Belgium

Law of 21 January 2022 regarding various tax provisions (Official Gazette of 28 January 2022)

From a corporate tax perspective, the following provisions are significant: 

Recharging of costs

The existing administrative tolerance for the full deductibility of certain costs (restaurant and reception expenses) that are on-charged is introduced in the law and is extended to clothing, business gifts, hunting, fishing, yachting, etc. They 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.

Fee form

A legal obligation to draft and file a fee form is no longer required when an invoice (in accordance with value-added tax [VAT] regulations) or a document in lieu thereof (credit note or simplified invoice within the meaning of art. 13 VAT-Royal Decree No. 1) has been issued by a taxable person located in the European Economic Area (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 1,000 euros (EUR) per year per supplier.

European Long-Term Investment Funds (ELTIFs)

There is a new tax-neutral regime for 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 (PIT) measures. 

From a corporate tax point of view, the program law introduces the following changes:

• 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 (WHT) 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)

• From 2026 onwards, only zero-emission company cars will be able to benefit from a tax deduction. Zero-emission company cars purchased before 1 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 1 July 2023, the current tax regime will remain unchanged. For polluting cars purchased after 1 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 1 September 2021 and 31 December 2022 are incentivised by allowing an increased tax deduction of 200%. Investments in public charging stations made by companies between 1 January 2023 and 31 August 2024 will be incentivised by allowing an increased tax deduction of 150%.
• Introduction of an increased investment deduction for carbon-free trucks and for the installation of fuel infrastructure for blue, green, or turquoise hydrogen and electric charging infrastructure for such trucks. 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 EUR 60 million, to avoid qualification as illegal State Aid. In some cases, the company will not be entitled to benefit from the increased investment deduction (i.e. 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 leading to 35%, + 16% in 2024, + 10.5% in 2025, and + 5% in 2026).

Measures announced in the framework of the Budget agreement

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 business-to-business (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 social contribution.

From a corporate tax point of view, the most important changes are the following:

• Airline tax on short flights (law of 28 March 2022).
• Gradual abolition/phasing out of the tax benefit on 'professional diesel' (in this regard, there is a law of 25 November 2021 on the greening of the mobility providing an increased deduction for investments in zero-emission trucks and recharge infrastructure).
• Reform of the wage WHT system, notably for shiftlabour and nightlabour (law of 28 March 2022).
• Amendments to the expat tax provisions (program law of 27 December 2021).
• Increased efforts in the fight against tax fraud (e.g. the law of 17 March 2022 that introduces a new legal framework allowing designated tax authority officials to join investigations undertaken by Multidisciplinary Investigation Teams).

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 recognised 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 that have irrevocably opted for this later year), capped at EUR 20 million. 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 materially 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 buyback, 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 expected to incur losses during the COVID-19 pandemic period were 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 was 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 was 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 could 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 audio-visual 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. 
• 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 March 2022).
• Introduction of a refundable tax credit amounting to 25% of non-recoverable expenses incurred as of 1 January 2021 during a taxable period associated with tax year 2022 in relation to a cancelled event. This tax credit concerns events scheduled to take place in the period from 1 October 2021 to 28 January 2022 but cancelled as a result of COVID-measures taken by the federal government, regions, communities, provinces, or communes.

Program Law of 26 December 2022 (Official Gazette of 30 December 2022)

From a corporate income tax perspective, the relevant provisions of the program law are the following:

• A temporary reinforced minimum tax will be applicable until the law transposing the proposed Directive on minimum taxation for multinational groups in the EU (so-called Pillar 2) has entered into force. This one-time measure reduces the use of tax assets in the current ‘basket system’ from 70% to 40% (above the MEUR 1 minimum threshold). It entered into force on 1 January 2023 and is applicable to tax year 2024 which relates to a taxable period starting on 1 January 2023 at the earliest.
• The notional interest deduction regime is abolished for taxable periods ending on or after 31 December 2023.
• The lump sum Foreign Tax Credit on royalties is changed to a credit based on the actual foreign WHT.
• 80% of the banking tax (for banks), the insurance tax (for insurers) and the net asset tax (for collective investment vehicles) will become a disallowed expense.
• Reform of the copyrights regime.

