Article

2016 Tax measures

New measures for a changing business landscape

An unprecedented range of important tax measures has been adopted by Belgian legislators during the course of 2016, whilst a number of other significant tax measures are currently pending. An overview of these measures follows below.

Last updated 15 March 2017

CORPORATE INCOME TAX

Updated dividends-received deduction blacklist

Under the Belgian dividends-received deduction (DRD) regime, 95% of dividends received are exempt from tax if certain conditions are fulfilled. One requirement to qualify for the DRD is that the company distributing the dividends must be subject to corporate income tax or a similar foreign tax. This requirement is considered as unfulfilled where the dividends concerned are, amongst others, paid by a company resident in a country that imposes corporate taxation at a nominal or effective tax rate below 15%.

In this respect, Belgian corporate income tax law historically provides a “blacklist” of countries in which the statutory nominal or effective tax rate is deemed lower than 15%. This blacklist has now been modified by the Royal Decree of 1 March 2016 (Belgian State Journal of 10 March 2016 (Dutch | French); see this article from 15 March 2016). After removing more than 30 countries (including Cuba, Panama and the Seychelles) and adding 19 new ones (including Kuwait, Qatar and the United Arab Emirates), the new blacklist only contains 31 countries (down from 51).

The updated blacklist is applicable to dividends distributed or attributed from 1 January 2016 (however, the previously existing list still applies for dividends distributed or attributed in accounting years ending before 1 April 2016).

Expansion of tax haven reporting obligation

Belgian tax legislation requires Belgian resident companies and Belgian establishments of non-resident companies to annually report certain payments made - either directly or indirectly - to persons established in tax havens (albeit subject to a consolidated threshold of EUR 100,000).

In a nutshell, there are two types of tax havens for the purposes of this reporting obligation: (1) countries with zero or low taxation included in a “Belgian list” established by Royal Decree and (2) countries included in the “OECD list” of countries that are rated as non-compliant by the OECD’s Global Forum on Transparency and Exchange of Information.

The reporting obligation has been revised twice in 2016. First, the “Belgian list” of tax havens has been slightly updated by the Royal Decree of 1 March 2016 (Belgian State Journal of 11 March 2016 (Dutch | French); see this article from 15 March 2016), and now contains 30 countries. The updated blacklist is applicable to payments made from 1 January 2016 (however, the previously existing list still applies for payments made in accounting years ending before 1 April 2016).

Furthermore, the Program Law of 1 July 2016 (Belgian State Journal of 4 July 2016 (Dutch | French) further extended the scope of this reporting obligation. The main changes are as follows:

  • Whilst the “Belgian list” was previously confined to (1) states with a statutory corporate tax rate below 10%, it now also includes countries (2) that do not levy corporate tax on income from domestic or foreign sources or (3) where the effective tax rate on foreign source income is lower than 15%. The list still has to be amended to reflect these changes.
  • The reference to the “OECD list” has been maintained, but the requirement under previous legislation that a state had to be listed during the entire taxable period has been abolished; it is now enough for the state to be rated as non-compliant by the OECD’s Global Forum on Transparency and Exchange of Information, at the time of the payment, in order for the reporting obligation to be triggered.
  • Finally, the reporting obligation is no longer limited to payments made to persons (including individuals and legal persons) established in tax havens, but also applies to (1) permanent establishments (PEs) located in a tax haven, (2) bank accounts managed or held by such persons or PEs, and (3) bank accounts managed or held with credit institutions located (or with a PE) in one of those tax havens.

Note that payments caught by the reporting obligation will as a rule be tax deductible only if they (1) have been duly reported and (2) have been incurred in the context of real and sincere transactions with persons and arrangements that are not artificial.

Three-tiered transfer pricing documentation standard

In line with the outcomes of Action 13 in the OECD’s Base Erosion and Profit Shifting (BEPS) project, the Program Law of 1 July 2016 (Belgian State Journal of 4 July 2016 (Dutch | French)) implements the 3-tiered transfer pricing documentation standard into Belgian tax law, requiring multinational groups within scope to submit with the Belgian tax authorities:

  • a Country-by-Country (CbC) report;
  • a Master file; and
  • a Local file.

