Archives - TMAS Newsalert - January 2011

We are pleased to draw your attention to a number of items requiring special attention when preparing and filing the Belgian resident or non-resident corporate income tax return for assessment year 2011.



Payments to tax havens

From 1 January 2010, Belgian resident and non-resident entities have to file a specific tax form to report payments made by them to tax havens insofar as those payments exceed the sum of EUR 100,000 on an annual basis (section 307(1), subsection 3 of the Belgian Income Tax Code 1992 (‘ITC’)).

The scope of this obligation has been specified in a practice note (Circular AFZ no. 13/2010 dated 30 November 2010). The practice note addresses the following items requiring special attention:

  • Both payments to enterprises (legal persons) and payments to private individuals (natural persons) are within scope. In the case of a trust, payments within scope are those made to settlers, trustees, protectors and beneficiaries.
  • The sum to be reported for tax purposes comprises the ‘actual payment’ (in cash or in kind, as well as ‘own’ payments or payments made ‘in the name and/or for the account of third parties’). As far as interest and royalty payments are concerned, however, the sum to be reported for tax purposes is the net sum after deduction of Belgian movable withholding tax.
  • Payments that do not represent an expense and which are recorded on the balance sheet account only (e.g. repayment of the principal of a loan) also have to be considered in this respect.
  • The mere making of a payment into a financial account held in a tax haven falls within the scope of the reporting obligation.
  • Indirect payments are considered only provided that the taxpayer knows (or reasonably should know) that the recipient of the payment is not the beneficial owner. This means that the recipient of the payment is merely an intermediary, even if he or she receives the payment for his or her own account. The ultimate recipient (i.e. the beneficial owner) proves to be a natural or legal person in a tax haven.
  • Any such payments have to be reported to the tax authorities in the period in which they were actually made.
  • This type of declaration has to be done in EUR. In the case of payments in foreign currency, the sums originally denominated in foreign currency have to be reported in the relevant form (i.e. Form 275F) in EUR, converted at the exchange rate applicable at the time of the payment.
  • In the case of failure to report or incomplete reporting, any non-reported payments are automatically disallowed.

Notional interest deduction for assessment years 2011 and 2012

The percentage applicable to notional interest deduction (‘NID’) for assessment year 2011 is 3.8%.

Please also note that the NID percentage for assessment year 2012 was recently published in the Belgian official gazette. It will decrease to 3.425%.


Fuel expenses from 1 January 2010

All fuel expenses incurred on or after 1 January 2010 and which relate to the use of cars (excl. cars used for taxi services, cars for double use, and minibuses) are deductible for 75% (section 66 ITC – section 198bis ITC).

The extent to which other expenses are deductible depends on the motor used (petrol/diesel) and the related CO2 emission of the car as provided in section 198bis ITC.


New opinions issued by the Belgian Accounting Standards Commission

Finally, we draw your attention to the following opinions that were (recently) issued by the Belgian Accounting Standards Commission (CBN, hereinafter referred to as ‘ASC’):


ASC opinion 2010/14 –Retention of books and vouchers (opinion issued on 24 September 2010)

The following periods apply to the retention of books and vouchers (i.e. supporting documents): “Belgian enterprises have to retain their books for seven years from 1 January of the year following the closing of the books. The vouchers also have to be stored methodically and retained for seven years, either in their original format or as a photocopy. Documents that are not to be used as evidence vis-à-vis third parties have to be retained for three years.” Please note that both periods apply only for accounting law purposes and not automatically for (in)direct tax purposes.

Additional obligations for retaining books and vouchers have to be met if the accounting books and records are kept electronically. In this respect, enterprises require “not only to retain the electronic files that contain the books and vouchers but also the programs and systems with which those electronic files can be read, and this for a minimum retention period of seven years”.

The place of retention is not specified in accounting law. As regards Belgian enterprises, it seems evident that the location where the books and vouchers are retained are the company's premises. However, Belgian enterprises may opt to centralise their electronic accounting operations on a computer that is located abroad. This creates the possibility to retain the books, accounts and vouchers abroad provided that use is made of an archiving method that provides for full on-line access from Belgium.

