Tax reform in Belgium 2014/2015
New Belgian tax measures announced
The following new tax measures have been announced in the framework of the Belgian government formation and the budget for 2015, on which an agreement was reached in the second week of October 2014:
As a general remark, the government focus on mutual trust between the tax authorities and taxpayers. Further, until now, the notional interest deduction regime remains in place (except in respect of banks and institutional companies there would be some changes).
Entities - companies - corporate income tax
- Secret commission taxation: the so-called secret commission tax of 309% (due on account of lack of proper filing of salary slips and fee forms) would be limited to 103%. The tax would be further limited to 51.5% if the beneficiary is subject to corporate income tax. Furthermore, the tax would only be applicable if the beneficiary is not known. The measure would be effective from tax year 2015 (financial years ending between 31 December 2014 and 30 December 2015, both dates included).
- Intermunicipal entities, currently subject to legal entities tax, would become subject to corporate income tax as from 1 January 2015.
- General Belgian anti-abuse measure: confirmation that Ruling Office can issue rulings on the general anti-abuse rule. In addition, an assessment (and if needed adaptation) would be carried out 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) liberalities and (iii) non-individualised benefits) and streamlining of the concepts of disallowed expenses in the framework of corporate income tax and VAT.
- The federal tax code would be simplified and coordinated.
- “Tax pact”: conclusion of a ‘tax pact” to eliminate the factor of uncertainty in the economic and fiscal environment of entrepreneurs.
- Catch all clause: Belgian companies are in principle required to levy a professional withholding tax for 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 professional withholding tax of 16,5% - which needs to be levied at source by the Belgian company - unless the applicable double tax treaty foresees in a reduced rate. In this context, the “perverse” side effect would be removed.
- Assessment (and possible expansion) of the Belgian patent income deduction regime with regard to software licenses.
Individuals - personal income tax
- "Look-through" tax (or "Cayman tax"): the shareholder or beneficiary (Belgian individual) of certain low-taxed entities or trusts would be taxed on the income of the low-taxed entity or trust, even if the income was not (yet) distributed to the individual.
- Lump-sum amount of professional expenses: the lump-sum amount would be raised.
- Tax reductions: various tax reductions, such as pension savings, exemption for savings deposits, gifts etc., would no longer be subject to indexation.
- Taxation of certain pension savings would be modified. Currently, the tax is set at 10%. The tax would be partly collected early, meaning that a 1% tax would be levied during each of the next 5 years and, when the beneficiary reaches the age of 60, the tax due would be limited to 3%.
- Continuation of the partial professional withholding tax exemption for qualifying researches.
- Harmonisation of the notion of remuneration both for social and tax law.
Procedure and penalties
- Increase of mutual trust between taxpayer and competent tax authorities in order to increase foreseeability. Focus on consultation and efficient settlement of disputes.
- Harmonisation of tax procedures in order to safeguard legal certainty for the taxpayer.
- Decrease of redundant high punishment in case taxpayer acted in good faith.
- Differences between tax penal law and common penal law will be examined in order to abolish anomalies.
- Reassessment of the VAT penalty system and interest for late payment.
- Decrease of secret commission taxation of 309% (supra).
Withholding taxes - liquidation boni
The current transitory measure limiting the taxation of liquidation boni (i.e. liquidation surpluses) would become a permanent measure. This would allow SMEs, under certain conditions, to pay only 10% withholding tax (in advance) upon liquidation, instead of 25%.
The 10% rate would be a final rate, unless a distribution of reserves takes place before liquidation. If the distribution takes place within 5 years, an additional tax of 15% would be due. If a distribution takes place after 5 years, an additional tax of 5% would be due.
Social security contributions would decrease from 33% to 27% and even to 25%.
- The excise duties on coffee, wine, liquors and energy become subject to indexation.
- Tobacco: the duties on tobacco would increase.
- Diesel: the duties on diesel would increase.
- Plastic surgery (of a non-therapeutic nature) becomes subject to 21%.
- Certain e-commerce transactions become subject to VAT.
- The current VAT rate of 6% for the renovation of private dwellings older than 5 years would only be applicable to private dwellings older than 10 years.
- Assessment if the threshold for VAT exemption of small enterprises can be increased to EUR 25.000.
Tax on stock exchange transactions
The current temporary increases of taxes on certain stock exchange transactions become permanent. In addition, the percentages would increase.
Fight against fraud
The current fight against fraud would continue.
The details of the above measures are not yet clear and are still subject to change.
For more information, you can contact your regular PwC contact.