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Tax Shift 2015
Law reinforcing job creation and spending power
Last updated on 3 February 2016
On 10 October 2015, the federal government reached a final agreement regarding the tax shift announced on 23 July 2015. The aim of these “tax shift measures” is to reinforce job creation and purchasing power in Belgium.
The agreement is materialised in the Law containing measures regarding the reinforcement of job creation and spending power (hereafter referred to as the Tax Shift Law).
PERSONAL INCOME TAX
After having already modified the lump sum business expenses for employees (Law of 19 December 2014) and the employment bonus (Law of 10 August 2015), the Tax Shift Law further increases the net salary through a combination of 3 measures, i.e. the lump sum business expenses, the tax rates and the tax-exempt amount.
Lump sum business expenses
The lump sum business expenses for employees will be further increased as of tax years 2017 and 2019:
- Tax year 2017: EUR 0 - 5,505: 30%
EUR 5,505 - 13,000: 11%
above EUR 13,000: 3%
maximum: EUR 2,760
- Tax year 2019: unique rate of 30%
maximum: EUR 2,950
It was the government’s intention to gradually abolish the 30% tax bracket through its integration in the 25% tax bracket and broadening the 40% tax bracket by increasing the lower threshold of the 45% tax bracket. Further to the Tax Shift Law, the tax rates will be revisited in 3 steps:
- tax year 2017: EUR 0.01 - 7,070: 25%
EUR 7,070 - 8,120: 30%
EUR 8,120 - 13,530: 40%
EUR 13,530 - 24,800: 45%
above EUR 24,800 : 50%
- Tax year 2019: EUR 0.01 - 8,120: 25%
EUR 8,120 - 13,940: 40%
EUR 13,940 - 24,800: 45%
above EUR 24,800: 50%
- Tax year 2020: EUR 0.01 - 8,120: 25%
EUR 8,120 - 14,330: 40%
EUR 14,330 - 24,800: 45%
above EUR 24,800: 50%
The tax-exempt amount will be reformed in 2 steps. First, the income limit for the application of the tax-exempt amount will increase from EUR 15,220 to EUR 25,220 as of tax year 2019. Second, one uniform tax-exempt amount (i.e. regardless of the income) applies as of tax year 2020: EUR 4,785.
In addition, the law has been modified to reflect that, as of tax year 2017, the tax-exempt amount will no longer be imputed against the different tax brackets but instead would be deducted from the basic tax due.
Where the tax on the tax-exempt amount is higher than the tax on the taxable income, the “excess” tax is converted into a refundable tax credit insofar as it relates to tax-exempt amounts for dependent children with a maximum of EUR 250 per child.
Note in this respect that the law has been amended to reflect that the tax brackets for purposes of calculating the tax on the tax-exempt amount will be indexed according to the rules for the tax brackets and not the rules for the tax-exempt amount.
Finally, the government wanted the increase of the tax-exempt amount to primarily provide a benefit to the working taxpayers. To achieve this goal, the benefit of the tax reduction for pensions and replacement income continues to take place for pensions and replacement income until and including tax year 2019. Taking into account the uniform tax-exempt amount as of tax year 2020 (see above), the Tax Shift Law adjusts the benefit of this tax reduction by decreasing the basic amount of this reduction as of tax year 2020.
Increase of net professional income
The increase of the payroll tax exemption to 22.8%, initially foreseen for 1 January 2019, has been accelerated and already applies as of 1 January 2016.
Payroll tax exemption for night and shift work
The night and shift payroll tax exemption has been extended, for salaries paid as of 1 January 2016, to employees effectively employed in night and shift work for the production of high-tech products. This exemption mirrors the current increased exemption for night and shift work – 2.2% on top of the basic exemption of 22.8% as of 2016, i.e. 25%).
The definition of “high-tech products” is the same as for the new investment deduction.
Payroll tax exemption for high-tech products
Further to the reform of the employer social security contributions in the framework of the tax shift, the general 1% payroll tax exemption will be abolished as of 1 April 2016, with the exception of
- the non-profit sector, where the rate remains 1% (the rate is increased to 1.12% for SME non-profit sector employers); and
- SMEs (either caught by the Law of 5 December 1968 or interim agencies), where the rate is reduced to 0.12%.
General 1% payroll tax exemption
A so-called “speculation tax” has been introduced for resident and non-resident taxpayers.
The tax is due on the capital gains realised (outside the exercise of a professional activity) on quoted shares, options and warrants or other quoted financial instruments which have been acquired for consideration less than 6 months before the alienation for consideration.
The shares, options, warrants or other quoted financial instruments should be quoted (i) on a Belgian or foreign regulated market in the sense of Art. 2, 1st ind., 3° of the Law of 2 August 2002, or (ii) on a multilateral trading facility in the sense of Art. 2, 1st ind., 4° of the Law of 2 August 2002 (provided there is daily trading and a central order book), or (iii) on a trading platform of a third country fulfilling a similar function.
For purposes of the speculation tax, the notion “shares” is defined as any shares in companies or assimilated securities as well as share certificates, except shares in collective investment vehicles (as meant by the Law of 3 August 2012), in undertakings investing in debt claims (as meant by the Law of 19 April 2014) and in regulated real estate companies.
