Tax reform in Belgium 2015/2016

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More details of the tax reform in the last 12 months in the tabs below.

Entities - Companies

Corporate income tax

Last update - 8 February 2016

From a corporate income tax point of view, a range of measures were introduced or amended at the end of the year by various Laws or Royal Decrees. The Act of 16 December 2015 introduced the exchange of information regulation, and the FATCA requirements and the European Accounting Directive were implemented by the Act of 18 December 2015.

A new withholding tax rate on dividends distributed by a Belgian company to non-resident minority corporate shareholders was introduced (Act of 18 December 2015), and interest payments to foreign investment companies will benefit from the withholding tax exemption (Royal Decree of 27 September 2015).

Some measures introduced by the Act of 10 August 2015 were amended by the Program Act of 26 December 2015 or by the Act of 26 December 2015.

New measures enacted

Exemption for Belgian withholding tax on interest income paid to foreign investment companies

Following an infringement procedure initiated by the European Commission several years ago, Belgium has amended its regulation regarding the collection of withholding tax on Belgian-source interest on debt claims and debt securities made or allocated to investment companies established abroad in another member state of the European Economic Area.

Belgian and foreign investment companies receiving Belgian-source interest on debt claims and debt securities are treated differently from a tax perspective. Whilst a withholding tax exemption applies to such income received by Belgian investment companies (resulting in no taxation for such companies due to the specific income tax regime that is available for Belgian investment companies), foreign investment companies are generally not exempted on that income (the Belgian withholding tax levied being a final tax for them).

Belgium has removed this difference in treatment. In a nutshell, foreign investment companies established in a member state of the European Economic Area will henceforth benefit from the same withholding tax exemption for interest payments as Belgian investment companies.

The Royal Decree is applicable as from 1 December 2015.

 

Reduced withholding tax for dividend payments to non-resident minority corporate shareholders

In 2012, the European Court of Justice ruled that the Belgian dividend withholding tax regime was incompatible with EU law (the “Tate & Lyle case”). The regime stated that dividends distributed by Belgian companies to foreign corporate shareholders having a holding interest in the capital of a company of less than 10% but with an acquisition value of at least EUR 1.2 million (currently EUR 2.5 million) are in principle subject to full withholding at 25% (27% as from 1 January 2016).

According to the Act of 18 December 2015, dividends distributed by a Belgian company to non-resident minority corporate shareholders are now subject to a reduced withholding tax rate of 1.6995% (instead of 27%) if certain conditions are met, among which the following:

  • the reduced rate of 1.6995% is only applicable to the extent that the Belgian withholding tax cannot be credited or is not refundable in the jurisdiction of the beneficiary ;
  • the beneficiary must be a non-resident corporate shareholder having a holding interest in the capital of the distributing company of less than 10% but with an acquisition value of at least EUR 2.5 million ;
  • the holding interest must be held for an uninterrupted period of at least one year (in full ownership) ;
  • the shareholder must be a company located in the European Economic Area or in a jurisdiction with which Belgium has concluded a double taxation avoidance agreement (“double tax treaty”) ;
  • the shareholder must have a legal form as mentioned in the EU Parent-Subsidiary Directive or a similar form.

Note that the distributing company should have a certificate in which it is confirmed that the various conditions are met, including confirmation to what extent the beneficiary can claim a tax credit or refund of the withholding tax on 31 December of the year preceding the dividend distribution.

This measure is applicable to dividends attributed or made payable as from 28 December 2015.

Administrative guidance (dating from 2013) has already provided the procedure to claim back withholding tax for previous years.

 

Meal vouchers and non-recurring result related benefits

As from 1 January 2016, the maximum contribution of the employer for meal vouchers increases to EUR 6.91 per voucher, and the tax deductible amount for the employer increases to EUR 2 per voucher (Act of 6 December 2015).

 

Automatic exchange of information / FATCA

The Act of 16 December 2015 introduces the exchange of information regulation and the FATCA requirements.

The purpose of the Act of 16 December 2015 “on the communication of information relating to financial accounts, by Belgian financial institutions and the Federal Public Authority of Finance, within the framework of an automatic exchange of information at international level for tax purposes” is (amongst other things) to implement Directive 2014/107/EU (amending Directive 2011/16/EU as regards automatic exchange of information in the field of taxation), the US-Belgium Intergovernmental Agreement of 23 April 2014 (on FATCA) and the multilateral agreement signed on 29 October 2014 within the framework of the Common Reporting Standard (“CRS”).

The measures enter into force 10 days after publication of the Act (31 December 2015) with respect to the United States and EU Member States. For other States, the entry into force will be determined by Royal Decree.

Particular attention should be paid to the short deadline imposed on Financial Institutions as regards the first FATCA reporting (relating to the period between 1 July and 31 December 2014) that will be due within 10 days from the date the Act is published in the Belgian Official Gazette (publication date: 31 December 2015).

