Tax reform 2014/2015


 

Corporate income tax

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).

View more

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.

View more

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.

View more

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.

View more

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).

View more


 

Act of 19 December 2014

Secret commission tax

The so-called secret commission tax of 309% (payable on amounts which have not been properly filed on salary slips, and fee forms and due on hidden profits) is limited to 103%. The rate is further limited to 51,5% in the case where it can be demonstrated that the beneficiary of the income is a legal entity, or that the hidden profits are recorded in subsequent financial accounts, to the extent that the taxpayer has not been informed (in writing) of the ongoing tax audit.

Further, the secret commission tax does not apply to the extent the hidden profits derive from disallowed business expenses. The secret commission tax does not apply in the case where it can be demonstrated that the beneficiary has properly declared the income. Further, in the case where income was not properly declared by the beneficiary, no secret commission tax is levied if the beneficiary is identified at the latest within 2 years and 6 months following 1 January of the tax year concerned.

The secret commission tax itself is tax-deductible but it depends on the situation at hand whether or not the underlying cost is tax-deductible.

Entry into force: this measure is applicable as from 29 December 2014 and is applicable to all disputes that are not finally settled on that date.

View more

Intermunicipal entities

The Act of 19 December 2014 stipulates that intermunicipal entities, collaborations and project associations are no longer automatically exempt by law from corporate income tax and are subject to legal entities tax. The entities at hand could be subject to corporate income tax or legal entities tax, depending on certain criteria (whether or not they carry out activities with a profitable nature, the way they do business etc.).

Entry into force: the measure is applicable as from tax year 2015, on financial years that are closed at the earliest on 1 July 2015.

View more

Liquidation reserve

SMEs are allowed to set up a so-called liquidation reserve. The liquidation reserve can be created by requalifying (part) of the after-tax profit account to a separate account on the liabilities side of the balance sheet. The creation of this liquidation reserve is subject to a 10% corporate income tax. In the case where the liquidation reserve would be distributed before the company’s liquidation, an additional tax, being a withholding tax, of 15% would be due in case of distribution within 5 years after the liquidation reserve is created.

A withholding tax of 5% would be due in case of distribution of the liquidation reserve after 5 years of its creation. No withholding tax is due in the case where the liquidation reserve is distributed upon liquidation. In case the ‘intangibility condition’ is not complied with, the liquidation reserve can no longer benefit from reduced withholding tax rates upon distribution.

Entry into force: the measure is applicable as from tax year 2015 (financial years ending between 31 December 2014 and 30 December 2015, both dates included).

View more

 

Personal income tax

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.

View more

Fiscal work bonus

The Program Act of 10 August 2015 includes a gradual increase in 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.

View more

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.

View more

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, digital payment and billing systems.

View more

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 2-year period (i.e. until 1 January 2017), which may be further extended in the future. 

View more


 

Act of 19 December 2014

Lump-sum amount of business expenses for employees

The lump-sum amount has been increased and results in a higher net income for employees as of January 2015. The increase in lump-sum business expenses (as included in the Program Act of 19 December 2014,), will be partially implemented in the new tax scales (and thus processed via the monthly payroll). Full implementation should be achieved as of January 2016.

View more

Tax reductions

Various federal tax reductions, such as pension savings, the tax-exempt amount for interests of savings deposits, gifts, etc. are no longer subject to indexation during tax years 2015 up to 2018 (income years 2014 up to 2017) and have been frozen (‘standstill’) at the level of the amounts applicable for assessment year 2014 (income year 2013).

However, the tax reduction for pension or replacement income has been indexed for tax year 2015 (income year 2014) and is now frozen.

View more

Tax reduction for pension savings

The maximum qualifying amount of tax reduction for pension savings has been frozen at the level of income year 2013 (EUR 940). For taxpayers who have already paid an amount of 950 EUR (initially indexed amount for income year 2014), the excess amount of EUR 10 paid in 2014 cannot be taken into account for a tax reduction with respect to income year 2014.

However, the excess amount (maximum EUR 10) would be automatically transferred to income year 2015. It will be considered as ‘paid during income year 2015’ (and will thus further qualify for tax relief in 2015).

View more

Tax charge on certain pension savings

The tax charge on certain pension savings (third pillar pension) has been modified. The tax was set at 10%. However, it has been reduced to 8%.

Furthermore, the tax will be collected at an earlier point in time, meaning that a 1% tax will be levied anticipatively during each of the next 5 years (2015 up to 2019) and, when the beneficiary reaches the age of 60, the (remaining) tax due will be (limited to) 3%.

View more

Benefit in kind for private use of a company car

For income year 2015, the formula for calculating the taxable benefit in kind for private use of a company car in the hands of company directors and employees remains unchanged. However, the reference CO2 emission for this calculation has been updated via the Royal Decree dated 16 December 2014 as follows:

  • Petrol, LPG or natural gas cars: 110 g CO2/km (instead of 112 g C02/km for income year 2014)
  • Diesel cars: 91 g CO2/km (instead of 93 g C02/km for income year 2014).

