Article

Belgium Budget 2015

The tax measures

Last updated 9 January 2015

On 7 October 2014, the political parties involved in the Government coalition (CD&V, MR, N-VA and Open Vld) reached an agreement on the Budget measures. Below you will find an overview of the tax measures included in this agreement. Most of these measures are included in the Program Law of 19 December 2014 (Dutch | French), published in the Official Journal on 29 December 2014. Where available, we have indicated the expected revenue or cost of the measures for the Treasury for the period 2015-2018, as mentioned in the Budget notifications.

This summary is based on currently available information and may be subject to change. Deloitte Belgium’s tax experts will closely monitor the developments around these measures.

BUSINESS TAX

  • The transitional 10% withholding tax regime for liquidation bonuses has become permanent for SME’s (as defined in Art. 15 Companies Code). As of tax year 2015, they are allowed to allocate part or all of their accounting profit to a liquidation reserve. This reserve needs to be booked on an unavailable equity account (which cannot serve as basis for any distribution or remuneration) and will be subject to a separate 10% tax (which is not deductible).
  • No additional taxation (withholding or personal tax) will be due provided this reserve is maintained until liquidation and hence distributed as a liquidation bonus. On the other hand, to the extent that the reserve is distributed as a dividend during the first 5 years, an additional 15% withholding tax will be due and in case of dividend distribution after 5 years (but before liquidation), an additional 5% tax will be due. The LIFO principle will apply for any withdrawal from the liquidation reserve: the oldest reserves will be deemed withdrawn first.
  • This withholding and personal tax regime will also apply to foreign dividends to the extent that their attribution or payment is the consequence of similar provisions (or provisions having equivalent effects) issued by another EEA Member State.
  • The constitution and increase of the reserve will only be allowed for tax years for which the company qualifies as SME.
  • Budgeted revenue:
    • 2015: EUR 50M
    • 2016: + 100M = EUR 150M
    • 2017: + 150M = EUR 300M
    • 2018: + 200M = EUR 500M

Liquidation reserve

  • The secret commissions’ tax as it exists today [penalising the lack of (timely) filing of forms] has been abolished. The tax will henceforth only have a compensatory nature (to compensate for the loss of Belgian income taxes). When there is no loss of Belgian income taxes, the secret commissions’ tax should, as a general rule, no longer be possible.
  • The secret commissions’ tax on non-reported costs and benefits will henceforth only be due when the identity of the beneficiary is not known to the tax authorities.  Stated differently, the secret commissions’ tax will as a rule be due on non-reported costs and benefits, unless (1) the taxpayer demonstrates that the amount of these costs and benefits is included in a tax return filed on time in Belgium or abroad or (2) the beneficiary of the payment is unambiguously identified at the latest within a period of 2 years and 6 months following 1 January of the tax year of payment.  The tax rate has been reduced from 309% to 103% (or to 51.5% for payments made to a legal entity). The tax, as well as the underlying payment subject to the tax,  remain, in principle, tax deductible. The underlying payment will also be deductible in case one of the two exceptions mentioned above applies. In case the costs and benefits have been reported by the beneficiary in a tax return, no administrative penalty or criminal sanction will apply for lack of disclosure of the costs or benefits on the appropriate forms. However, based on declarations by the Finance Minister during the parliamentary discussion of the Program Law, it may be expected that the underlying payment would no longer be deductible if the beneficiary of the payment has not been disclosed.
  • The same principles  apply to hidden excess gains (“verdoken meerwinsten/bénéfices dissimulés”) that cannot be found in the company’s equity. Such gains will only be subject to the secret commissions’ tax if they are not the consequence of disallowing expenses.  Similarly, certain taxable reserves (such as those arising from an underestimation of assets or an overestimation of liabilities) will also not be treated as hidden excess gains. The secret commissions’ tax rate will be equal to 103%, unless there is a reintegration in the accounts, in which case the rate will be equal to 51.5%. Reintegration of hidden gains will henceforth also be possible for years other than the one during which the gain is realised. Such reintegration will only be allowed provided that the taxpayer has not been notified in writing of current specific investigation acts and that the 3-year assessment term has not yet expired.  Upon such spontaneous reintegration no tax increase, administrative penalty or criminal sanction will be due.
  • For certain “smaller expenses which lack business purpose (e.g. restaurant and reception expenses, small ICT expenses, etc.) the tax should not apply; the expenses will merely be disallowed.
  • The new regime applies as of 29 December 2014, as well as to any pending litigation.
  • Budgeted revenues:
    • 2015: EUR 30M
    • 2016: + 40M = EUR 70M
    • 2017: + 30M = EUR 100M
    • 2018: EUR 100M