Moreover, before the first reporting, Financial Institutions will have to inform the individuals concerned (amongst other things) that personal data will be reported. The contents and timing of such communication are specified in article 14. Individuals can request communication of the specific data reported in relation to an account and have a right of correction of personal data.

On 18 January 2016, the Belgian Federal Public Authority of Finance (“Finance”) announced that, following consultation with the financial sector, it will apply an administrative tolerance as regards the introduction of the FATCA files relating to income year 2014. This information has to be communicated to Finance on 15 April 2016 at the latest. The deadline for the reporting in respect of income year 2015 remains unchanged (30 June 2016).

Sanctions are provided for in the event of non-compliance. A EUR 1,000 penalty can be imposed per account not reported consistently with the Act. A penalty of EUR 2,500 is applicable with respect to other breaches (except for breaches of article 14 that can be punished under the Belgian Privacy Protection Act of 8 December 1992). These penalties are doubled in the case of fraudulent intent. Criminal sanctions provided for by the Belgian Income Tax Code may be applicable in the case of fraud.

 

European Accounting Directive

The Act of 18 December 2015 implemented the European Accounting Directive concerning accounting principles for SMEs (and other matters).

One of the goals is to reduce the administrative burden for small enterprises. The measures enacted in this respect include (but are not limited to) the following:

The threshold for small enterprises is adjusted in line with the European Accounting Directive. In general, a company is considered as small if maximum one of the following criteria is exceeded:

  • average number of personnel: 50;
  • turnover: EUR 9,000,000;
  • balance sheet total: EUR 4,500,000.

The thresholds are calculated differently (i.e. on an individual basis instead of a consolidated basis).

A new sub-category will be implemented for micro enterprises, for which less stringent accounting measures apply.
Entry into force: 1 January 2016.

 

Measures introduced and enacted by the Program Act of 10 August 2015 but changed by the Program Act of 26 December 2015 or by the Act of 26 December 2015

Financial Sector Contribution (“FSC”)

As part of the Belgian Government Agreement, it was decided that banks and insurance companies should pay an additional contribution to the State Revenue, via an amendment to the notional interest deduction regime (“NID”), taking into account Basel III and Solvency II agreements.

The draft bill aimed at considering specific own funds of credit institutions and insurance companies as representing the part of prudential capital on which a reduction of the NID would be charged.

The final Program Act, however, introduces a limitation to the NID itself, the dividends-received deduction and the deduction of tax losses carried forward. Finally, no limitation of the basis for calculating the NID is provided.

Entry into force: tax year 2016.

The Program Act of 26 December 2015 introduced some changes to the Financial Sector Contribution (“FSC”). For tax year 2017, the rate increases from 3.39% to 4.88% for credit institutions, and from 2.69% to 3.88% for insurance undertakings. However, as the NID rate decreases for tax year 2017, the combined rate is deemed, so far, to remain stable. The FSC rate would be increased, for tax year 2016, from 2.37% to 3.39% for credit institutions, and from 1.88% to 2.69% for insurance undertakings.

 

Investment deduction: ordinary rate for SMEs

The rate for the ordinary investment deduction for SMEs increases from 4% to 8%. The ordinary investment deduction cannot be combined with the use of notional interest deduction.

Entry into force: the new rate is applicable for investments made as from 1 January 2016.

 

Investment deduction: increased spread investment deduction for high-tech products

An increased spread investment deduction of 20.5% for companies has been introduced for investments in production means for high-tech products. The production must be new and the products directly or indirectly should lead to increased expenses for research and development as from the first mass production.

Entry into force: the measure is applicable for investments made as from 1 January 2016 and is subject to the European Commission deciding that this measure is not considered as illegal state aid.

 

New measures introduced by the Program Act of 10 August 2015

Liquidation reserve

Currently, SMEs can benefit from a reduced tax charge of 10% (instead of generally 25% or 15%) on distributions by creating a ‘liquidation reserve’. The Program Act of 10 August 2015 introduces a similar regime for (after-tax) profits realised for tax year 2013 (financial years ending between 31 December 2012 and 30 December 2013, both dates included) and tax year 2014 (financial years ending between 31 December 2013 and 30 December 2014, both dates included).

These profits can – under certain conditions – also be converted into a liquidation reserve, by paying a corporate income tax of 10% (payable on 30 November 2015 at the latest and on 30 November 2016 at the latest). No additional withholding tax is due in the case where this liquidation reserve is distributed to the shareholder upon liquidation. In the case where the liquidation reserve is distributed via a dividend distribution within 5 years of its creation, (an additional) 15% withholding tax is due. In the case where it is distributed via a dividend distribution after 5 years, a withholding tax of 5% is due.

Entry into force: 18 August 2015 (date of publication in the Belgian Official Gazette).

