous years);
· Notional interest for the year.
Companies would be able to use these deductions up to an amount of 1,000,000 euros, plus 70%. This means that 30% of taxable profits exceeding one million euros will constitute a minimum tax threshold.
In addition, the increase of the taxable basis further to a tax audit could no longer be reduced by the deductions mentioned above (with the exception of the DRDs for the year in question).
The determination of notional interest would also be reviewed using a system, where only the increase in equity over a period of 5 years would be taken into account.
3. Capital gains on shares
The conditions of exemption for capital gains would be modelled on the DRD regime (holding period of more than one year and a participation of at least 10% or 2.5 million), failing which, capital gains would be taxed at the normal corporate tax rate.
The 0.412% rate applicable to capital gains implemented by large companies would be eliminated.
4. Limitation of certain expenses
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)
· The deduction of interest would be limited - in accordance with the EU Directive of 2016
5. Fiscal consolidation and stable establishments
A tax consolidation system would be introduced gradually from 2020, duplicated from the Swedish model (?!).
On the other hand, the possibility of allocating foreign losses to Belgium through permanent establishments would be subject to stricter conditions.
The concept of permanent establishment would also be amended in accordance with OCDE guidelines to adopt a more economic definition.
6. Capital reductions
Capital reductions starting in 2018 could no longer be charged according to shareholders' wishes; they would be deducted proportionally from the taxed reserves. They would therefore be subject to withholding tax on the part of the refunded taxable reserves.
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.
Signature of the Multilateral Instrument (MI) by Belgium
On 7 June, 67 countries and jurisdictions signed the Multilateral Convention organizing the implementation of tax treaty measures to Prevent Base Erosion and Profit Shifting ("Multilateral Instrument" or "MI").
The purpose of this Instrument is to facilitate the application of BEPS adaptations in existing tax treaties, where both Contracting States accept the specific adaptations as set out in the MI.
The MI contains measures against hybrid entities and the misuse of tax treaties, a revision of the definition of permanent establishment and measures to improve the effectiveness of mutual agreement procedures, including arbitration specifications.
Signatories can choose which tax treaties they wish to amend through the MI. Once a tax treaty has been notified by both parties, it becomes a tax treaty covered by this Instrument.
As far as Belgium is concerned, 98 double taxation treaties will be covered.
Daily allowances : changes to be made from 1 September 2017 !
From 1 September 2017, the daily allowance amount granted to civil servants is changing from 20.00 euros to 16.73 euros. The granting of these benefits is also subject to new conditions from that date. Private sector employers will have to take into account this new system ...
A more detailed explanation of 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 (Uitbreidingsstraat, 60-62 to 2600 Berchem) ... This will make us, more than ever, a genuine partner for our customers from the north!
We are 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 Pricing - News
In order to meet the transfer pricing needs of our customers, Tax Consult is being formed and informed ... We were involved and active in the training day organised jointly 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!