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Corporate Tax Reform
Phase 3 measures | Effective as of tax year 2021
An outline of the Phase 3 tax measures in the Law of 25 December 2017 enacting the Corporate tax reform (hervorming vennootschapsbelasting | réforme impôt des sociétés). These measures will be effective as of tax year 2021 (taxable periods starting on or after 1 January 2020). Any different effective dates are mentioned in the summary.
Last updated: 21 February 2020
The standard tax rate is reduced from 29.58% to 25%.
The reduced SME rate further decreases from 20.40% to 20%.
The exit tax rate increases from 12.75% to 15%.
Audiovisual and Performing Arts Tax Shelter
The percentage of the amount of the investment to be exempt is increased from 356% to 421%. Similarly, the percentage of the tax shelter certificate’s tax value is increased from 172% to 203%.
Taxable reversals of exempt provisions and reserves are taxed at the rate of 29.58% (instead of 33.99%) when the taxable event relates to a provision or reserve recorded during tax year 2019 or later.
Release of Tax-exempt Reserves
Certain tax-exempt reserves are eligible, during tax years 2021 and 2022 only, for release at the preferential rate of in principle 15%:
- Taxable releases of the investment reserve established for tax year 1982
- Taxable releases of exempt gains other than those on trucks, barges and sea vessels and deferred capital gains, due to non-compliance with the intangibility condition, provided that their amount is not higher than the total amount of such gains existing at the end of the last taxable period closing prior to 1/1/2017
- Taxable releases of the 20% super deductions that are exempt and that existed at the end of the last taxable period closing prior to 1/1/2017
- Taxable releases of profits of integration companies that have been exempt from tax during a taxable period closing before 1/1/2017
- Taxable releases of the investment reserve established during a taxable period closing prior to 1/1/2017.
The 15% standard rate is reduced to 10% to the extent that the amount of taxable releases corresponds to investments made in tangible fixed assets (other than passenger cars and cars for double use) and amortisable intangible fixed assets during the taxable period concerned. The reduced rate is not available if these assets are intended to serve as reinvestment or allocation under certain specific capital gains regimes (e.g. deferred capital gains taxation regime).
It is not possible to reduce the taxable base for this tax with any of the tax attributes, nor is it allowed to offset the separate tax with withholding taxes, tax credits and/or foreign tax credits. This tax is subject to the increase for insufficient, or lack of, advance tax payments.
The separate tax rate for capital gains on shares not meeting the minimum holding period requirement is abolished, as its rate equals, as of tax year 2021, the standard tax rate.
The investment reserve regime is not abolished but will fade out, as companies were only able to record an investment reserve until tax year 2018.
Non-mortgage loans without fixed duration
Interest for non-mortgage loans without any fixed duration are only tax deductible if the interest does not exceed the sum of
(i) the MFI rate for loans up to EUR 1m with a variable rate and an initial rate determination for a period of maximum 1 year, granted to non-financial companies and concluded during the month of November of the calendar year preceding the calendar year to which the interest relates, plus
This rate is published on the website of the National Bank of Belgium. For 2020 the maximum rate amounts to 4.06%.
Interest paid pursuant to cash pooling agreements is excluded from this new rule.
This new rule is applicable to interest relating to periods after 31 December 2019.
1:1 thin cap rule
The notion of “money loan” (“geldlening / prêt d’argent”) has been replaced by the broader concept of “receivable” (“vordering / créance”).
This amendment is applicable to interest relating to periods after 31 December 2019.
Discounts on non-depreciable tangible or intangible fixed assets, or financial fixed assets, recorded in the P&L account in accordance with accounting law, are no longer tax deductible where the asset’s purchase price is lower than the asset’s fair market value increased with the discount.
SME’s also have to comply with the rule that the first depreciation (during the year of acquisition or production) must be limited pro rata temporis.
The double-declining balance depreciation method (“degressieve afschrijving / amortissement dégressif”) has been abolished for corporate tax purposes.
SME’s continue to be allowed to deduct ancillary costs related to the acquisition of tangible or intangible fixed assets either immediately or over the same period as the principal amount. MNE’s do not have this option. They need to deduct the ancillary costs over the asset’s depreciation period.
New benefit in kind
As of tax year 2021, the benefit in kind (BIK) for a “plug-in” hybrid is adjusted.