 

Diamond regime

The Program Act introduces the so-called ‘diamond regime’ for registered companies (incl. Belgian permanent establishments of foreign companies) active in the diamond sector. The taxable result of these companies is determined on a lump-sum basis, being 0.55% of the turnover from the diamond activities. Companies subject to the diamond regime cannot benefit from the notional interest deduction and cannot deduct losses carried forward. For certain registered traders of rough diamonds, the diamond regime is optional.

Entry into force: tax year 2016 (financial years ending on 31 December 2015 at the earliest), subject to confirmation by the European Commission that this measure cannot be considered as illegal state aid.

 

Investment deduction for digital investments

The Program Act provides for an increased investment deduction for SMEs and individuals investing in digital investments as of assessment year 2016. As of 8 December 2015, a Royal Decree has been implemented which confirms the investments that effectively qualify for the investment deduction for digital investments, more specifically it concerns investments in information security, communication technologies and digital payment and billing systems.

 

Intermunicipal entities

Currently, certain inter-municipal entities, collaborations, and project associations are no longer, by default, exempt by law from corporate income tax (“CIT”) and, hence, are no longer, by default, subject to legal entities tax. As of tax year 2015, the entities at hand could be subject to CIT or legal entities tax, depending on certain criteria (e.g. whether or not they perform activities with a profitable nature, the way they do business). The Program Act of 10 August 2015 introduces an exception for hospitals and institutions assisting the disabled, elderly people, protected minors, etc. They remain subject to legal entities income tax. Furthermore, the Program Act provides for less stringent consequences upon the conversion from legal entity income tax to corporate income tax. For example, retained earnings are now deemed to be taxed reserves.

The measure is applicable as of tax year 2015 (i.e. accounting years ending between 31 December 2014 and 30 December 2015, both dates inclusive) and is applicable as of financial years that are closed, at the earliest, on 1 July 2015.

 

Joint and several liability of the ‘maître de l’ouvrage’ / ‘opdrachtgever’

The Program Act extends the joint and several liability for social and tax debts of the contractor (or sub-contractors) to the ‘maître de l’ouvrage’/’opdrachtgever’.

Entry into force: 18 August 2015 (date of publication in the Belgian Official Gazette).

The following measures have been announced but not yet enacted:

  • Anti-fraud measures: the following measures were announced at the end of the budgetary control exercise in March 2015: ‘fiscal amnesty’ (for previously undeclared income), fight against abuse of corporate structures and online fraud, extension of data-mining projects, and better use of information concerning the 183 days rule.
  • Belgian general anti-abuse measure: confirmation that the Rulings Office can issue rulings on the general anti-abuse rule. In addition, an assessment (and if needed adaptation) would be implemented in respect of the general anti-abuse rule in order to increase legal certainty for the taxpayer.
  • Disallowed expenses: simplification of disallowed expenses (divided into three categories: (i) penalties and taxes, (ii) donations and (iii) non-individualised benefits) and streamlining of the concept of disallowed expenses in the framework of corporate income tax and VAT.
  • The Federal Tax Code would be simplified and consolidated.
  • Tax pact’: conclusion of a ‘tax pact’ to eliminate the uncertainty factor in the economic and fiscal environment for entrepreneurs.
  • Catch-all clause: Belgian companies are in principle required to levy a wage withholding tax on qualifying fees attributed or made payable as from 1 March 2013 to certain types of non-residents. These payments may be subject to an effective wage withholding tax of 16,5% – which needs to be levied at source by the Belgian company – unless the applicable double tax treaty provides for a reduced rate. In this context, the ‘perverse’ side effect would be removed.
  • Patent income deduction: in the framework of the Belgian Government formation and the budget for 2015, a feasibility study (and possible extension) of the patent income deduction regime with regard to software licences and other technology related IP has been announced. Furthermore, it is also the intention to align the recent regime with the so-called modified nexus approach. 

Individuals

Personal income tax

Last update - 8 February 2016

In the framework of the Government Agreement and of the Tax Shift Agreement, new tax measures were enacted at the end of the year (i.e. the Acts of 18 December 2015 and 26 December 2015, respectively, and the so-called ‘Program Act’ of 26 December).

Key measures are the provisions aimed at enhancing job creation and purchasing power, the introduction of the speculation tax, the increase of the withholding tax on investment income, and the change to some legal provisions governing the Cayman tax.

At regional level, the Regions also decided to implement a tax reform, in particular to modify the tax deduction for mortgage loans for the sole and own dwelling. The Flemish Region has already enacted the new measures. In the Brussels Region and the Walloon Region, they will be adopted in the following weeks.

A. Federal tax measures

New tax measures enacted by the Act of 26 December 2015 and the Program Act of 26 December 2015 (Official Gazette of 30 December 2015)

Cayman tax

The Program Act of 10 August 2015 implemented the so-called ‘Cayman tax’. Under this regime, private individuals subject to Belgian personal income tax (or Belgian entities subject to legal entities income tax) are taxable in respect of certain income generated by legal constructions of which they are the founder or the beneficiary. The legal constructions are thus treated as tax transparent.

