December 9, 2019
Belgium: 2019 year-end tax planning for MNEs
The end of the calendar year marks the end of the financial year for many companies. The Belgian corporate tax reform, which was adopted in late 2017, is entering its third and final wave of introducing measures that will come into effect in 2020. These measures include a further reduction of the corporate tax rate to 25% (compared to 29.58% in 2018 and 2019).1 The first and second wave introduced a series of measures, including a 100% participation exemption on dividends received and a tax consolidation regime, further improving the Belgian holding regime.2
As background, the following list of measures entered into force as from financial years commencing on 1 January 2019 - transposing the European Union (EU) Anti-Tax Avoidance Directives (ATAD).3
Only limited guidance has been provided by the tax authorities. A draft law which includes some changes to the abovementioned measures was published on 26 November 2019. The draft law amends further the EBITDA interest restriction, and further aims to align the Belgian hybrid mismatch rules to the ATAD.4 Due to the important impact these measures continue to have, it is critical to continue measuring the impact of these new rules and how the practice evolves. Action before year-end might be required to avoid adverse impact of these new rules.
In addition to the measures that entered into force this year, the following key measures will enter into force as from financial year 2020:
Other international developments
The following recent international developments should be considered, as these may have an impact on Belgian companies:
Determining whether a cross-border arrangement is reportable raises complex technical and procedural issues for multinational enterprises (MNEs) and their advisors. Belgium published on 26 November 2019 draft legislation and explanatory notes addressing the implementation of DAC6.8 This draft law is largely in line with DAC6. MNEs are highly encouraged to start reviewing and understanding the ramifications of this new obligation, which may include severe penalties.
As from 1 January 2020, existing companies are obliged to modify their articles of association in accordance with the new Code at the occasion of the first modification of their articles of association, or at the latest by 1 January 2024. Triggering events include e.g., capital reduction, change of name, change of date of annual shareholders meeting.
During the transitional period (1 January 2020 – 1 January 2024), the mandatory provisions of the new Code will apply regardless of whether the existing company’s articles of association are contrary, while the supplementary (non-mandatory) provisions of the new Code will only apply if these are not deviating from the company’s articles of association.
It must be noted that the Code reduces the number of different company types, and one of the commonly used type of companies – the private limited liability company, i.e., BVBA/SPRL is restyled into a new company form, i.e., the BV/SRL (besloten vennootschap/société à responsabilité limitée). The impact of a conversion of a BVBA/SPRL into a BV/SRL should also be reviewed from a foreign perspective, especially if specific a specific election was made for non-Belgian tax purposes.
To ensure a timely tax ruling, taxpayers should start a ruling process as early as possible and preferably still in the financial year to which it relates to.
1. See EY Global Tax Alert, Belgian government approves draft law on corporate tax reform including 100% participation exemption, dated 7 November 2017.
2. See EY Global Tax Alert, Belgium introduces 100% participation exemption, dated 20 March 2018.
3. See EY Global Tax Alert, Belgium: Year-end review for MNEs, dated 26 November 2018.
4. See EY Tax Alert, Draft bill amends interest limitation deduction and anti-hybrid rules, dated 3 December 2019.
5. See EY Global Tax Alert, Belgium deposits instrument of ratification for MLI, dated 9 July 2018.
6. See EY Global Tax Alert, Council of the EU reaches an agreement on new mandatory transparency rules for intermediaries and taxpayers, dated 14 March 2018.
7. See EY Global Tax Alert, EU publishes Directive on new mandatory transparency rules for intermediaries and taxpayers, dated 5 June 2018.
8. See EY Global Tax Alert, Belgium issues draft mandatory disclosure regime legislation, dated 5 December 2019.
9. See EY Global Tax Alert, Belgium Parliament approves new Code on Companies and Associations, dated 29 March 2019.
10. See EY Tax alert, Ruling Commission publishes deadline for filing TP and Innovation Income deductions requests for tax year 2020, dated 27 September 2019.
For additional information with respect to this Alert, please contact the following:
Ernst & Young LLP (United States), Belgian Tax Desk, New York