As regards Belgian branches and places of business of foreign enterprises, the Belgian establishment is also to be seen as the place of retention for books, accounts and vouchers that relate to such Belgian branch/place of business. The possibility exists that the foreign enterprise of the Belgian branch/place of business has centralised its accounting operations on a computer that is located abroad. In that case, the Belgian establishment only needs to have direct access to the data mentioned above.


ASC opinion 2010/20 –Use of standardised accounting software by international enterprises (opinion issued on 10 November 2010)

Following up on the above ASC opinion 2010/14, ASC opinion 2010/20 explains the use of standardised accounting software by international enterprises.

Under accounting law, Belgian subsidiaries and branches or places of business of foreign parent companies have to prepare accounting books and records, an inventory and annual accounts in accordance with the relevant Belgian statutory provisions. Yet, foreign parent companies often impose accounting procedures on their Belgian subsidiaries and Belgian branches or places of business. What requires particular attention is the chart of accounts imposed, in order that it meets the statutory provisions in Belgium as regards the minimum classification of the standardised chart of accounts ('minimumindeling van het algemeen rekeningenstelsel' or 'MAR').

Each accounting package, whether or not provided by the foreign parent company, of an enterprise that is established in Belgium has to contain, as a minimum, the accounts prescribed in a Royal Decree, including the fixed account numbers. Exceptionally, derogation can be granted with respect to the chart of accounts prescribed by the Royal Decree, but only in part. In other words, full exemption from the obligation to use the standardised chart of accounts is never granted.

An enterprise is allowed, however, to use a chart of accounts different from the Belgian MAR provided that it is able, at any time and using a correspondence table, to present a trial balance prepared as required by the Royal Decree of 12 September 1983 on the MAR. Consequently, at any time, an MAR account can be designated that corresponds to one or more accounts in the chart of accounts imposed by the parent company.

In addition, ASC opinion 2010/20 clarifies the accounting procedures imposed by Belgian enterprises on their foreign branches. Those foreign branches are an integral part of their Belgian enterprise and have to adhere to the statutory provisions of Belgian law.

Finally, the following should be noted: “In cases where the branch or place of business is located in a country other than that of the registered office, the branch requires, in accordance with the legislation of the country where it is located, not only to keep a separate set of accounting books and records on its business in the latter country, but furthermore it requires to do so in compliance with the rules that apply in that same country.”


ASC opinion 2010-1 - Interpretation of the duty to disclose significant transactions with related parties not at arm's length, as provided in the Royal Decree of 10 August 2009 (opinion issued on 13 January 2010)

As part of an effort to improve the corporate governance practice and enhance transparency with regard to the financial information of companies, a duty of disclosure has been introduced. Companies have to complete the notes to the financial statements with certain data on significant transactions between related parties that were not performed at arm’s length.

ASC opinion 2010-1 specifies what transactions and what companies are subject to that duty:

  • listed companies;
  • companies whose securities have been admitted to a Multilateral Trading Facility (‘MTF’);
  • companies that exceed more than one of the criteria referred to in section 16(1), subsection 1 of the Belgian Companies Code (i.e. large groups); and
  • public limited companies.

Companies mentioned under (1), (2) and (3) are fully subject to the duty of disclosure. For public limited companies not belonging to (1), (2) or (3), it is sufficient that they disclose any significant transactions not performed at arm's length and which were directly or indirectly entered into between the company and its major shareholders and the company and the members of the executive, supervisory or managing bodies.

ASC opinion 2010-1 subsequently provides an interpretation of ‘significant transactions not at arm's length’.

Significant (level of materiality)

This wording limits the transactions to material transactions, i.e. transactions that, if they were not presented or were presented incorrectly (in the financial statements), their absence or incorrect presentation might have an impact on economic decisions that are made by users who rely on the financial statements in making such decisions.

Transactions not at arm's length

This wording limits the transactions to transactions that do not meet the arm's length principle. This comes down to: “transactions entered into while not observing the conditions and securities that are commonly applied in the market for similar transactions.”

Exception

Disclosure of this information is not mandatory for transactions entered into between two or more members of a group provided that the subsidiaries that are parties to the transaction are fully owned by one such member.

If transactions are significant and were not performed at arm's length, disclosure in the notes also requires the following details to be included: (a) the amount of those transactions, (b) the nature of the relationship with related parties, and (c) any other information on the transactions as necessary to gain an insight into the company's financial position.