Law regarding various tax provisions (Official Gazette of 28 January 2022)
From a corporate tax perspective, the following provisions can for instance be pointed out:
- Recharging of costs: the existing administrative tolerance for the full deductibility of certain costs (restaurant and reception expenses) which are on-charged is introduced in the law and is extended to clothing, business gifts, hunting, fishing, yachting, etc. Those are fully deductible when they are re-invoiced to a third party (and mentioned expressly and separately in the invoice) even if this third party is not subject to the limitation.
- Reporting obligation for copyrights: the law introduces a legal basis regarding the obligation to draw up forms and summary statements for copyrights and related rights income and the concession of these rights. Before, this reporting was not mandatory. This extension triggers the following consequences from a corporate tax perspective:
- by default of forms and statements, the expense will be deductible but subject to the secret commissions tax
- for a loss-making company, the entire tax base of the secret commissions tax will be included in the minimum tax base.
- A legal obligation to draft and file a fee form is no longer required when an invoice (in accordance with VAT regulations) or a document in lieu thereof (credit note or simplified invoice within the meaning of art. 13 Royal Decree No. 1) has been issued by a taxable person located in the EEA territory. Moreover, the King will have the power to set a cap below which no record shall be made. The threshold may not exceed EUR 1,000 per year per supplier.
- New tax neutral regime for European Long-Term Investment Funds (ELTIFs).
Program law of 27 December 2021 (Official Gazette of 31 December 2021)
In the framework of the Budget, the Government decided to introduce a range of measures covering different areas such as energy, labour, tax and social contribution. This program law includes amongst others important changes to the Belgian expat tax regime and various other personal income tax measures.
From a corporate tax point of view, the program law introduces the following changes:
- the deductibility of brokerage fees for athletes is limited to 3% of their total gross annual salary. Brokerage fees exceeding the 3% are a disallowed expense and form a minimum taxable basis.
- the deductibility of the payments in the framework of fiscal and social amnesty is excluded. Also the amounts paid leading to the forfeiture of the criminal proceeding are no longer deductible.
- the withholding tax on dividends distributed by regulated real estate companies remains limited to 15%, if at least 80% (instead of 60% as it was before) of the real estate is invested in real estate intended for residential care or healthcare facilities. A new provision determines how to calculate the 80% threshold.
Law of 25 November 2021 organising the fiscal and social greening of mobility (Official Gazette of 3 December 2021)
- As from 2026 onwards, only zero emission company cars will be able to benefit from a tax deduction. Zero emission company cars, purchased before the first of January 2027 will remain 100% tax deductible. For zero-emission cars purchased after this date, this percentage will be gradually reduced to 67,5% by 2031. For polluting cars (i.e. any car with a CO2-emission higher than 0g/100km) purchased before the first of July 2023, the current tax regime will remain unchanged. For polluting cars purchased after the first of July 2023 a cool down period is foreseen whereby the deduction will be gradually reduced to zero by 2028.
- Investments in public charging stations made by companies between the first of September 2021 and 31 December 2022 are incentivized by allowing an increased tax deduction of 200%. Investments in public charging stations made by companies between the first of January 2023 and 31 August 2024 will be incentivized by allowing an increased tax deduction of 150%.
- Introduction of an increased investment deduction for carbon-free trucks and fuel infrastructure for blue, green and turquoise hydrogen and electric charging infrastructure. The purpose is to stimulate the acquisition of new green trucks and fuel infrastructure as soon as possible. The total investment deduction is limited to MEUR 60, to avoid qualification as illegal State Aid. In some cases, the company will not be entitled to benefit from the increased investment deduction. It will be the case if the company has overdue social security debts, is a company in difficulties, has an outstanding recovery from the Commission for illegal State Aid or has requested regional aid/subsidies (exceptions possible). The increased rate will apply for investments made between 2022 and 2026 (+ 21,5% in 2022 and 2023, 16 % in 2024, 10,5% in 2025 and 5% in 2026).