Law of 20 November 2022 on various tax and financial provisions (Official Gazette of 30 November 2022)

This law contains substantial changes to the investigation, assessment and retention periods in direct tax and VAT procedure that enter into force as of tax year 2023 (direct taxes) or as of 1 January 2023 (VAT):

• The following exceptions to the normal three-year investigation and assessment period are applicable for direct income taxes:

• 4 years in the event of failure to file a return or for late submission of a return;
• 6 years for certain cross-border cases;
• 10 years in the case of ‘complex’ tax returns and in cases of fraud.

• The VAT statutes of limitation are amended as follows:

• the three-year period is extended to four years for late or non-filing of the tax return;
• a ten-year period will apply for fraud in relation to VAT matters.

• The retention period for accounting and tax records is extended from seven to ten years.

List of some other measures included in the law:

• obstruction of a tax investigation can be punishable by a judge with penalty payments (dwangsom/astreinte) at the request of the tax authorities.
• the deadline for filing a tax claim / protest letter (administratief bezwaar/réclamation) is extended from six months to one year.
• partial harmonisation of the interest regime in the VAT Code and Code of Miscellaneous Duties and Taxes with the interest regime for direct taxes.
• disallowed expenses: to put an end to some controversial case law, it is clarified that non justified expenses (secret commissions) and hidden profits, subject to the distinct taxation, are no longer considered as deductible expenses.
• tax credit for increased flat-rate mileage allowance: following the fuel prices increase, the law provides for a temporary increase of the mileage allowance (1 March 2022 until 31 December 2022). To encourage employers to temporarily pay this increased mileage allowance to their employees who use their own car for professional journeys, the law provides for a tax credit.

Law of 21 December 2022 regarding DAC7 (Official Gazette of 30 December 2022)

Council Directive (EU) 2021/514 of 22 March 2021 (DAC7) completes the DAC as regards the Automatic Exchange of Information (AEoI) for digital platform operators (both EU and non-EU platforms). It also introduces specific obligations to collect, verify, and exchange information on their sellers with the tax authorities.

The scope of the directive is very broad as the term platform covers “any software, including a website or a part thereof and applications, including mobile applications, accessible by users and allowing sellers to be connected to other users for the purpose of carrying out a relevant activity, directly or indirectly, to such users. It also includes “any arrangement for the collection and payment of a consideration in respect of a relevant activity”.

It should be noted that DAC7 aims to cover both private individuals and companies that are sellers of the platform. The mere fact of being registered on the platform during the reportable period is sufficient to qualify as a 'seller' if one of the activities covered by the directive is carried out for consideration. Once the 'seller' falls into the scope of the directive, some information will have to be communicated to the tax authorities (e.g. the name and identity of the seller, the total consideration paid or credited to the seller).

In addition, the administrative cooperation between EU Member States' tax administrations is also strengthened, including by providing a legal basis for 'joint audits'. Furthermore, active participation in tax investigations by foreign tax officials is made possible (see Reporting obligations for platform operators (DAC 7) in the “Other issues” section).

Indirect tax measures (VAT and customs)

The Belgian government implemented different temporary VAT measures as a consequence of COVID-19:

• 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 30 January 2020 until 31 December 2022.
• Face masks and hydro-alcoholic gels will be subject to 6% VAT from 4 May 2020 until 31 December 2022.
• Definitive abolishment of the December VAT prepayment from 1 January 2021.
• 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% from 1 January 2021 until 31 December 2022.
• The VAT refund thresholds are decreased (amount threshold is depending on the circumstances) from1 April 2021.
• A tolerance of the semi-flat-rate method for determining the business use for VAT purposes of motor vehicles for the calendar years 2020 and 2021.

For updates, see GlobalVATOnline.