View more

Flemish Region

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 Flemish Tax 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 (publication date), except for the provision related to the binding opinion on the advance decision (date to be determined by the Flemish Government).

View more

Family-owned companies

Exemption or reduced rates are applicable to gifts and legacies of family-owned 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 provision is immediately applicable.

View more

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 provision is immediately applicable.

View more

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-owned companies);
  • conditions to take advantage of the compensation and refund regimes are amended;
  • there are also changes to the property traders system and the rules applicable to the charge of debts incurred to acquire specific assets.

View more


 

The Flemish Program Decree of 3 July 2015 published in the 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 system 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.

 


 

Decrees of 19 December 2014

Burglary and fire

The tax reduction for expenses made with regard to the security of a home against burglary and fire will be abolished as from income year 2015 (assessment year 2016). Consequently, only expenses made until 31 December 2014 will be eligible for this tax reduction.

View more

Own dwelling

Regional tax reduction for an ‘own dwelling’- mortgage loans concluded as from 1 January 2015.

The tax reduction in relation to interest payments and capital redemptions for an ‘own dwelling’ will be fixed at 40% for mortgage loans concluded as of 1 January 2015. Moreover, for these loans the maximum qualifying amount of the tax reduction will be reduced with EUR 760 per taxpayer.

 

Regional tax reduction for an ‘own dwelling’ – mortgage loans concluded up to 31 December 2014.

For mortgage loans concluded up to 31 December 2014 for an own dwelling, the tax reduction will still be granted at the marginal income tax rate (maximum 50%).

View more

Own dwelling: non-indexation

The maximum qualifying amounts will be frozen at the level of tax year 2015 (income year 2014) and thus no longer indexed going forward. The reduced qualifying amounts for the tax deduction for mortgage loans concluded as from 1 January 2015 will also be frozen (and thus not subject to indexation).

In case a first mortgage loan was concluded by a taxpayer for his own dwelling prior to 1 January 2005 (old system of tax benefits) and a second mortgage loan (for the renovation of this dwelling) would concluded as from 1 January 2015, the latter will no longer give rise to the application of tax benefits for interest payments and capital redemptions under the old system. Indeed, the taxpayer will no longer be able to make a choice for the benefits of ‘building savings’ and ‘additional deduction of interest’.

As of assessment year 2015 interest paid in relation to a loan for an own dwelling but which is not eligible for the corresponding regional tax reduction, can no longer be deducted from the taxpayer’s other immovable income (federal competence). However, at the level of the Flemish region which states that a tax reduction for the interests paid will still be possible.

View more

Surcharges

If the regional surcharges (calculated on the ‘reduced federal tax’) would not be sufficient to offset the regional tax reductions, it will be possible to deduct the remaining amount of the regional tax reductions from the federal personal income tax (overflow mechanism).

View more

Win-Win loan

As from assessment year 2015, the Flemish tax reduction for a win-win loan is converted into a regional tax credit which can be offset against the personal income tax and which is refundable. This tax credit will only be granted if the creditor has his fiscal residence in the Flemish region on 1 January of the assessment year. Although some have been abolished, other conditions remain unchanged until further notice. 

View more

 

Decrees of 11 December 2014 (Official Gazette of 23 December 2014) and 12 December 2014 (Official Gazette 29 December 2014)

Service cheques

Regional tax reduction for service cheques (i.e. titres services / dienstencheques): the amount of the qualifying expenses made with regard to service cheques will be determined differently (i.e. in a three-step approach). This new calculation method will reduce the amount of the qualifying expenses (and thus the actual tax reduction) significantly.

Please note that the maximum amount (EUR 1.400,00) and the percentage (30%) of the tax reduction will not change.

View more

Reduction for burglary and fire

Regional tax reduction for burglary and fire: the tax reduction for expenses made with regard to the security of a home against burglary and fire will be abolished as from income year 2015 (assessment year 2016).

Consequently, only expenses made until 31 December 2014 will be eligible for this tax reduction.

View more

Own dwelling

Regional tax reduction for an ‘own dwelling’- mortgage loans concluded as from 1 January 2015: the tax reduction in relation to interest payments and capital redemptions for an ‘own dwelling’ has been fixed at 40% for mortgage loans concluded as of 1 January 2015.

Regional tax reduction for an ‘own dwelling’ – mortgage loans concluded up to 31 December 2014: for mortgage loans concluded up to 31 December 2014 for an own dwelling, the tax reduction will still be granted at the marginal income tax rate (maximum 50%).

View more

Surcharges

If the regional surcharges (calculated on the ‘reduced federal tax’) would not be sufficient to offset the regional tax reductions, it will be possible to deduct the remaining amount of the regional tax reductions from the federal personal income tax (overflow mechanism).

View more

Contact us

Patrick Boone
Managing Partner, Tax & Legal Services, PwC Belgium
Tel: +32 2710 4366
Email

Philippe Vanclooster
Partner, PwC Belgium
Tel: +32 3259 3288
Email

Follow PwC Belgium