The tax also targets capital gains realised on “other quoted financial instruments”, leveraged or unleveraged, through which an investor invests in changes to the value of an underlying asset, provided the underlying asset consists solely of one or more specific quoted shares. The Explanatory Memorandum relating to the tax clarifies that quoted “turbos”, “speeders”, “sprinters”, warrants and futures may fall under this category, but excludes convertible bonds.
The tax equally applies, on the one hand, where the shares, options, warrants or other quoted financial instruments have been acquired through a donation inter vivos (“schenking onder levenden/donation entre vifs”), and, on the other hand, in case of short sales (“shorttransactie /vente à découvert”) as meant by Art. 2, 1st ind., b of EU Regulation n° 236/2012 of 14 March 2012. The 6-month period is calculated based on the LIFO method. In case of short selling, the 6-month period is calculated between the date of sale and the date of acquisition of the shares, options, warrants or other quoted financial instruments concerned.
The tax rate is equal to 33% (no increase with communal surcharges).
Two situations are excluded from the speculation tax:
- Capital gains realised on shares, options or warrants acquired in the context of a professional activity (cf. employee stock option plans), where the acquisition has triggered a taxable professional income in the hands of the beneficiary, according to the ITC or similar foreign law provisions;
- Capital gains realised as a result of the transfer of quoted shares, options, warrants or other quoted financial instruments solely pursuant to the issuer’s initiative, and where no choice was available for the taxpayer [e.g. mergers, demergers, spin-offs, “squeeze outs” (Art. 513 Companies Code) and (non-optional) stock dividends].
The tax is also not be due in case of a share exchange governed by Art. 95 and 96 ITC.
The tax is in principle levied through a withholding tax due by the intermediaries established in Belgium who intervene “in any manner” in the transaction. This withholding tax releases the taxpayer from reporting. If no Belgian intermediary intervenes, the speculation gain has to be reported in the tax return.
The taxable base is equal to the difference between:
- The sales price reduced with the stock exchange tax borne by the taxpayer on the sale, and
- The acquisition price increased with the stock exchange tax borne by the taxpayer (or donor in case of donation inter vivos) on the acquisition. If this price is unknown, the withholding tax is due on the sales price (less the stock exchange tax) and any excess has to be reclaimed through the tax return.
Under certain very limited, specific circumstances, capital losses could be taken into account in determining the capital gain realised.
The speculation tax applies on shares, options, warrants or other quoted financial instruments acquired as of 1 January 2016, except in case of short selling where the tax applies in case of a sale as of 1 January 2016.
The standard withholding tax rate for dividends, interest and royalties is increased from 25% to 27% for income paid or attributed as of 1 January 2016.
Note that the 15% rate is also increased to 17% in case of distribution of a liquidation reserve during the initial 5-year blocking period as well as in case of a capital decrease during the initial blocking period deemed originating from so-called “click” dividends.
Standard rate increase
The existing reduced rates for dividends from real estate vehicles (“vastgoedbevak-GVV/Sicafi-SIR”) as well as for interest from citizen lending (“thematische volksleningen/prêts-citoyens thématiques”) is abolished.
The Explanatory Memorandum confirms that the following income continues to benefit from reduced rates:
- Interest from regulated savings deposits;
- Interest from the 2011 “Leterme bond”;
- Dividends from new shares in SMEs issued since 1 July 2013 (VVPR-SME).
The Explanatory Memorandum also states that these changes do not affect copyright income.
Several (technical) changes have been made to the rules governing the investment deduction, in order to reflect the tax shift decision to grant an 8% investment deduction to SMEs (as defined in Art. 15, §§1-6 Companies Code) for investments, made as of 1 January 2016, in new material or immaterial fixed assets directly related to the existing or planned economic activity actually exercised by the company.
Investment deduction for SMEs
A spread investment deduction is available to all companies for investments made as of 1 January 2016 in high-tech products, to be further defined by Royal Decree.
The rate is equal to the basic rate (currently 3.5%) increased with 17% (20.5% for the current tax year).
Spread investment deduction for high-tech products
The Council of Ministers approved on 16 October 2015 a draft royal decree introducing a new reduced rate of 6% as of 1 January 2016 for taxable supplies relating to school buildings (Section A of the Annex to Royal Decree n° 20). The definition of “school building” would be the same as for purposes of the VAT exemption in Art. 44, §2, 4°, a VAT Code. The Royal Decree was published in the Belgian Offical Journal on 15 December 2015 (Belgisch Staatsblad | Moniteur belge). The Tax Shift Law ratified this Royal Decree.
In execution of the Federal Government agreement of October 2014, the VAT exemption of Art. 44, §1 VAT Code is limited, as of 1 January 2016, to therapeutic surgery, with the exclusion of cosmetic surgery.
The Tax Shift Law modifies the excise duties on alcohol-free beverages (other than water and fruit juices) and coffee (Law of 21 December 2009), tobacco (Law of 3 April 1997) and diesel, gasoline and the like (Program Law of 27 December 2004).