The legal constructions in scope include:

  • trusts without legal personality (category 1); and
  • foreign entities with legal personality that are subject to an effective tax rate of less than 15% (category 2).

Under application of the Cayman tax, income obtained by legal constructions as from 1 January 2015 is taxable in the hands of the Belgian founder or, if it has been distributed, the beneficiary of the distribution. The income is treated in the hands of the founder or the beneficiary as if it was obtained directly and may be taxed as real estate income, movable income (interest, dividends and royalties), miscellaneous income or, possibly, professional income. If legal constructions do not distribute income in the year it has been obtained, the founder may be taxed on income that could later be received by another person. This is criticised by legal doctrine.

In August 2015, two lists of the qualifying entities of the second category were published:

  • Outside the EEA: ‘Stichting Particulier Fonds’ (Aruba or Dutch Antilles), Foundation (Switzerland), Company or Foundation (Jersey), etc. This list is not limitative and is refutable. For instance a limited company of Curaçao benefitting (on the basis of a ruling) from an advantageous tax treatment could also fall within the scope of application.
  • Within the EEA: ‘Société de Gestion de Patrimoine familiale’ (Luxembourg), ‘Stiftung’ and ‘Anstalt’ (Liechtenstein). In December 2015, the Luxembourg ‘Fondation Patrimoniale’ was added, although this legal form does not yet exist. So-called ‘hybrid’ entities that are tax transparent under local law but not tax transparent for Belgian purposes have also been included. However, for such entities, the Cayman tax only applies in respect of Belgian-source income.

As from tax year 2014, taxpayers have to mention in their yearly income tax return the existence of a legal construction of which they (or their spouse or children) are the founder or the beneficiary. The Act of 26 December 2015 has extended this obligation as from tax year 2016:

  • Not only the mere existence of a legal construction has to be mentioned but also the full name, the legal form, the address and the identification number of the legal construction. For a legal construction of the first category, the name and address of the trustee have to be declared.
  • Legal entities with a real economic activity and sufficient substance are excluded from the Cayman tax provided that the founder or the beneficiary invokes this exception in the annual income tax return and can prove, upon request, that the legal construction has in fact a real economic activity and enough substance. Whereas, before the Act of 26 December 2015 entered into force, this type of legal construction was not within the scope of the Cayman tax and the reporting obligation, taxpayers will now have the obligation to report the existence of a legal construction with a real economic activity and sufficient substance in their personal income tax return, although Cayman tax will in that case not be applicable.

The Program Act of 10 August 2015 provides for a general anti-abuse rule under which a legal action of a legal construction (of the second category) cannot be made binding towards the tax authorities if it is aimed at avoiding the Cayman tax. The Act of 26 December 2015 adds a specific anti-abuse rule relating to the exclusion of collective investment entities, pension funds and listed companies. The Cayman tax still remains applicable where the entity is held by one person or by persons that are connected, i.e.:

  • natural or legal persons that have control over one another; or
  • people who are related by blood or marriage, live together, etc.

The heir of a founder of a legal construction (of category 1 or 2) may be excluded from the Cayman tax if he can prove that he or his heirs will never and in no way receive any benefit from the legal construction.

Entry into force: The Program Act of 10 August 2015 is applicable to income that is obtained, attributed or paid by a legal construction as from 1 January 2015. As for withholding taxes (incl. wage withholding tax), the measures are applicable to income attributed or paid as from 1 September 2015. The Act of 26 December 2015 regarding the reinforcement of job creation and purchasing power is applicable as from tax year 2016.

 

Speculation tax

In the framework of the Tax Shift Agreement, the Belgian Government announced the introduction of a new tax, notably a “speculative tax”. The Act on measures aimed at enhancing job creation and purchasing power dated 26 December 2015 provides further details in this respect:

  • Taxpayers concerned: individuals subject to personal income tax (individuals considered as resident in Belgium for income tax purposes) or subject to non-resident personal income tax.
  • Financial instruments concerned: listed shares, options and warrants, and more generally any financial derivatives provided that (1) they are listed and (2) whose underlying asset is exclusively made up of one or several specified listed shares. Units in undertakings for collective investments (UCITS, including ETFs and AIFs) and Belgian regulated real estate companies are excluded from the scope of application of the capital gains tax. Specific definitions and references to regulatory definitions are provided (e.g. undertakings for collective investment, options and warrants). The leverage is not relevant. One should note that the exclusion of Belgian regulated real estate companies from the scope of the tax is not extended to similar foreign REITs, which may likely give rise to some concerns from an EU law point of view.
  • Triggering event: transfers for valuable consideration of financial instruments held in portfolio (‘long’) or not (‘short’), which are voluntary (i.e. excluding operations exclusively at the issuer’s initiative and for which the taxpayer has no opportunity to choose) and not as part of the carrying-on of a business activity.
  • 6-month holding period: the transfer for valuable consideration is only taxable if the holding period is less than 6 months (calculated as the number of months between the purchase date and the selling date). Gifts inter vivosare disregarded for calculating the holding period.
  • Taxation method: where a financial institution based in Belgium intervenes in the transaction, the tax charge is made through the levy of a Belgian withholding tax. In the absence of financial institution based in Belgium (typically, a securities account held with a foreign credit institution or broker), the individual taxpayer will have to declare the income in his annual personal income tax return.
  • Taxable basis: [(sale price – Belgian tax on stock exchange transactions supported by the seller) – (acquisition price + Belgian tax on stock exchange transactions supported by the buyer, subject to the disclosure of appropriate supporting documents)]
  • Calculation of the standard tax base: to determine the holding period (and capital gain, probably), a ‘last in, first out’ (LIFO) method is applied (for either long or short positions). In case bunches of identical securities have been purchased successively and are sold on a given date, the amount of realised income (capital gain or loss) is first determined separately per bunch of securities, and then added up together (with a minimum net result of zero, which enables to some extent offsetting gains against losses for a given sale).
  • Tax rate: 33%

Entry into force: 1 January 2016

 

Withholding taxes on income from investment

The withholding tax on income from investment, such as interest and dividends, has been increased from 25% to 27%; except for interest derived from savings accounts, from Leterme State bonds and from cash contributions under the VVPR-bis treatment. This new rate is applicable to investment income paid or attributed on or after 1 January 2016.

 

Lump-sum amount of business expenses for employees

In 2014, it was announced that the lump-sum amount of business expenses would be increased. This would result in a higher net income for employees and boost their purchasing power. The increase in lump-sum business expenses (as included in the Program Act of 19 December 2014) was already partially implemented in the tax scales applicable as from January 2015 (and thus processed via the monthly payroll). Full implementation of this measure will be achieved as from January 2016. Additionally, it has been decided by the Federal Government and approved by the federal legislator to further increase the lump-sum amount for business expenses as from January 2016 (Act of 26 December 2015 enhancing job creation and purchasing power). As from January 2018 (within certain limits) a single percentage will be applied for the calculation of the lump-sum amount of business expenses for employees, which should further increase the level of these deductible expenses.

 

Individual income tax brackets and tax-exempt amount

One of the tax measures that were announced by Prime Minister Charles Michel during a press conference on 10 October 2015 was the abolition of the 30% rate and the increase of the tax bracket of the 45% rate.

On the basis of the Act of 26 December 2015, the gradual abolition of the 30% rate and the expansion of the tax bracket of the 40% rate will be achieved in 2 steps, with the first changes to be implemented as from income year 2016 and full implementation to be achieved as from income year 2018. The first step (i.e. expansion of the 25% tax bracket) is implemented and enters into force as from assessment year 2017. The second step (i.e. abolition of the 30% rate and expansion of the tax bracket of the 40% rate by increasing the lower limit of the 45% rate) enters into force as from assessment year 2019.

Additionally, the Act of 26 December 2015 implements new tax brackets for the calculation of the tax-exempt amount. These new brackets will be different from the actual income tax brackets (used to determine the basic progressive income tax amount due on the taxable income). This measure will result in a higher income tax exemption and is in force as from assessment year 2017. Furthermore, the tax-exempt amount is expected to be further increased as from assessment year 2019. 

 

Exemption of the business premium ('bedrijfstoeslag'/'complément versé par l’employeur')

When a former employee who entered the system of unemployment with business premium takes up new employment with another employer (or becomes self-employed), he continues to be entitled to receive the business premium in principle. This premium (and additional allowances) can give rise to a tax reduction for pensions and replacement income (a reduction that is not impacted by the newly received professional income).

In order to stimulate taxpayers even more to ‘resume work’, the Program Act of 26 December 2015 introduces a ‘tax exemption’ for the business premium (and additional allowances) attributed for the period or periods in which work is resumed. Consequently, the existing tax reduction will be abolished for these amounts (but will remain applicable to certain amounts that do not fall under the new tax exemption).

This new tax exemption is applicable to business premiums (and additional allowances) attributed or paid as from 1 January 2016 provided that they are not related to periods before this date.

 

Fiscal amnesty

In our “Tax Reform in Belgium 2015/2016” communication, it was first announced that a new measure regarding fiscal amnesty would be introduced. This measure was initially included in the draft of the Program Act of 26 December 2015 but was subsequently removed.

 

Wage withholding tax

The amount of wage withholding taxes to be withheld by the employer is based on the withholding tax scales published in a Royal Decree. The Belgian Income Tax Code provides for several exemptions (overtime, R&D, night and shift work, etc.) with respect to the remittance of Belgian withholding taxes to the Treasury.

In May 2014, the Belgian Government decided to gradually increase the exemption for night and shift work from 15.6% to 22.8% during a course of 3 years. With the Act of 26 December 2015, the Belgian government immediately (instead of gradually) increased the exemption with respect to the remittance of Belgian withholding taxes to 22.8%.

