Federal tax measures
Draft Program Act (budget) under review at the Chamber
- Company cars
Besides the taxation of the company cars and the fuel cards for the company (see corporate income tax), the general policy note also mentions the creation of a “mobility budget” which provides for the possibility for the employee to choose between a company car, another mode of transportation or a net salary increase. Up to now, it is not included in the bill.
- Internal capital gains
As previously announced, in the case of a contribution of shares by an individual in a holding company, there would no longer be a tax-free step-up: the difference between the fair market value of the shares and their acquisition value would be considered as a taxed reserve (and no longer as fiscally paid-up capital). As such, in the case where the reserves would be distributed to the shareholder, a withholding tax will apply.
This would also apply in the case of gifts or inheritance. However, a sale of shares would remain outside of the scope because they can be taxable on the basis of other Income Tax Code provisions. Contributions of shares to non-resident companies would also fall within the scope of this measure. This change would apply to the capital gains realised as from 1 January 2017.
- Increase in the withholding tax
- increase in the withholding tax rate from 27 to 30 % on investment income as of 1 January 2017;
- increase of the withholding tax rate from 17 % to 20% on the liquidation reserves created as of 2017 and distributed within the first 5 years
- abolition of the speculation tax for individuals on the transfer of quoted shares as of 1 January 2017;
- tax on stock exchange transactions:
- the maximum tax amount due would be doubled and the tax would be extended to include transactions realised by Belgian residents through non-resident intermediaries;
- the Belgian resident giving the order is liable for the payment of the tax except if he can prove that the tax has been paid;
- the delay for the payment is extended and the penalties are amended (reduced penalties are provided between 1.1.2017 and 31.12.2017);
- before any transactions, the non-resident professional intermediary may appoint a responsible representative
- these changes would apply to transactions executed as from 1 January 2017
These measures are subject to change.
Act of 21 July 2016 introducing a permanent fiscal amnesty (Official Gazette of 29 July 2016)
The Act of 21 July 2016 introduced a permanent fiscal amnesty which provides taxpayers with a possibility – under certain conditions – to regularise income that has incorrectly not been subject to Belgian standard income taxes as well as evaded Belgian VAT. This income is taxable at standard tax rates, increased by 20%.
In addition to the federal fiscal amnesty system, the Act of 21 July 2016 also introduced a permanent system of social amnesty concerning the regularisation of social security contributions on professional income earned by a self-employed person.
New tax measures enacted by the Program Act of 1 July 2016 (Official Gazette of 4 July 2016)
- Fiscal treatment of the ‘sharing economy’
The Program Act of 1 July 2016 introduces specific fiscal provisions regarding income received by a private individual (outside a business activity) from services provided to another private individual using an electronic platform, which is recognised or organised by the Government. This income will constitute a separate category of ‘miscellaneous income’ in the Belgian Income Tax Code. If certain well-defined conditions are strictly met and if the income does not exceed a certain threshold (i.e. EUR 5,000, which is the indexed basic amount of EUR 3,255 on an annual basis), a flat tax rate of 20% will be applicable, after application of a 50% lump-sum cost deduction. Consequently, the effective tax rate will be 10%. The tax provisions on the sharing economy are applicable as of 1 July 2016. As a result, for income year 2016 (tax year 2017) the above-mentioned threshold is reduced by half (i.e. EUR 2.500, which is the indexed amount of EUR 1.627,50). If the threshold is exceeded, the full income will be deemed to be earned income (however, it is possible to provide evidence to the contrary).
- Extension of the investigation period when tax information is received from abroad
Belgian legislation provides an extension of the period to issue an assessment notice with 24 months in the case where the Belgian tax authorities receive information from another State, which has concluded a double tax treaty with Belgium, provided this information is based on a tax audit or investigation (conducted by the competent authorities of that State), showing that taxable income was not declared in Belgium within a 5-year period preceding the year during which the tax authorities receive the relevant information from abroad.
Under the Program Act of 1 July 2016, the Belgian Government brings the term of the investigation period in line with the special assessment period of 24 months. Furthermore, the scope of application is extended to ‘any information received by the competent authority of another State’. This means that it is no longer required that the information results from a foreign tax audit or investigation. Information can also be received spontaneously or via automatic exchange of information. Finally, legal grounds (on which information can be received and used in Belgium) are extended from classical ‘double tax treaties’ to ‘other instruments on the exchange of information’ (such as multilateral treaties, Tax Information Exchange Agreements, EU Directives, FATCA, etc.).
Please also note that, in case of tax fraud, the above period of 5 years is extended to 7 years.
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 beneficiary. 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), and miscellaneous income or, possibly, earned 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 authors.
In August 2015, two lists of 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 exhaustive 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 transparent for Belgian tax 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 report the existence of a legal construction of which they (or their spouse or children) are the founder or beneficiary, in their annual income tax return. The Act of 26 December 2015 has extended this obligation as from tax year 2016:
- Not only has the mere existence of a legal construction to be stated but also its full name, legal form, address and identification number. For a legal construction of the first category, the trustee’s name and address 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 puts forward 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 came into force, this type of legal construction was not within the scope of the Cayman tax and the reporting obligation, taxpayers 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.
Under the Program Act of 1 July 2016, the Belgian government has introduced a specific administrative fine for taxpayers who have omitted to state the existence of such a legal construction in their annual income tax return. The fine amounts to EUR 6,250.00 per year and per legal construction that is not mentioned.