A plug-in hybrid is a vehicle that (i) has been purchased as of 1 January 2018, (ii) is equipped with both an electric battery and a fuel engine, but (iii) where the battery has an energy capacity of less than 0.5 kWh per 100 kg of car weight or where the emission is higher than 50 grams CO2 per km. All plug-in hybrids purchased before that date continue to be governed by the existing rules.
The BIK for such hybrid is based on the CO2 emission of the “corresponding” car with only a fuel engine. If no such corresponding car exists, the hybrid’s emission must be multiplied by 2.5 to determine the BIK.
New deductibility rules
Expenses relating to company cars with a CO2 emission of 200 g/km or more are only deductible for 40%.
For company cars with a lower CO2 emission, the following formula needs to be applied: 120% - (0.5% x coefficient x CO2 g/km), whereby the coefficient is 1 for diesel engines, 0.95 for petrol, LPG, electric and other engines, and 0.90 for cars equipped with a natural gas engine (CNG) and less than 12 taxable horsepower. The resulting percentage is minimum 50% and maximum 100%.
The plug-in hybrid rule also applies for the deduction of expenses (save for cars purchased prior to 2018).
The 120% super deduction for electric vehicles has been abolished.
Fuel expenses are also governed by the new formula.
A number of changes have been made to other expenses:
- Administrative fines are non-deductible, even if they relate to deductible taxes and irrespective of whether or not they qualify as a criminal penalty (e.g. VAT increases or proportional administrative fines)
- The 120% super deductions for employer-organised commuting, for security expenses and bikes have been abolished.
- The deduction for the secret commissions tax is abolished. The 50% rate applicable to the inclusion of hidden excess gains in the accounts is also abolished. Similarly, the rule allowing inclusion of such gains in a later financial year than the actual year of their realisation, has been abolished.
Foreign Treaty PE Loss Deduction
The law on the corporate tax reform abolishes the rule according to which losses incurred abroad and related to a tax treaty permanent establishment or assets (real estate) can, subject to compliance with certain conditions (including a loss recapture rule), be deducted from the Belgian taxable base. Tax treaty losses are in principle disregarded for purposes of determining the Belgian taxable base, except “definitive losses” incurred within the EEA.
Foreign losses will be considered definitive when the Belgian company definitively terminates its activities carried out abroad through a foreign establishment, or no longer disposes of any assets abroad absent such establishment, without having obtained any deduction whatsoever for these losses in the EEA member state where the establishment or assets are located.
A SAAR (specific anti-abuse rule) targets situations where the company restarts its activities in the EEA member state where the establishment or the assets were located, within a period of 3 years after the deduction of the definitive losses. The amount of the definitive foreign loss that has been deducted previously in Belgium must be recaptured and included in the taxable base for the taxable period during which the activities were started up again.
A transitional rule exists for pre-2020 tax treaty losses. Foreign PE losses that were deducted in Belgium during a taxable period that started before 1/1/2020, have to be deducted from the profits benefiting from a treaty exemption or reduction, unless the taxpayer demonstrates that these losses have not been deducted from the foreign PE’s profits abroad.
Belgian Establishment Definition
The exception for “independent agents” has been thoroughly modified, in order to make it compliant with the new Art. 5, §6 of the OECD Model Convention. Where previously an independent intermediary does not give rise to a Belgian establishment if he acts within the ordinary course of his business, such intermediary is under the new domestic definition nevertheless constitutive of an establishment if he (almost) exclusively acts for one or more “closely related” enterprises.
A “close relation” with an enterprise exists, in accordance with Art. 5, §8 of the OECD Model Convention, where, based on all the relevant facts and circumstances, either one party has control over the other or both are under control of the same persons or enterprises. In any event, a person is automatically considered “closely related” to an enterprise if one party possesses a (direct or indirect) stake of more than 50% in the other (defined differently depending on whether it is an enterprise or a company), or if another person or enterprise possesses such stake in the person and the enterprise concerned.
The exception for order takers is abolished.
Abolition of Preferential Regimes
A number of preferential regimes has been abolished, namely the exemption for capital gains realised on the transfer of Belgian situs unbuilt real estate in the hands of housing companies and the so-called “economic exemptions” for expert/quality hirings, trainees and additional personnel.
The minimum taxable base is increased from EUR 34,000 to EUR 40,000. The latter amount will be subject to annual indexation as of tax year 2022.
The reduced 40% R&D payroll tax exemption for researchers with a bachelor degree has been increased to 80% on 1 January 2020.