Secret commissions' tax

  • The Government intended to limit the NID for banks and insurance companies by excluding part of the increase of the prudential capital under Basel III (banks) and Solvency II (insurance companies) from the deduction. The pre-draft program law contained a measure for banks (not yet for insurance companies) but it has been taken out of the 19 December 2014 Program law (Dutch | French) after advice from the State Council (there was no link with 2015, entry into force is from tax year 2016). The Finance Minister is expected to submit a new proposal in the first half of 2015 to have the banks and insurance contribute the expected revenue to the budget. The nature of this new proposal is not known at this stage.
  • Budgeted revenue:
    • 2015: EUR 100M
    • 2016: EUR 100M
    • 2017: EUR 100M
    • 2018: EUR 100M

Notional Interest Deduction for banks and insurance companies

  • In order to foster loyal tax competition between the private and public sector, intercommunales closing their financial year as of 1/7/2015 (tax year 2015) will no longer be automatically subject to the legal entities tax; they will become subject to the corporate tax whenever they meet the standard criteria for subjection.
  • The transfer from the legal entities’ tax to the corporate tax will be subject to the following rules:
    • Paid-in capital and share premiums paid in financial years before first year of applicable corporate tax will be treated as fiscal capital under the conditions of Art. 184 ITC;
    • The tax exemption of previously taxed reserves, revaluation capital gains and provisions for risks and charges (recorded in financial years before first year of applicable corporate tax) will be subject to compliance with the intangibility condition;
    • Expenses for which a provision was set up under the legal entities’ tax regime and are actually borne during year of applicable corporate tax will be deductible as business expenses for the year during which they have been actually borne provided compliance with the general conditions of Art. 49 ITC; utilising a provision up to the amount of the expense will result in a corresponding increase of the opening balance of the taxed reserves; reversing an excess provision will only remain tax exempt subject to compliance with the intangibility condition;
    • Definitive losses realised on assets during a year of applicable corporate tax but for which a write-off was recorded under the legal entities’ tax regime, will be deductible for the tax year of definitive loss; the same principles as for provisions will apply for increase of the opening balance of the taxed reserves and excess write-offs;
    • Depreciations as well as capital gains and losses on assets will be determined as if the intercommunale had always been subject to corporate tax; if an audit for a year of applicable corporate tax will reveal an under- or overestimation of assets/liabilities, there will be no taxation provided the intercommunale can demonstrate they originate from during a year of applicable legal entities’ tax;
    • Losses built up during the legal entities’ tax regime will not be deductible from taxable profits realised under the corporate tax regime.
  • For dividends distributed by intercommunales for financial years closed on or after 1/7/2015 the current provisions, according to which the holding (period) requirements and the first exclusion under the taxation requirement do not apply, will be abolished.
  • Any changes as of 1/11/2014 to the closing date of the financial year are not opposable towards the tax authorities.
  • Budgeted revenue:
    • 2015: EUR 200M
    • 2016: + 10M = EUR 210M
    • 2017: + 10M = EUR 220M
    • 2018: + 10M = EUR 230M

Intercommunales

INDIVIDUAL TAX

 
  • The increase of the night and shift work payroll exemption has been postponed to 1/1/2016 but its increase will be accelerated.