Budget agreement: new measures announced
On 12 October 2021, the Belgian Government reached an agreement on the Belgian budget. The budget agreement combines several measures to transition the Belgian economy after COVID in an environmentally balanced manner. Some points will need further agreement with the social partners, and some measures are taken explicitly in view of the recent surge of energy prices.
Some of the most important tax related measures include (i) the increase of resources for the transfer pricing team of the Belgian tax authorities (ii) the gradual transition to E-invoicing for B2B transactions, (iii) a number of environmental taxes aiming to stimulate the use of greener sources of energy (e.g. the introduction of an airplane tax for short flights) and also a number of measures aiming to support the economic weakest in society and to reduce the taxes on labour.
Beyond taxation, the agreement puts forward several new measures covering a variety of areas such as energy, labour and tax and social contribution.
From a corporate tax point of view, the most important changes would be the following:
- Airline tax on short flights;
- Gradual abolition/phasing out of the tax benefit on the “professional diesel” (in this regard, there is a law on the greening of the mobility providing an increased deduction for investments in zero-emission trucks and recharge infrastructure);
- Reform of the wage withholding tax system (notably for shiftlabour and nightlabour);
- Amendments to the expat tax provisions (program law of 27 December 2021);
- Increased efforts in the fight against tax fraud.
Tax measures in response to COVID-19
As a result of the COVID-19 crisis, the Belgian government has introduced various tax measures of which some examples are listed below. For more details, see PwC's COVID-19 Updates.
Corporate income tax (CIT) measures
The law of 19 November 2020 introduced a reconstitution reserve aiming to enable companies to gradually restore their solvency position going forward. To that end, a tax-exempt reserve can be recognized by a company at the end of the taxable period relating to the tax years 2022, 2023 and 2024. The exemption is granted up to a maximum amount equal to the Belgian accounting operating loss over the financial year 2020 (or alternatively financial year 2021 for companies with a year-end closing between 1 January 2020 and 31 July 2020 which have irrevocably opted for this later year), capped at 20 million EUR. For each tax year, the amount of the exemption that can be claimed is limited to the increase of taxable reserves in the financial year without considering the impact of the booking of the “reconstitution reserve” in application of this specific tax measure, up until the cap is reached. The reserve has to be recorded on one or more separate liabilities accounts (so-called intangibility condition). The reconstitution reserve will become partially or fully taxable in a given year to the extent the company will distribute dividends, execute share buy backs or make capital reductions or will in such year record material lower (“62 account”) salary, social liabilities and pension expenditures compared to the last financial year prior to the COVID-19 period (exceptions apply).
Certain companies are excluded from the measure, such as companies not subject to the common Belgian tax regime. Companies that execute between 12 March 2020 and the date of filing of the tax return related to the financial year during which the reconstitution reserve is created a capital decrease, share buy back or dividend distribution are also not entitled to this measure. Moreover, the measure is not available for companies with a shareholding in a company located in a tax haven country and companies that have made payments to tax haven companies unless these payments can be justified based on specific grounds (period between the 12 March 2020 and the end of the taxable period during which it benefits from the reconstitution reserve).
Also, a temporary 'loss carryback' regime or 'reserve COVID-19' was introduced. Under certain limits and conditions, companies that expect to incur losses during the COVID-19 pandemic period are entitled to claim a temporary exemption of all (or a part of) their taxable result of a financial year preceding this period (related to FY 2020, FY 2021, or FY 2022), up to the amount of such losses (other limitations apply). This temporary exemption of profits is only applicable to tax years 2019, 2020, or 2021 (corresponding to an accounting year ended in the period between 13 March 2019 and 31 December 2020) and is granted through the creation of a temporary tax-exempt reserve to be deducted from the taxable reserves in that financial year. The temporary tax-exempt reserve can be created for only one taxable period closed/ended during the period between the 13 March 2019 and 31 December 2020. This tax-exempt reserve should be reversed in the subsequent financial year, which is the financial year in which the losses have been incurred ('the COVID year'). Certain companies are excluded from the measure (see Net operating losses in the Deductions section for more information).
Several other temporary measures have been enacted, such as:
- An increased investment deduction rate regarding investments made between 12 March 2020 and 31 December 2022 for self-employed and small companies.