CbC report should be filed with the competent Belgian tax authorities by every Belgian Ultimate Parent Entity of an MNE Group that has gross consolidated revenues of at least EUR 750 million, as reflected in the consolidated financial statements during the year preceding the reporting year. In certain cases, a Belgian Constituent Entity that is not the Ultimate Parent Entity of the MNE Group may also be required to file the CbC report for such MNE Group.

The CbC report should be filed no later than 12 months after the last day of the MNE Group’s reporting period. In addition, before the last day of the reporting period, any Belgian Constituent Entity of an MNE Group will have to notify the competent Belgian tax authorities (1) that it will submit a CbC report in Belgium (in its capacity as Ultimate or Surrogate Parent Entity or other Reporting Entity) or if not applicable, (2) which Constituent Entity of the MNE Group will submit the CbC report (including its residence state).

Master file and Local file must be submitted with the competent Belgian tax authorities by any Belgian Constituent Entity of an MNE Group that, based on the (standalone) annual financial statements of the accounting year immediately preceding the last closed accounting year, exceeds one of the following thresholds:

  • Total operational and financial revenues of EUR 50m;
  • Balance sheet total of EUR 1 Billion; or
  • Annual average number of employees of 100 FTEs.

While the Local file should be filed with the tax return covering the accounting year under scope, the Master file should be filed no later than 12 months after the last day of the MNE Group’s reporting period.

The abovementioned transfer pricing documentation requirements apply to reporting periods and accounting years that started on or after 1 January 2016. Non-compliance may be subject to increased penalties, ranging from EUR 1,250 to EUR 25,000, applicable from tax year 2017.

Dividend withholding tax of 1.6995% (Tate & Lyle)

In order to comply with the Court of Justice of the European Union’s Tate & Lyle judgment, the Law of 18 December 2015 introduced a reduced withholding tax of 1.6995% for dividends distributed by a Belgian company to non-resident corporate shareholders with shares representing less than 10% of the distributing company’s capital, but with an acquisition value exceeding EUR 2.5m, provided some other conditions are fulfilled.

The Law of 3 August 2016 containing urgent tax measures (Belgian State Journal of 11 August 2016 (Dutch | French)) remedies some unforeseen “gaps”. In particular, the Law renders the application of the reduced 1.6995% WHT conditional upon (1) the Belgian company distributing the dividend and the beneficiary company meeting a subject-to-tax requirement and (2) the beneficiary not being a Belgian resident company.

The Law also modifies the elements that must be certified by the beneficiary company, in a certificate that must be kept by the Belgian company distributing the dividend.

Abolition of patent income deduction with grandfathering

The Law of 3 August 2016 containing urgent tax measures (Belgian State Journal of 11 August 2016 (Dutch | French)) abolishes the patent income deduction (PID) regime with effect from 1 July 2016, subject to a grandfathering regime (see the R&D Tax Alert of 12 July 2016).

The grandfathering regime allows taxpayers to still apply the ‘old’ PID regime to income earned until 30 June 2021, provided certain conditions are met. First, the grandfathering regime can only be applied to eligible patents that were requested or acquired before 1 July 2016. Second, grandfathering is excluded for patents directly or indirectly acquired from an associated company as of 1 January 2016, which were not eligible for the old PID or similar foreign regime in the hands of such company.

The Belgian government is currently preparing draft legislation to replace the previous PID regime with a new “innovation income deduction” (IID) regime (see below).

New real estate investment funds (REIF) regime

The Program Law (II) of 3 August 2016 (Belgian State Journal of 16 August 2016 (Dutch | French)) introduces a new real estate investment fund (REIF) in Belgian legislation, i.e. the so-called “FIIS” / “GVBF” (“Fonds d’investissement immobilier spécialisé” / “Gespecialiseerd Vastgoedbeleggingsfonds”) (see also the Real Estate Tax Alert of 27 July 2016).

