Perspectives

COVID-19 Business Tax

Business tax reliefs and concerns

Business tax relief measures taken by the Federal Government and by the Regional Authorities

Federal Government

To help companies facing financial difficulties due to the COVID-19 crisis, the Belgian Federal Government introduced an automatic extension of due dates for a number of tax reporting obligations and tax payments in the near future (Dutch | French).

Tax-free loss carry-back reserve

Companies could offset the profits of fiscal years 2019 and 2020 (i.e. relating to financial year closed between 13 March 2019 and 31 July 2020) with the losses incurred - or expected to be incurred - in the subsequent fiscal years (i.e. respectively, 2020, 2021 or 2022).

The purpose of this measure is to strengthen the financial position of companies affected by the COVID-19 outbreak, allowing them to:

  • Reduce the income tax liabilities for fiscal years 2019 and/or 2020; and/or
  • Claim a refund for income tax payments already settled (or being exempt from paying it).

The benefit is granted through the creation of a tax-exempt reserve in the fiscal year in which the taxpayer elects to apply the measure.

The total amount of the reserve is limited to the amount of the taxable result of the year, prior to certain tax deductions (broadly the net profits plus non tax-deductible expenses) minus dividend received deduction, innovation income deduction and patent income deduction. The maximum limit is set at EUR 20 million.

The losses carried back should be reintegrated into the taxable basis of the subsequent year, to avoid any double deduction. The reversal of the tax exempt reserve is also increased to avoid intentional shift of profits that are taxable at a better rate the subsequent year (i.e. 29.58% in financial year 2019 and 25% in financial year 2020). The measure can be applied only once.

It is important to note that the taxpayer needs to estimate - as correctly as possible - the expected losses: a penalty, calculated through a dedicated formula, would be levied on companies that have overestimated these losses by more than 10%.

The carry back of losses is also restricted for companies that, during the period from 12 March 2020 to the date of the fiscal year 2021 tax return's filing:

  • buy back own shares, distribute a dividend (including a distribution of liquidation reserves), reduce their capital or execute any other reduction or distribution of equity;
  • hold direct interest in a company established in a tax haven;
  • make payments of at least EUR 100,000 to companies established in a tax haven, unless justifications are provided.

Finally, the loss carry back is not available for companies subject to a special tax regime (e.g. investment companies, cooperative holding companies, companies subject to “tonnage tax”) and companies in distress at the date of 18 March 2020.

Recovery reserve 

For one or more of tax years 2022, 2023, and 2024, Belgian companies may exempt profits from tax by allocating the profits to the recovery reserve. This should facilitate the restoration of pre-COVID-19 equity levels.

The new measure will apply concretely as from tax year 2022 (i.e. companies may start establishing the reserve at the earliest with the results of the financial year ending 31 December 2021).

In order to benefit from the new provision, companies must establish and maintain the new recovery reserve in their accounts for as long as the exemption is granted. The maximum amount of profit that may be allocated to the reserve is limited to the amount of book losses recorded in the company’s financial statements for financial year 2020 (2021 for companies closing their financial years between 1 January 2020 and 31 July 2020), subject to an overall cap of EUR 20 million. Companies without book losses for financial year 2020 or 2021 are not eligible for this regime.

Certain companies are excluded from the measure, namely those:

  • Subject to a special tax regime, including investment companies and companies subject to tonnage tax;
  • In financial distress at 18 March 2020;
  • Carrying out prohibited equity distributions, such as a repurchase of own shares, dividend distribution, or capital reduction, as from 12 March 2020 until the last day of the taxable period during which the company benefits from the exemption of the recovery reserve; and
  • That have certain links with tax haven companies (i.e., companies that hold shares in a tax haven company, or have made payments of at least EUR 100,000 in a financial year to a tax haven company, without satisfying the required business purpose test).

The measure is conditional on a company maintaining its level of equity and personnel cost. The recovery reserve will be recaptured and will become (partially) taxable in the taxable period during which the company either carries out an equity distribution, or reduces its personnel costs to below 85% of the amount for the 2019 financial year.

Corporate Income Tax Prepayments

The government increased the CIT prepayment credits for the third and fourth quarter (when these payments relate to a tax period closed between 30 September 2020 and 31 January 2021 included). 

With this measure, postponing CIT prepayments is less detrimental.