- There is also an extension of the tax deadlines regarding the tax shelter for audiovisual works and for stage performances for production companies that have been directly affected by measures taken by the government in response to the COVID-19 pandemic. Also, the maximum amounts of the exemption have been increased. Furthermore, it is accepted for each framework agreement that the production company indicates another eligible recognised audiovisual or stage work by means of a covenant. Moreover, in the event of a shortage of liquidity, investors may obtain a more flexible term of payment of the sums promised, or may decide not to participate in the financing of the work, for all or part of the sums promised, without administrative penalty. For stage works that must be performed with a live audience in order to qualify for a tax shelter, it is temporarily accepted that they are performed by live streaming instead of with a live audience.
- A CIT exemption is available for regional, provincial, and local financial assistance allocated to companies within the framework of the COVID-19 crisis (extension until the end of 31 December 2021).
Indirect tax measures (VAT and customs)
The Belgian government implemented different temporary VAT measures as a consequence of COVID-19:
- From 30 January 2020 until 31 December 2021, imports of goods intended to be used to combat the effects of the COVID-19 outbreak will be exempt from VAT (under specific conditions).
- From 4 May 2020 until 31 December 2021, face masks and hydro-alcoholic gels will be subject to 6% VAT.
- Definitive abolishment of the December VAT prepayment as from 2021.
- From 1 January 2021 until 31 December 2022, (intra-Community) supplies and imports of vaccines against COVID-19 and in vitro medical diagnostic devices for this disease, as well as the services closely associated with such vaccines and devices will be subject to the reduced rate of 0%.
- For the second and third quarter of 2021, a decrease of the late payment interest from 9,6% to 4% per year (8% in specific cases) and a decrease of the corresponding proportional penalty of 15% to 10% will be applicable.
- As from 1 April 2021 the VAT refund thresholds are decreased to EUR 50-1485 (amount threshold is depending on the circumstances).
For updates, see GlobalVATOnline.
New tax on securities accounts
The law of 17 February 2021 has introduced a new annual tax on securities accounts (version 2.0) in the Code of Various Duties and Taxes. The tax is an annual tax on the holding of a securities account, levied by a financial intermediary at the rate of 0.15% on the average value of the account in excess of EUR 1.000.000. Where applicable, the amount of the tax is limited to 10% of the difference between the tax base and the threshold of EUR 1,000,000. In this way, the government wishes to prevent the collection of the tax from causing the assets to fall below the threshold of EUR 1,000,000. To compute the “average value” of the securities account, the reference period is a period of twelve successive months beginning on 1st October and ending on 30th September of the following year. Also, a series of anti-abuse rules apply.
The tax applies to securities accounts as such and therefore in principle concerns all securities accounts, whomever the account holder is – natural person, company, legal entity, “legal arrangement” in the meaning of the Cayman Tax or de facto association – whatever its tax residency status – resident or non-resident – and its legal rights on the account (full ownership, bare ownership, usufruct). The tax is not due on securities accounts held by specific types of financial institutions in the course of their own business activities, i.e. (sic) “exclusively for their own account”. Residents (including Belgian permanent establishments of foreign companies provided the double tax treaty concluded with its country of residence allows such wealth taxation) are taxable on securities accounts held in Belgium or abroad; non-residents are taxable on securities accounts held in Belgium only (and provided the double tax treaty concluded with the country of residence allows such wealth taxation).
The tax is collected indirectly, i.e. through a financial intermediary (i.e. any intermediary which offers securities accounts: credit institutions, brokerage firms, investment firms) and is due on the first day following the end of the reference period. Transitional measures provide that the first reference period begins on the day of the entry into force of the Law (i.e. 26 February 2021) and ends on 30 September 2021.
Entry into force of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (Multilateral Instrument or MLI)
On 26 June 2019, Belgium ratified the MLI. It entered into force on 1 October 2019. This means that, upon condition of the fulfilment of the condition of reciprocity of ratification of the covered tax agreements, for Belgium the MLI will enter into effect at the earliest on or after 1 January 2020 for WHTs and, for other taxes, as of taxable periods beginning on or after 1 April 2020.