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28 August 2018 Belgium publishes law with technical changes and amendments to corporate tax reform On 10 August 2018, the law on various income tax measures was published in the Belgian Official Gazette. The law was approved on 19 July 2018 and includes technical changes and amendments to the corporate tax reform adopted in 2017. The main items are summarized below. Notional interest deduction: The corporate tax reform provided that the notional interest deduction (NID) is calculated based on the average incremental net equity over the last five years (instead of the prior-year net equity). The new law now provides for technical adjustments to the calculation of the NID. In addition, new anti-abuse provisions are introduced. The first provision is aimed at "double-dip" situations. The NID is refused at the level of the subsidiary in situations where the direct or indirect parent financed the equity contribution with a loan. Furthermore, capital contributed from entities resident in jurisdictions which do not provide for exchange of information should be deducted from the calculation basis of the NID, unless a business purpose test is met. A similar rule applies to loans granted by the company to entities resident in jurisdictions which do not provide for exchange of information. The new rules are applicable as of assessment year 2019 for financial years starting on or after 1 January 2018. Minimum salary requirement: Companies should grant a minimum remuneration of at least €45,000 or half of the company's taxable income to an individual manager. To the extent the remuneration is insufficient, the company is subject to a special tax assessment of 5% and the company will not qualify for the reduced corporate tax rate for small and medium enterprises. It was initially provided that the rate of the special tax assessment would increase to 10% as of 2020 (assessment year 2021 for financial years starting on or after 1 January 2020), but this is now withdrawn so that the rate will remain 5%. In addition, the law provides for technical improvements and clarifications. Fairness tax: The Belgian Government initially intended to formally abolish the Fairness tax (FaTa) for the future. However, as the Constitutional Court decided on 1 March 2018 to annul the FaTa, a formal abolition of the legal provisions relating to the tax is no longer necessary. The annulment applies as of assessment year 2019 (financial years ending on or after 31 December 2018). The FaTa remains applicable for tax year 2018 and prior assessment years (financial years ending before 31 December 2018). European Union (EU) Anti-Tax Avoidance Directive (ATAD): The law replaces large parts of the legislation in relation to the implementation of the EU ATAD. The changes are technical and relate to hybrid mismatches, the controlled foreign company provisions, the exit tax and the interest limitation rule. In relation to the interest limitation rule, it was initially provided that excess borrowing costs could be transferred between Belgian group companies. In order to make the interest limitation rule more robust, this has been replaced by the possibility to transfer excess deduction capacity between Belgian group companies. Note that the Belgian Federal Government recently decided to bring forward the entry into force of the interest limitation rule to 2019 (financial years starting on or after 1 January 2019). Tax consolidation: The law provides for technical improvements to the new group contribution regime applicable as of assessment year 2020 for financial years starting on or after 1 January 2019. Personal income tax: In the context of the activation of savings for direct investments in companies, it is also decided to increase the exempt amount for the income year 2019 (assessment year 2020) to €800. The Belgian Federal Government also decided recently to put an end to the discrimination in personal income tax between the calculation of the benefit in kind if housing is provided free of charge by individuals vs. housing provided free of charge by companies. This discrimination was condemned by case law. The Government has now decided to use the same calculation method for both categories. The benefit in kind is equal to the cadastral income of the property (indexed) × 100/60 × 2. Once the royal decree is published, it is likely to be applicable as of income year 2018 (assessment year 2019). For additional information and publications regarding the tax reform, see EY Belgium's dedicated website.
Document ID: 2018-6021 |