First of all, the Law sets the legal framework for the REIF, anticipating a Royal Decree that will further define the legal characteristics of the REIF and the adoption of which is necessary to be able to effectively set up a REIF. Although the Royal Decree has yet to be adopted, the likely characteristics of the REIF are, for example, that (1) it is a closed-end real estate fund only open to institutional and professional investors (e.g. pension funds, insurance companies, corporates meeting certain thresholds, etc.), (2) its securities cannot be quoted on a stock exchange and (3) it will be subject to applicable AIFMD regulations and exceptions. Hence, the REIF will be a very flexible vehicle and subject to only a few regulatory restrictions.

Second, the Law defines the tax regime applicable to the REIF. A REIF is subject to corporate income tax, but on a very limited basis (in practice, its income and capital gains are not subject to tax). Upon assumption of the REIF status, or contribution of properties into an existing REIT (e.g. through contribution in kind, (de-)merger, etc.), latent capital gains are in principle subject to a so called ‘exit tax’ of 16.995%. The REIF is subject to an annual subscription tax, but generally only if Belgian investors hold its shares. The management of REIFs is exempt of VAT.

The Program Law also brings about some major changes to the current tax system applicable to the Belgian regulated real estate company (RREC) regime (“GVV” / “SIR” or “gereglementeerde vastgoedvennootschap” / “société immobilière réglementée”), which equally apply to the REIF:

  • Subject to some conditions, dividends distributed by a RREC and REIF may benefit from the dividends received deduction (DRD) regime in the hands of Belgian corporate investors, to the extent that the RREC or REIF’s real property income stems from qualifying foreign real estate or from qualifying dividends (with respect to the latter, the previously existing 90% redistribution requirement is reduced to 80%).
  • The 16.995% exit tax rate is also applicable if a company contributes real estate assets to a RREC (such contributions were previously taxable at the standard tax rate) or REIF;

A Royal Decree (currently in preparation) would introduce a mechanism which would render dividends distributed by a REIF or RREC eligible for a dividend withholding tax exemption, in function of the amount of income stemming from foreign real estate.

Implementation of changes to EU Parent-Subsidiary Directive

The EU Parent-Subsidiary Directive was amended in 2014 and 2015 to include (1) an anti-hybrid rule (countering the exemption in the Member State of the parent company of the return on certain “hybrid instruments”) and (2) a general anti-avoidance rule (GAAR), respectively. The Member States were in principle required to implement these changes by 31 December 2015 at the latest.

Draft legislation implementing these provisions has eventually been deposited on 27 September 2016 with Parliament and can in essence be summarised as follows.

Firstly, in order to implement the anti-hybrid rule, the subject-to-tax conditions of the dividends received deduction (DRD) regime will be expanded to include a provision stipulating that DRD would not be available for dividends distributed by a company insofar as that company can deduct or has deducted the income from its profits.

Secondly, in order to implement the GAAR, both (1) the subject-to-tax conditions of the DRD regime and (2) the provisions related to withholding taxes (WHT) will be amended. This blocks the application of DRD or a WHT exemption for dividends that are, in essence, related to a legal act or a series thereof for which the tax authorities deem that:

  • It is artificial, i.e. not set up for valid business reasons reflecting economic reality; and
  • It is set up with one of the main purposes being to obtain the DRD or the WHT exemption, or obtain one of the benefits of the EU Parent-Subsidiary Directive in another EU Member State.

The draft legislation provides for a retroactive entry-into-force of these rules. The new DRD rules apply to dividends distributed or attributed from 1 January 2016, unless the financial year of distribution or attribution has been closed before the first date of the month following the publication of the new law. The new WHT GAAR applies to dividends paid or attributed from the first day of the month following the new law’s publication.

Deferral regime for payment of exit tax

In a formal notice letter of September 2014, the European Commission requested Belgium to bring its “exit tax” legislation (on the basis of which companies transferring their seat or assets from Belgium to another Member State are subjected to an immediate taxation) in line with the freedom of establishment.

The draft legislation (which does not create any additional taxable events in which “exit tax” would be due) is the Belgian government’s response to this notice. Its main features are as follows:

  • The general rule remains that an immediate and final exit tax will be levied in case of outbound reorganisations or transfers of seat, in case assets are not maintained in a Belgian permanent establishment (PE);
  • Through an exception, taxpayers would be given the option to pay the exit tax either immediately or in equal instalments over a period of 5 years. However, the option to defer the payment of exit tax is only available with (1) certain listed outbound reorganisations or transfers of seat (2) to an EU member state or an EEA member state with which an agreement on mutual assistance in the recovery of taxes has been concluded (currently, only Norway and Iceland);
  • If a taxpayer opts for the deferral, the draft legislation also specifies, among others, the calculation of the exit tax due, whether a guarantee must be provided, and the circumstances in which the deferral regime expires.