Furthermore, as regards night and shift work in companies producing ‘highly technological products’, this exemption is additionally increased by 2.2% to give a total exemption of 25%.

Both increases are applicable as from income year 2016.

 

New tax measures enacted by the Act of 18 December 2015 (Official Gazette of 28 December 2015)

Reduction for pension savings

In 2014, the Court of Justice of the European Union ruled that, as the Belgian tax reduction for pension savings was only possible for payments made to Belgian institutions and funds, Belgium did not meet its obligations with respect to the free movement of capital.

As a reaction to this European case law, Belgium extended the tax reduction for pension savings to payments in another Member State of the European Economic Area (EEA). Consequently, taxpayers who make payments to a foreign institution located in another EEA Member State can equally benefit from the Belgian tax reduction for pension savings. In order to be able to evidence that foreign institutions meet the qualifying conditions for the tax reduction, foreign entities need to comply with a new information obligation.

 

New tax measures enacted by the Program Act of 10 August 2015 (Official Gazette of 18 August 2015)

Tax incentives for investments in starting SMEs

The Program Act of 10 August 2015 introduces a new tax deduction for individual taxpayers (both residents and non-residents) who acquire new shares in a starting SME even when the investment is made via a recognised crowdfunding platform or via a recognised starters’ fund. This tax deduction will amount to 30% (45 % if it concerns micro-companies) of the qualifying amount (which is limited to EUR 100.000,00 per taxable period) and will only be granted if several conditions are met regarding shares, time of acquisition of these shares and enterprise in which the taxpayer invests. The tax deduction can be cancelled retroactively in the case where the taxpayer does not meet a 4-year holding period. This is applicable to shares issued as from 1 July 2015.

New SMEs or SMEs which already exist for a period of maximum 4 years will be able to benefit from a new partial exemption of remittance of withholding taxes. If certain conditions are met, 10% (or 20% if it concerns a micro-company) of the withholding taxes levied on salaries that were paid as from 1 August 2015 to their employees, does not have to be remitted by these SMEs to the Belgian tax authorities. The Program Act of 10 August 2015 introduces a new tax exemption, notably with respect to the annual interest income received by individual taxpayers (private investors) and resulting from newly-issued loans within the framework of a recognised crowdfunding platform to new SMEs or to SMEs which already exist for a period of maximum 4 years. The tax exemption relates to interest received in relation to the first portion of EUR 15.000 of the loan amount. Certain conditions must be met in order to benefit from this tax exemption. These conditions concern among others the loan itself (amount, term, etc.) and the companies which are financed via this method. This tax exemption applies to interest income from loans concluded as from 1 August 2015.

 

Fiscal work bonus

The Program Act of 10 August 2015 includes a gradual increase of the fiscal work bonus from 14.40% calculated on the amount of the social work bonus to 17.81% (for wages paid as from 1 August 2015) with a maximum of EUR 235, from 17.81% calculated on the amount of the social work bonus to 28.03% (for wages paid as from 1 January 2016) with a maximum of EUR 420, and from 28.03% calculated on the amount of the social work bonus to 33.14% (for wages paid as from 1 January 2019) with a maximum of EUR 500.

 

Additional tax reduction for pensions and replacement income

Additional tax reduction for pensions and replacement income is increased for taxpayers who only receive pensions or replacement income. This provision is applicable as from tax year 2016.

 

Investment deduction for digital investment

The Program Act provides for an increased investment deduction for SMEs and individuals investing in digital investments as of assessment year 2016. As of 8 December 2015, a Royal Decree has been implemented which confirms the investments that effectively qualify for the investment deduction for digital investments, more specifically it concerns investments in information security, communication technologies and digital payment and billing systems.

 

Innovation premium

At a certain point in time, it seemed that employers would no longer be able to grant an innovation premium, as this ‘instrument’ would expire on 1 January 2015. However, via the Program Act of 10 August 2015, the Belgian Government has (retroactively) extended the application of the favourable tax regime applicable to innovation premiums with a period of 2 years (i.e. until 1 January 2017), which may be further extended in the future. 

 

Update of benefit in kind of company car via the Royal Decree of 9 December 2015

For income year 2016, the formula for calculating the taxable benefit in kind for the private use of a company car in the hands of company directors and employees remains unchanged. However, the reference CO2 emission to be used for this calculation has been updated via the Royal Decree dated 9 December 2015 as follows:

  • petrol, LPG or natural gas cars: 107 g CO2/km (instead of 110 g C02/km for income year 2015);
  • diesel cars: 89 g CO2/km (instead of 91 g C02/km for income year 2015).