The below table shows the amended credits for prepayments. As mentioned, the percentages of third and fourth quarters have been increased (unless there is a dividend payment):

 

CIT credits (no dividend distribution)

CIT credits (but dividend distribution)

Q1

9%

9%

Q2

7.5%

7.5%

Q3

6.75%

6%

Q4

5.25%

4.5%

The measure is intended for companies with liquidity problems. Therefore, this does not apply to companies that - during the period between 12 March 2020 until the last day of the taxable period concerned:

  • buy back own shares or perform a capital reduction;
  • pay or declare dividends;
  • pay variable remunerations to persons such as the main representative of the executive directors, the president of the “directieraad / conseil de direction”, or the main representative of the persons in charge of daily management;
  • had a direct interest in a company established in a low tax or non-cooperative jurisdictions or
  • made payments to companies established in low tax or non-cooperative jurisdictions, provided that these payments account for an amount of at least EUR 100,000, and that it was not demonstrated that these payments were made in the framework of real and sincere operations resulting from legitimate financial or economic needs.

The increase for insufficient prepayments as well as the due dates of the prepayments remain unchanged.

Deferral of payment

Taxes assessed from 12 March 2020 onwards (and related to tax year 2019) were granted an automatic extension of two months.

No penalties or late payment interest are due. This applies to corporate income tax, legal entities tax, and non-resident tax. It should be noted that these measures can be applied regardless of whether company activities are negatively affected by COVID-19.

The payment of the special contribution levied on Belgian companies was deferred from 1 July to 31 October 2020. However, the contribution amount did not change: EUR 347.50 or EUR 868, depending on the company balance sheet total.

For taxes that have been assessed before 12 March 2020, the taxpayers can file a request for other tax support measures (see below).

Payroll withholding tax

An automatic extension for payment was granted, depending on the taxable period:

  • Monthly February return: until 13 May 2020
  • Monthly March return and 2020/Q1 quarterly return: until 15 June 2020
  • Monthy April return: until 15 July 2020

For tax that has become due before 12 March 2020, taxpayers can still file a request for other tax support measures (see below).

Other tax relief measures

Deferral of tax payments

All Belgian registered businesses, which were able to demonstrate that they are negatively affected by the COVID-19 outbreak, can apply, until 31 March 2021, for a set of dedicated measures providing financial relief in settling their tax liabilities. This applies to the following taxes: corporate income tax, legal entities tax, payroll withholding tax, and VAT.

Affected persons can request aid in the form of:

  • payment plan in arrears,
  • exemption from late payment interest and
  • remission of fines for non-payment.

Taxpayers planning to apply for these relief measures are requested to submit a form (one per debt) that should be sent by mail or letter to the competent regional centre (Regionaal Invorderingscentrum / Centre régional de Recouvrement). More info about the procedure to be followed can be found on the website of the FOD/SPF Finance (Dutch | French).

Costs relating to donations

The Belgian Federal government announced that companies will be allowed to deduct the costs for donations of medical devices and protective gear for health care workers (such as gloves, medical masks, mouth covers etc.) to health care institutions. The measure applies to donations given in kind from 1 March to 31 December 2020.

Donations in scope of this measure will also not be subject to provisions regarding the granting of abnormal or benevolent advantages provided by the Belgian tax code.

Additional information can be found in Circular Letter 2020/C/46 (Dutch | French).

Investment deduction for SME

Fixed assets acquired or constituted by small medium enterprises between 12 March and 31 December 2022 benefit from an enhanced deduction of 25%.

Reception costs

The deduction of reception costs incurred between 8 June and 31 December 2020 increases from 50 to 100%.

Regional Authorities

Flemish Region

The Flemish Government has decided to delay the issuance of tax assessments for the property tax until September. Normally, the property tax is assessed from May onwards.

In addition, for the assessment year 2020, companies will be granted a 4-month deferral of payment of the annual traffic tax.

Go to the COVID-19 Subsidies & Grants web page to find out which other measures have been taken by the Flemish Region.

 

Walloon Region

Go to the COVID-19 Subsidies & Grants web page to find out which measures have been taken by the Walloon Region.

 

Brussels Region

The Brussels Government has decided to cancel the city tax for the first half of 2020.

Go to the COVID-19 Subsidies & Grants web page to find out which measures have been taken by the Brussels Region. 

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