According to the draft legislation, the above regime would apply from tax year 2017 to transactions occurring from the law’s publication date.

"Catch-all" clause revisited

The Law of 18 December 2016, published in the Belgian Official Journal on 20 December 2016 (Dutch | French), has modified the catch-all provision, i.e. Article 228, §3 of the Income Tax Code (“ITC”).

Art. 228, §3 ITC subjects certain income earned by a non-resident to Belgian tax if that income (1) is taxable according to the ITC (not subject to withholding tax), (2) borne by a Belgian resident or Belgian establishment, and (3) either taxable in Belgium under an applicable tax treaty or, absent such treaty, where the taxpayer cannot demonstrate effective taxation in the residence state. Such income is subject in principle to withholding tax at the effective rate of 16.5%.

The limitation of the scope of application to certain income only, i.e. income that is derived from rendering ‘services’ (see official instruction dated 23/7/2014 which has been addressed in the Corporate Tax Alert of 1 August 2014), is now legally confirmed. The main difference with the official instruction is that the foreign service provider must have ‘ties’ with the Belgian client (“enigerlei band van wederzijdse afhankelijkheid” / “des liens quelconques d’interdépendance”).

The provision applies as from 1 July 2016. The de minimis threshold of EUR 38,000 fees for each debtor per year (which was foreseen in the instruction) no longer applies from that date.

New Belgian Innovation Income Deduction regime

The Law of 9 February 2017 (Dutch | French), published in the Belgian Official Journal on 20 February 2017, has introduced the Innovation Income Deduction (“IID”).

The IID replaces the previous Patent Income Deduction (PID) which has been abolished by the Law of 3 August 2016, with effect as from 1 July 2016 (subject to a grandfathering rule for income up to 30 June 2021).

The main features of the IID regime (which are also highlighted in the R&D Tax Alert of 21 February 2017) are as follows:

  • The new IID entails that Belgian corporate taxpayers can obtain an 85% deduction for net “qualifying IP income” from “qualifying IP rights”. Taxpayers who opted to apply the PID regime under the grandfathering rule will not be able to ‘switch’ to IID regime for the same IP rights. The IID can be combined with the investment deduction or R&D tax credit and the unused IID can be carried forward unlimited in time.
  • “Qualifying IP rights” not only include patents and supplementary protection certificates), but also plant breeders’ rights which are applied as of 1 July 2016 of acquired after 30 June 2016, orphan drugs which are (i) applied as of 1 July 2016 or acquired after 30 June 2016 and (ii) are limited to the first 10 years of registration in the European Register of orphan drugs, data or market exclusivity granted by a public body after 30 June 2016, and computer programs protected by copyright resulting from an R&D project or program and which did not generate any income before 1 July 2016. The company should be owner, co-owner, licensee (exclusive or non-exclusive) or rights holder of the IP rights.
  • “Qualifying IP income” comprises income derived from revenues from licenses, IP income embedded in products or services, IP income embedded in the application of production processes, damages from IP infringement and income obtained upon IP rights’ alienation, subject to a re-investment condition. Income generated after filing for IP right recognition (except copyrighted software) but before obtaining the qualifying IP right, qualifies as an exempt innovation income, provided specific provisions are applied.
  • Contrary to the former PID regime, the new legislation introduced the “net income approach”. This implies that the IID regime can only be applied to the net amount of qualifying IP income that exclusively relates to a qualifying IP right, i.e. the gross qualifying IP income related to the qualifying IP right of the taxable period less the overall expenditure taken as an expense and borne in the taxable period. For the first fiscal year during which the IID regime is applied for the first time, also the historic expenses of the previous fiscal years have to be taken into account to determine the net income, i.e. the so-called “recapture” rule. These historic expenses can be deducted at once or spread over a maximum of 7 tax years.
  • The main difference with the old PID regime is the “modified nexus approach” which has to be verified separately for each qualifying IP right (or type or group of products or services), which is intended to reflect the extent to which the taxpayer contributed (in terms of expenditure incurred) to the development of a qualifying IP right. The formula which should be used is the following: Qualifying expenditure (A+B+C) x maximum 1.30 / Overall expenditure (A+B+C+D+E).