Night and shift work

  • The lump-sum deduction for business expenses for employees has been increased as of tax year 2016.  The new brackets and rates are as follows:
    • as of 1/1/2015:
      • EUR 0 – 3,775: 29.35%
      • EUR 3,775 – 7,450: 10.5%
      • EUR 7,450 – 12,700: 8%
      • above EUR 12,700: 3%
    • as of 1/1/2016:
      • EUR 0 – 3,800: 30%
      • EUR 3,800 – 13,000: 11%
      • above EUR 13,000: 3%.
  • The new maximum amounts of lump sum business expenses are equal to:
    • as of 1/1/2015:
      • employees: EUR 2,676.25
      • company executives: EUR 1,555.50
      • co-working spouses and profits: EUR 2,592.50
    • as of 1/1/2016:
      • employees: EUR 2,760
      • company executives: EUR 1,555.50
      • co-working spouses and profits: EUR 2,592.50.
  • Budgeted cost:
    • 2015: EUR 450M
    • 2016: +450M = EUR 900M
    • 2017: EUR 900M
    • 2018: EUR 900M

Lump-sum business expenses

  • The following items will not be indexed as of tax year 2015: (1) the exemptions for savings deposits, dividends from recognised cooperative companies and interest/dividends from companies with a social purpose, as well as (2) the tax reductions for replacement income, long-term savings, pension savings, employer’s shares, the carried forward reduction for energy-saving expenses, passive and low-energy dwellings, electric vehicles, development funds, gifts and domestic staff. The annual indexation of the maximum amount concerning the marriage quotient will remain intact.
  • Budgeted revenue:
    • 2015: EUR 46M
    • 2016: + 32M = EUR 78M
    • 2017: + 55M = EUR 133M
    • 2018: + 60M = EUR 193M

Non-indexation of exemptions and reductions

  • A so-called “look-through tax” (or “Cayman tax”) would be introduced as of tax year 2016 for income derived from legal constructions (through the use of foreign vehicles such as trusts or foundations). Such legal constructions already have to be reported in the personal tax return (as of tax year 2014) but the income from such constructions is often not taxable in Belgium. Such taxation would be achieved by considering these legal constructions as tax transparent, so that the income would be taxable directly in the hands of the resident individual who is the shareholder or beneficiary of the construction. The tax transparency regime would allow the tax authorities to levy tax in those cases where the interposition of a legal construction frustrates a normal taxation. On the other hand, it should be avoided that individuals who are not the ultimate beneficiaries are taxed and that certain income is subject to (economic) double taxation. Accompanying measures to encourage correct reporting would be taken.
  • The provisions implementing this tax in the Income Tax Code are not included in the draft program law. A legislative proposal is expected for Spring 2015
  • Budgeted revenue:
    • 2016: EUR 120M
    • 2017: EUR 120M
    • 2018: EUR 120M

“Look-through tax”

  • The currently existing anticipated tax of 10% on pension savings has been accelerated for the reserves built on 31/12/2014. The amount of the theoretical buyback value of the reserves on that date will, during the next 5 years (2015-2019), be subject to a 1% tax, due by 1/9 of each year. The remainder of the anticipated tax (due at the normal date at age 60) will be reduced from 5% to 3% (resulting in an overall 8% tax).
  • For reserves built under the pension savings regime as of 1/1/2015 the current 10% rate has been reduced to 8%.
  • Budgeted revenue:
    • 2015: EUR 300M
    • 2016: EUR 300M
    • 2017: EUR 300M
    • 2018: EUR 300M

Anticipated pension savings levy

INDIRECT TAX

E-commerce

  • Electronic services, including telecommunication and broadcasting, supplied by EU based enterprises to Belgian private individuals are subject to VAT in Belgium as of 2015. This is a mandatory measure introduced under the 2010 EU VAT Package and only requires limited implementing legislation. Since 2007, the same rule already applies for non-EU based enterprises.
  • The obligation for the service providers to apply and collect VAT at the rate applicable in their customers’ countries, is accompanied by a centralised VAT reporting for these transactions, called the Mini One Stop Shop (MOSS).  Under this regime, EU based providers can declare their turnover and VAT through a single portal in their country of establishment.  The VAT is paid onwards to the relevant Member States by the tax authorities of the country of registration.  