B. Regional tax measures

Flemish Region

New tax measures enacted by the Decree of 18 December 2015 (Official Gazette of 29 December 2015)

The Decree of 18 December 2015 contains several changes to the tax relief for mortgage loans that apply to mortgage loans concluded as from 2016:

  • The condition of 'sole' dwelling is abolished. Consequently, taxpayers who contract a loan for their own dwelling but already own another house or flat are able to benefit from a tax reduction. However, the tax benefit will be lower compared to the case of taxpayers who take out a loan for the purpose of purchasing or building their first property. In fact, the tax reduction will apply to every house or flat that can be classified as a taxpayer's 'own dwelling', regardless of the number of properties owned.
  • The (maximum) amounts that qualify for the mortgage loan tax relief remain the same as the thresholds set for mortgage loans contracted in 2015, i.e. EUR 1,520 (base) + EUR 760 (increase during the first 10 taxable periods) + EUR 80 (during the first 10 taxable periods if there are 3 or more dependent children on 1 January of the year following the year of the signing of the loan).
  • As in the past, the increased amounts of EUR 760 and EUR 80 in principle – there are certain exceptions – are not available for taxpayers who are or become owner of other properties (i.e. houses and/or flats).
  • The tax relief percentage also remains 40% (calculated on the above qualifying amounts).
  • Following the above, the Flemish tax relief for long-term savings (capital repayments) and the Flemish tax relief for 'ordinary interest' paid for the own dwelling are abolished for loans contracted as from 2016.

For loans contracted before 2016, the current tax relief continues to exist. Consequently, three differentiating tax systems for the 'housing bonus' ('woonbonus'/'bonus-logement') co-exist in the Flemish Region: (1) the ‘old’ system for loans signed between 1 January 2005 up to and including 31 December 2014, (2) the ‘first-generation’ regional system for loans contracted as from 1 January 2015 and, finally, (3) the ‘second-generation’ regional system for loans contracted as from 1 January 2016. A combination of the first-generation tax relief (i.e. mortgage loans prior to 2016) and the second-generation tax relief (i.e. mortgage loans as from 2016) for the own dwelling is not possible.

 

New tax measures enacted by the Decree of 17 July 2015 (Official Gazette of 14 August 2015)

Flemish Ruling Office

It sets up a Flemish Ruling Office for regional registration duties and inheritance taxes. This office is competent to deliver advance decisions on requests concerning exclusively the application of (the provisions of) the Tax Flemish Code. With respect to mixed situations or operations (issues including federal and regional provisions), it will deliver a binding opinion on the advance decision to the Ruling Office (which will issue the advance decision). Entry into force: 14 August 2015 (date of the publication), except for the provision related to the binding opinion on the advance decision (date to be determined by the Flemish Government).

 

Family companies

Exemption or reduced rates are applicable to gifts and legacies of family companies if certain conditions are fulfilled, notably a minimum shareholding by the donor with his close family members. The terms ‘close family members’ now include lineal relatives and their partners and relatives up to the second degree and their partners. According to the Flemish Tax Administration website, this is immediately applicable.

 

Adoption

With respect to inheritance and gift taxes, a child adopted by his/her father-in-law or mother-in-law also benefits from reduced rates in case of inheritance or gift in direct line. According to the Flemish Tax Administration website, this is immediately applicable.

 

Registration duties and inheritance taxes

Regarding registration duties and inheritance taxes, the Decree amends or complements a series of provisions introduced by the Decree of 19 December 2014: it broadens the definition of ‘building plots’, of ‘family dwelling’ (it includes now ‘outbuildings’) and also the concept of ‘close family members’ (regarding reduced rates applicable to gifts and legacies of family companies); conditions to take advantage of the compensation and refund regimes are amended; there are also changes to the regime of property traders and the rules applicable to the charge of debts incurred to acquire specific assets.

 

New tax measures enacted by the Flemish Program Decree of 3 July 2015 (Official Gazette of 15 July 2015)

  • The Flemish Region reformed and lowered the donation tax rates on donations of immovable property (except for building plots). There are no longer four tables but only two, using the same rates and brackets: one between descendants and ascendants and between married people/partners and a second one, between other persons. For immovable property situated in the Flemish Region, the Program Decree provides for a limited refund if the beneficiary carries out renovation works in the building for an amount of at least EUR 10.000 excl. VAT within 5 years after the donation. Such refund is also possible if the beneficiary produces a conformity certificate, a 9-year registered rental agreement within 3 years after the donation, and provided the building has been rented out for an effective period of 9 years. An additional reduction is applicable for disabled beneficiaries. Entry into force: 1July 2015.
  • Currently, donations of building plots to individuals are subject to a reduced rate. This reduction will be applicable until 31 December 2019. Therefore, it has been defined in the explanatory statement that the taxpayer may choose between the current special regime and the new one. Entry into force: 1 July 2015.
  • The Decree also introduces a tax on gambling (horses races, dog races) and sports betting, submits the ‘maison mortuaire’ clause (attribution of the matrimonial property to one of the spouses, whether surviving or not) to inheritance tax and brings amendments to the ecological fee.