In said formula “qualifying expenditure” covers expenses made by the taxpayer (A); expenses made by the taxpayer in the context of outsourcing to an unrelated party (B); and expenses made by the taxpayer in the context of outsourcing to a related party, as far as that related person outsources the R&D and invoices, without mark-up, his outsourcing costs to the taxpayer (C).

Qualifying expenditure must directly relate to a qualifying IP right and does not include (e.g.) interest payments and costs related to real property. The overall expenditure, as a rule, comprises the same expenses as qualifying expenditure, with the addition of: expenses made by the taxpayer for acquiring the qualifying IP right (D) and expenses made by the taxpayer in the context of outsourcing to a related party (E), with the exception of expenses listed under item C.

The new IID regime applies (retroactively) from 1 July 2016.

Law implementing recovery procedure with regard to the Belgian excess profit provision

The Program Law of 25 December 2016 (Dutch | French), published in the Belgian Official Journal on 29 December 2016, contains a chapter covering the implementation of the European Commission (“EC”) decision of 11 January 2016 with regard to the Belgian excess profit ruling (“EPR”) regime based on Article 185, §2, (b) of the Income Tax Code (“ITC”). The decision of the EC can be accessed by clicking here.

The EC concluded in its decision that Belgium used the unilateral downward adjustment enshrined in Article 185 §2, (b) ITC to decrease the Belgian tax base of multinational companies and considered the provision to be the basis for granting unlawful State aid. Therefore, the EC ordered recovery of the unlawful State aid granted.

Although the decision of the EC is currently being challenged by the Belgian government and multiple EPR beneficiaries at the General Court of the European Union, such action does not suspend Belgium’s obligation to recover the unlawful aid. The Program Law determines the modalities of the recovery from the beneficiaries.

The recovery takes the form of corporate tax assessments for the amount of the state aid, i.e. the unpaid corporate tax plus the compound interest. The amount of unpaid taxes determined for each financial year covered by an excess profit ruling through tax year 2015 and is equal to the difference between the tax paid with application of the EPR regime and the tax due without the benefit of the EPR regime.

Because of the methodology (recalculation of the tax assessment for each year), some items of the tax return are automatically considered in view of the recovery (e.g. unused tax losses or tax credits). Some other items are allowed upon specific request from the beneficiary such as the application of R&D tax deductions or credits, or Patent Income Deduction. The burden of proof to apply these items lies with the beneficiary. Furthermore, to the extent the Belgian excess profit was effectively taxed abroad, such taxation can be taken into account to determine the correct amount of the unpaid tax to be recovered by the Belgian tax authorities.

The unpaid tax has to increased with a compound interest which has to be determined based on the EU rules, and is due from the last useful date for the fourth advance tax payment four the tax year concerned.

The Program Law further contains provisions governing the actual collection of the state aid and obliges the Belgian State to reimburse the recovered sums in case a final decision of the General Court or the Court of Justice would annul the Commission’s state aid decision.

PERSONAL INCOME TAX

Collaborative economy

The Program Law of 1 July 2016 (Belgian State Journal of 4 July 2016 (Dutch | French)) introduces a specific tax regime for the so-called “collaborative economy” in Belgian tax legislation.

As far as income taxes are concerned, the collaborative economy regime implies that profits or revenues earned by a private individual with respect to services rendered for another private individual through an electronic platform will be regarded as constituting miscellaneous income and, as such, separately taxed at an effective rate of 10% (i.e. 20% with a 50% lump-sum deduction of expenses), provided some conditions are met. These conditions include the following among others:

  • the electronic platform must be organised or recognised by the government;
  • the profits or revenues may not exceed EUR 5,000 (tax year 2017) for the on-going or previous taxable period (this threshold is reduced by half for tax year 2017 to EUR 2,500); if the threshold is exceeded, the income is deemed to be professional income unless counterproof is provided;
  • the profits or revenues do not relate to services generating immovable or movable income or the subletting of real property; if necessary, a split-up is required.