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, who 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 on 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 (note that the draft Program Act currently under review at the Chamber provides for the abolition of this tax as from 1 January 2017):
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 falling within the scope of a business activity.
The Belgian government is preparing specific updates of this legislation. A draft legislation was already published and it would specify that every transaction where a contract is ended early and a new contract is concluded, can trigger the speculation tax, as it concerns a transfer for valuable consideration. There is no formal agreement on the update.
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 vivos are 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 report 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 calculating 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 in the tax bracket of the 45% rate.
According to the Act of 26 December 2015, the progressive abolition of the 30% rate and expansion of the tax bracket of the 40% rate will be achieved in 2 steps, the first changes being implemented as from income year 2016 and full implementation being achieved as from income year 2018. The first step (i.e. expansion of the 25% tax bracket) is implemented and comes 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) comes into force as from assessment year 2019.
Additionally, the Act of 26 December 2015 implements new tax brackets for calculating 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 allowance ('bedrijfstoeslag'/'complément versé par l’employeur')
When a former employee who entered the system of unemployment with business allowance takes up new employment with another employer (or becomes self-employed), he continues in principle to be entitled to receive the business allowance. This allowance (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 earned 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 allowance (and additional allowances) granted 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 allowances (and additional allowances) granted or paid as from 1 January 2016 provided that they are not related to periods prior to this date.
- 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 3-year period. 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 reach a total exemption of 25%.
Both increases are applicable as from income year 2016.
Tax measures enacted by the Act of 18 December 2015 (Official Gazette of 28 December 2015)
- Reduction for pension savings
In 2014, the EU Court of Justice 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.
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 purchase 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% for 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. The Royal Decree of 1 April 2016 determines further formalities in this respect, notably with respect to the documentation that the companies involved must provide to individual taxpayers on an annual basis.
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% for 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.
Please find the other measures of the Program Act of 10 August 2015 on our website : Tax reform 2014-2015.
Update of the company car benefit in kind under the Royal Decree of 24 November 2016 (Official Gazette 5 December 2016)
For income year 2017, 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 under the Royal Decree dated 24 November 2016 as follows:
- petrol, LPG or natural gas cars: 105 g CO2/km (instead of 107 g C02/km for income year 2016);
- diesel cars: 87 g CO2/km (instead of 89 g C02/km for income year 2016).
Regional tax measures
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 when the loan is signed).
- 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 ‘former’ 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.
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. This reduction would only apply to the purchase of immovable property up to 500.000 €. Regional surcharges on personal income taxes will also be lowered by half a percentage. The draft order implementing these changes has just been passed by the Brussels Parliament.
- 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%.
The Walloon Decree of 20 July 2016 on the reform of the regional tax reduction for mortgage loans for the sole and own dwelling has been published in the Official Gazette on 10 August 2016. It introduces a so-called system of ‘chèque-habitat’.
The tax relief is maintained but is less generous. It becomes an incentive for the first acquisition also calculated in relation to the taxpayer’s personal situation (income, number of dependent children):
- the ‘chèque-habitat’ is applicable to all mortgage loans concluded as from 1 January 2016;
- the tax credit is 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 is increased by EUR 125 per dependent child on 1 January of the assessment year;
- the tax credit is equal to 100% for the first ten years and then reduced to 50 % from the eleventh year;
- the maximum tax reduction is 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 is reduced gradually;
- the taxpayer whose taxable net income is higher than EUR 81,000 is not entitled to benefit from the tax credit;
- the tax reduction for loans for one’s own dwelling contracted before 2016 is maintained, but the eligible (maximum) amounts for the tax reduction are no longer subject to any indexation;
- the tax reduction applies on the basis of certificates established by the financial institution (Implementation Decree of 24 November 2016 published in the Official Gazette of 5 December 2016)
Service vouchers and PWA cheques
As from income year 2015, the tax reduction for service vouchers is a regional competence. In December 2014 the Walloon Region used its competence to adapt the calculation method of this tax reduction and one year later (on 17 December 2015) published a guideline in this respect.
Based on the new legislation and guidelines, the tax reduction for service vouchers has significantly been reduced compared to previous years and the other Regions. In short the qualifying amount will be limited to 450 EUR maximum per taxpayer resulting in a maximum tax reduction of 135 EUR (30% of 450 EUR) per year per taxpayer (excluding municipal taxes).
Tax credit related to loans for small and medium-sized enterprises and independents
Under the Decree of 28 April 2016 (Official Gazette of 10 May 2016), the Walloon Parliament introduced a tax credit with respect to loans granted by private individuals to small and medium-sized enterprises (i.e. SMEs) and self-employed with registered office located in the Walloon Region, after 1 January 2016.
Taxpayers will be entitled to a tax credit provided that several conditions with respect to the debtor, creditor and loan are fulfilled. The loans should be granted by individuals (not companies or independents) to either SMEs or self-employed for a period of four, six or eight years. Furthermore, the loans should be used solely by SMEs or self-employed in the scope of their business activities. Employees of the SMEs cannot benefit from the tax credit in the case where they grant a loan to the company employing them.
For the first 4 years, the tax credit will amount to 4% of the entire loan amount granted per taxable period per taxpayer. For the following years, it is reduced to 2.5% of this amount. The qualifying loan amount will be capped at EUR 100,000.00 for the debtor and EUR 50,000.00 for the creditor.
The implementation Decree of 22 September 2016 (Official Gazette of 6 October 2016) lays down the entry into force at the date of 30 September 2016 and the implementing rules of this regime.