 

Brussels Region

  • In 2015, when the Brussels Capital Region presented its budget for 2016, amongst other things a tax reform was announced, to be implemented partly in 2016 and partly in 2017.
  • In 2016, the lump-sum regional tax of EUR 89 and the additional levy of 1% on federal personal income taxes no longer apply. Property taxes, however, increase by 12%, but residents of the Brussels Region are entitled to a EUR 120 reduction in this respect. Also in 2016, registration duties on donations of real estate properties are lower.
  • In 2017, the tax relief for the sole and own dwelling will be abolished. Instead, when purchasing their own dwelling in the Brussels Region, buyers will be entitled to a reduction in registration duties of up to EUR 22,500.00 subject to certain limits. Regional surcharges on personal income taxes will also be lowered by half a percentage.
  • The purchase price of service vouchers (i.e. EUR 9 per voucher) will be maintained until 2020, and the tax relief will be limited to 15%.

 

Walloon Region

In 2015, the Walloon Government reached an agreement on the reform of the regional tax reduction for mortgage loans for the sole and own dwelling; a so-called system of ‘chèque habitat’ would be introduced.

The tax relief would be maintained but be less generous. It would become an incentive for the first acquisition also calculated in relation to the taxpayer’s personal situation (income, number of dependent children):

  • the tax credit would be granted for 20 years maximum for the first sole and own dwelling, calculated in relation to the net taxable income of the taxpayers involved, and would be increased by EUR 125 per dependent child;
  • the tax credit would be equal to 100% for the first ten years and then reduced to 50 % from the eleventh year;
  • the maximum tax reduction would be capped at EUR 1,520 per year per taxpayer for taxpayers having a net taxable income of up to EUR 21,000. If the taxable income exceeds EUR 21,000 per year, the tax benefit would be reduced gradually;
  • the taxpayer whose taxable net income is equal to or higher than EUR 81,000 would not be entitled to benefit from the tax credit;
  • the tax reduction for loans for one’s own dwelling contracted before 2016 would be maintained, but the eligible (maximum) amounts for the tax reduction would no longer be subject to any indexation. 

Indirect Taxes

Last update - 8 February 2016

In the framework of the Belgian Government Agreement and Tax Shift Agreement or following case law of the Court of Justice of the European Union (“CJEU”), new measures were enacted at the end of the year (Acts of 6, 18 and 26 December 2015 and Royal Decrees of 14 December 2015 and 26 January 2016).

VAT

The applicable VAT rate for the supply of electricity to private individuals has increased from 6% to 21% as from 1 September 2015.

As from 1 January 2016, the following changes are also to be noted:

  • the VAT rate applicable to the (non-exempt) sale of, construction works related to and (non-exempt) leasing of school buildings decreases from 21% to 6%;
  • the annual turnover threshold for the exemption for small businesses has been raised to EUR 25.000;
  • the invoice will be re-instated as tax point for VAT purposes. However, for the supply of certain services and the sale of movable goods to public entities, VAT becomes due at the time (partial) payment is received from the public entity;
  • following the decision in the CJEU case commonly referred to as “Skandia” (C-7/13), article 19bis of the Belgian VAT Code was considered redundant. Therefore this article, being an abuse provision against so-called ‘channelling’, is abolished.

The reduced VAT rate applicable to the renovation of private dwellings increases from 5 to 10 years (the VAT authorities published a transitional scheme until the end of 2015) as from 12 February 2016.

 

Excise duties

  • The excise duties on coffee, wine, liquors and energy become subject to indexation.
  • Tobacco: the duties on tobacco increase.
  • Diesel: the duties on diesel increase.
  • Sodas: duties on sugared and light sodas are introduced.

Other taxes or tax measures

Tax on stock exchange transactions

As from 1 January 2015, the temporary increase of taxes on certain stock exchange transactions has become permanent. In addition, the tax rate of both secondary market transactions in shares and transactions in capitalisation funds is increased (for secondary market transactions in shares: increase to 0.27% with a maximum of EUR 800, for transactions in capitalisation funds: increase to 1.32% with a maximum of EUR 2,000).

 

Fight against fraud

The current fight against tax and social fraud would continue. Additional tax inspectors will be hired and trained by the Government.

In the framework of the budgetary control exercise in March 2015, the following measures in this regard were announced: ‘fiscal amnesty’ (for previously undeclared income), fight against abuse of corporate structures and online fraud, extension of data-mining projects, and better use of information concerning the 183 days rule.

The Belgian Minister of Finance also launched the ‘Plan to Combat Tax Fraud’ in December 2015, sharing new insights on how Belgium will be addressing the outcome of the OECD/G20 project in relation to Base Erosion and Profit Shifting (“BEPS”). A plea for coordinated actions in sync with global, OECD and EU initiatives as opposed to unilateral measures is a recurring theme that glimmers through the entire policy document.