The new income tax regime for the collaborative economy is applicable to income paid or attributed from 1 July 2016. The Program Law also provides for a specific collaborative economy regime for VAT and social security purposes.

Sanctions for non-reporting of legal constructions

Under Belgian personal income tax legislation, taxpayers are obliged to report the existence of a “legal construction” in their annual personal income tax return.

The Program Law of 1 July 2016 (Belgian State Journal of 4 July 2016 (Dutch | French)) introduces a specific administrative penalty for non-compliance with this reporting obligation. The penalty amounts to EUR 6,250 per year for every unreported legal construction.

VAT

Collaborative economy

The Program Law of 1 July 2016 (Belgian State Journal of 4 July 2016 (Dutch | French)) introduced a specific tax regime for the so-called “collaborative economy” in Belgian tax legislation.

A new paragraph is added to the VAT Code to provide that private individuals are no longer subject to VAT if they perform services (otherwise taxable in Belgium) to individuals through an official platform (i.e. one that has been registered with and recognised by the tax authorities), and the value received for such services does not exceed EUR 3,255 per year (now indexed at EUR 5,000). This measure is designed to take into account the increasing number of individuals that provide services to other individuals through apps and other digital platforms. The rule applies from 1 July 2016.

Games

The Program Law of 1 July 2016 (Belgian State Journal of 4 July 2016 (Dutch | French)) changed Article 44 of the VAT code. Online gambling games are no longer exempt from VAT. Lotteries however, remain exempt even if made available online. The Belgian customer will be liable for the payment of Belgian VAT in cases where the foreign supplier is not VAT-registered, in Belgium or another EU member state, via the mini one-stop-shop (MOSS) system. This change is effective from 1 August 2016.

Client listings

Following the Program Law of 1 July 2016 (Belgian State Journal of 4 July 2016 (Dutch | French)), from 1 July 2016, an entity applying the exemption for small enterprises is no longer obliged to file a nil Annual Client Listing. This applies to ASL's for the year 2016 if the activity has not been stopped during the first 6 months of 2016. ASL's for 2015 or for 2016 whereby the activity was stopped in the first 6 months still need to be filed even if the ASL is a nil return.

Cost sharing associations

The Law of 26 May 2016 (Belgian State Journal of 9 June 2016 (Dutch | French)) creates opportunities for taxpayers by introducing more flexible exemption requirements for cost sharing associations. The new rules are effective from 1 July 2016, with a transition period applicable until 31 December 2016. The tax authorities are expected to issue a circular letter detailing the new rules within the next few weeks.

TAX PROCEDURE

Information received from abroad: income taxes

Belgian tax legislation granted the Belgian tax authorities an additional assessment period of 24 months when they receive information resulting from a tax audit or investigation, carried out by the competent tax authorities of a country with which Belgium has a tax treaty, showing that taxable income has not been declared in Belgium during a 5-year period preceding the year in which the information was obtained from abroad.

Furthermore, the Program Law of 1 July 2016 (Belgian State Journal of 4 July 2016 (Dutch | French)) extends the scope of the specific 24-month assessment period.As a result, it is no longer confined to information on non-reported income (relating to the previous 5 years) obtained after a foreign tax audit, but is triggered (1) by any exchange of information, regardless of the legal basis, or (2) by a domestic audit. Moreover, the 5-year period is extended to 7 years for fraud cases.

The Belgian tax authorities could merely make additional tax assessments on the basis of such foreign information (i.e. they could not subject the taxpayer to additional audits). The Program Law introduces a new provision which going forward, will allow such audits during the same 24 month-period.

Information received from abroad: VAT

In the past, the three-year statute of limitations period could be extended to seven years if the VAT authorities received information from abroad, a legal claim or probative data demonstrating that taxable transactions were not declared, exemptions were wrongfully applied or VAT was incorrectly deducted.

The Program Law of 1 July 2016 (Belgian State Journal of 4 July 2016 (Dutch | French)) added a new measure to the VAT code to provide that this information does not need to be received within the normal three-year statute of limitations period in order for the extended statute of limitations period to be triggered.