Cosmetic surgery

  • The VAT exemption for medical services regarding cosmetic surgery and treatment (other than therapeutic treatment) would be abolished. Such services would become subject to VAT at the rate of 21% as of 1/7/2015.
  • This measure was not included in the draft program law

Real estate maintenance and renovation works

  • The reduced 6% rate for renovation, maintenance and repair works related to private dwellings would only be available after 10 years (instead of 5 years). This measure would enter into force on 1/1/2016. A royal decree implementing this measure would need to be issued.

Budgeted revenue of VAT measures

  • 2015: EUR 10M
  • 2016: EUR 200M
  • 2017: EUR 200M
  • 2018: EUR 200M

VAT

Diesel

  • Excise duties on diesel will gradually be increased as of 2016 through the “cliquet” system. The tariff will be identical to the price in the Netherlands (0.0581 EUR increase per litre). The price increase for professional diesel will be neutralised through the refund mechanism. This was not included in the draft program law.
  • Budgeted revenues:
    • 2016: 100M EUR
    • 2017: + 104M = 204M EUR
    • 2018: + 109M = 313M EUR

Tobacco

  • Excise duties on tobacco are increased as of 2015.  At the same time, there is a partial shift from ad valorem excise duties (price-based), which are decreased, towards specific excise duties (quantity-based), which are increased.
  • Budgeted revenues:
    • 2015: EUR 100M
    • 2016: + 75M = EUR 175M
    • 2017: + 75M = EUR 250M
    • 2018: + 75M = EUR 325M

Automatic indexation

  • Excise duties (except on tobacco and beer) are subject to an automatic annual indexation as of 1/1/2015, taking into account inflation and competition risk. The indexation rate for 2015 amounts to 0.27%.  This indexation rate applies to energy products and electricity, as well as to coffee and non-alcoholic beverages. The increase of the excise duties on wine and other alcoholic beverages in 2015 will be above this index rate, as it has to compensate the non-indexation of beer.
  • Budgeted revenues:
    • 2015: EUR 23M
    • 2016: + 17M = EUR 40M
    • 2017: + 7M = EUR 47M
    • 2018: + 4M = EUR 51M

Abolition of certain nil and reduced energy tax rates

  • The nil rates or reduced rates of excise duty or energy contribution that apply for (energy intensive) enterprises which have adhered to an environmental convenant (Flemish region) or a sector agreement (Walloon region) have been abolished per 1 January 2015.  This means that these companies will have to pay the normal rate of excise duty or energy contribution for gasoil products, natural gas and (low voltage) electricity, unless they can benefit from another exemption.
  • The benefit of reduced excise duty rates for biofuels also expired per 1 January 2015.

Excise duties

  • The temporary increase of the tax on stock exchange operations (decided by the previous Government in 2012) has been made permanent and the percentages of the tax are even further increased for certain types of transactions as of 1/1/2015 :
    • secondary market transactions in shares : increase to 0.27%
    • transactions in capitalisation funds : increase to 1.32%
    • secondary market transactions in bonds : remain at 0.09%
  • The existing caps of EUR 740 and EUR 1,500 have been increased to EUR 800 and EUR 2,000.
  • Budgeted revenues:
    • 2015: 43M + 37M = EUR 81M
    • 2016: 43M + 37M = EUR 81M
    • 2017: 43M + 37M = EUR 81M
    • 2018: 43M + 37M = EUR 81M

Stock exchange tax

 
  • The environmental levy or “picnic” tax (an environmental tax on packaging) has been abolished as of 1/1/2015.  This tax applied to disposable plastic bags, plastic utensils and other plastic packaging.  The abolition is justified by the limited amounts collected, due to the changed consumer behaviour.

Environmental tax abolished

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