The change is effective from 14 July 2016. Although the VAT authorities consider this change to be an interpretation of the VAT rules, the measure may potentially not be applied on a retroactive basis because the timeframe for obtaining the information was not clear before the amendment.

Transfer pricing adjustments

The Program Law of 1 July 2016 (Belgian State Journal of 4 July 2016 (Dutch | French)) provides that if additional Belgian taxes are due following a tax treaty-based mutual agreement procedure or Arbitration Convention procedure, an additional 12-month assessment period would start to run from the time the relevant procedure is closed.

In the reverse scenario (i.e. if the conclusion of such procedure shows that a reduction of taxes is warranted), an ex officio relief option is provided.

The above amendments apply from tax year 2017.

Advance tax payments

Insufficient advance tax payments (with respect to certain income elements) gives rise to a tax increase calculated referring to an ECB reference rate, rounded down to a lower unit. Since that base rate has long been lower than 1%, the tax increase would be nil.

In order to incentivise taxpayers to make advance tax payments, the law has been amended by the Program Law (II) of 3 August 2016 (Belgian State Journal of 16 August 2016 (Dutch | French)) to provide that the base rate may never be lower than 1%. In addition, the Law also provides that a tax increase will not be due if said increase would be lower than 0.5% or EUR 50 (1% or EUR 25 under previous legislation).

These amendments, together with some other changes to the advance tax payment provisions, are applicable from tax year 2018.

Permanent system of tax and social amnesty

While Belgium often allowed spontaneous tax regularisations in the past, the Law of 21 July 2016 (Belgian State Journal of 29 July 2016 (Dutch | French)) has introduced a new permanent tax and social regularisation regime.

Based on the tax amnesty regime, taxpayers can under certain conditions request a regularisation (with the Contact Point Regularisations) of (1) undeclared income, sums and values and VAT transactions as well as (2) statute-barred capital amounts. For the time being, only federal taxes and duties are, as a rule, eligible for regularisation. Valid regularisation, in a nutshell, entails (1) payment of the taxes due at the time the income was earned, together with a penalty ranging from 20% to 40% (depending on the type of tax and the year of regularisation), in exchange for (2) protection from tax claims and criminal prosecution.

As alluded to above, aside from the tax amnesty system, the Law also established a permanent system of social amnesty, allowing for a regularisation of social security contributions on professional income earned by a self-employed person.

Cloud audits

Belgian tax procedure rules already allowed the Belgian tax authorities to audit data (for instance, accounting records) that is electronically stored by taxpayers on computers for example.

In order to keep up with the latest technologies, the Program Law of 1 July 2016 (Belgian State Journal of 4 July 2016 (Dutch | French)) provides that the tax authorities may now also audit data that is stored in the “cloud” (on external servers, wherever located), which will going forward have probative value in tax matters.

The Program Law of 1 July 2016 (Belgian State Journal of 4 July 2016 (Dutch | French)) also broadened the scope of article 61 VAT code allowing VAT inspectors to audit data that are stored digitally in Belgium or abroad (on external servers).

FINANCIAL SECTOR

Banking tax

The Law of 3 August 2016 introducing a new annual tax on credit institutions (Belgian State Journal of 11 August 2016 (Dutch | French)) consolidates four different existing taxes (i.e. (1) the annual subscription tax, (2) the annual tax on credit institutions, (3) specific corporate tax rules and (4) the financial stability contribution) into one single “banking tax”.

The tax is inserted in the Code on Miscellaneous Duties and Taxes and is in a nutshell, based on the average amount of “debt towards clients” of the year preceding the tax year. The applicable tax rate is set at 0.13231%. The banking tax is due on 1 January and for the first time on 1 January 2016, then payable by 1 July of each year. Certain transitory measures have been foreseen for the new banking tax’s first year of application (tax year 2016 - see the FSI tax alert of 22 August 2016).

At this stage, the changes brought about by the Law are limited to credit institutions and therefore do not concern insurance companies for example.

The changes to the corporate tax rules apply from tax year 2017. Other provisions will enter into force from 21 August 2016.

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