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.
Companies or individuals with a CBE number that can prove that they are facing difficulties directly resulting from the coronavirus spread, subject to additional conditions, can request for payment arrangements, such as payment by instalments, waiver of interests for late payments, and/or discounts on fines, for wage withholding taxes (WHTs), value-added tax (VAT), personal income tax (PIT), corporate income tax (CIT), income tax on legal entities, and non-resident income tax.
Companies that are confronted with difficulties in paying the social security contributions on their employees’ wages as a direct result of the coronavirus pandemic can also request a payment by instalments for the social security contributions due for the first and second quarter of 2020.
Also, the tax credit related to the advance tax payments to be made for the third and fourth quarters of tax year 2021 will (temporarily) be increased (see Payment of tax in the Tax administration section for more information).
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 assessment years 2022, 2023 and 2024. The exemption will be 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 assessment year, the amount of the exemption that can be claimed will be 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 will have 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' is 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).
The tax authorities confirm in a circular of 23 March 2020 that the spread of the COVID-19 virus and the drastic measures taken by the government to take back control over the human impact of COVID-19 are regarded as exceptional circumstances that occurred during the taxable period, justifying the write-down on trade receivables on entities having a backlog in payments following (directly or indirectly from) specific (health) measures taken by the government.
Several temporary 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.
- In order to support the event sector, reception costs incurred between 8 June 2020 and 31 December 2020 are deductible up to 100% (instead of 50%).
- There is also an extension of the tax deadlines regarding the tax shelter 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.
- The government also introduced a series of tax measures to stimulate donations of medical material and supplies to certain medical facilities and institutions, such as hospitals, retirement homes, schools, and similar organisations. The donation of these medical goods done between 1 March 2020 and 31 July 2020 does not qualify as an abnormal or benevolent advantage in the hands of the donator and the costs associated with the donated medical devices are tax deductible. Similar tax measures are foreseen for donations of computers to schools between 1 March 2020 and 1 September 2020.
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 30 April 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 1 March 2020 until 1 September 2020, the self-supply rule will not be applicable for the free supply (donations) of medical devices, certain protective equipment to specified institutions and organisations (under specific conditions).
- From 1 March 2020 until 31 December 2020, the self-supply rule will not be applicable for the free supply (donations) of computers to specified institutions and organisations (under specific conditions).
- From 4 May 2020 until 31 December 2020, face masks and hydro-alcoholic gels will be subject to 6% VAT (proposal is pending to extend this measure to 31 March 2021).
- From 8 June 2020 until 31 December 2020, restaurant and catering services will be subject to 6% VAT.
- For the year 2020 exceptionally no December VAT prepayment will be required to increase the liquidity of companies.
For updates, see GlobalVATOnline.
Other taxes (not exhaustive)
- All property tax assessments for the assessment year 2020 sent to legal entities may exceptionally be paid by 30 April 2021 at the latest, despite the ordinary payment term stated on the assessments. This measure applies to companies that are legal entities. One-man businesses can request a repayment plan more flexible.
- For companies, an additional delay of four months for the payment of the circulation tax and the registration tax, and, for individuals, payment arrangements or waiver of interest for late payments can be requested.
- More flexibility regarding requests for payment arrangements.
- Automatic postponement of deadlines for certain formalities regarding inheritance taxes and registration duties until 31 January 2021 (if the original term expires between 1 November 2020 and 31 January 2021, and the tax obligations are complied with by 31 January 2021).
- The terms to comply with the conditions to maintain or obtain favourable regimes regarding registration duties will be extended until 31 January 2021.
- Extended deadline for the payment of property tax assessments (additional delay of two months).
- The city tax (due by tourist accommodation establishments) is not due for the year 2020.
- The terms to comply with the conditions to maintain or obtain some favourable regimes regarding registration duties will be extended until the end of the crisis (this measure is still subject to change).
- The tax on taxi operations is not due for 2020.
- It was decided that the tax on certain automatic entertainment devices, which is paid annually in advance, would be reimbursed for each month affected by a compulsory closure.
New tax on securities accounts
The Belgian Government has submitted a bill to Parliament introducing a new annual tax on securities accounts 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.
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 would not be due on securities accounts held by specific types of financial institutions in conducting their own business activities. Residents 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). Note that these features could still evolve during the legislative process.
Implementation of DAC6
On 25 May 2018, the Council of the European Union (EU) has formally adopted Directive amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements (also known as DAC6). DAC6 aims at bridging the information gap between taxpayers and tax authorities by installing a mandatory disclosure obligation for cross-border arrangements/transactions that fall within one of the hallmarks. Under DAC6, the reportable information will be disclosed to the national tax authority, shared between the tax authorities of the EU member states, and will also be (partly) accessible by the EU Commission.
DAC6 has been implemented by a federal law of 12 December 2019, which closely follows the Directive, and by the Regions. In June 2020, the Belgian tax authorities published an FAQ with further guidance on the application of the DAC6 rules.
The law foresees that an intermediary may potentially not be allowed to actually report following the Belgian professional secrecy rules that apply to, e.g., registered lawyers and registered tax consultants. In this case, the intermediary has to inform the taxpayer and/or other intermediaries (if any) that there is a reporting obligation due but that the actual reporting is prevented due to legal professional secrecy rules. This is known as the so-called 'legal professional privilege'. If there are no other intermediaries, the taxpayer can at all times waive the professional secrecy enabling the advisor to make the reporting. The professional secrecy rules do not apply for reporting obligations related to so-called ‘market-ready’ arrangements.
Penalties ranging from 1,250 euros (EUR) to EUR 100,000 per infraction may be applied by the tax authorities. The intentional character (or not) of the breach will be considered.
The law provides that the reportable cross-border arrangements whose first implementation step occurs between 25 June 2018 and 1 July 2020 are to be reported as of 1 July 2020, and by 31 August 2020 at the latest. As of 1 July 2020, there is a 30-day turnaround period to report to the domestic tax authorities. Due to the COVID-19 pandemic and following a European proposal for an amending council directive, the Belgian government has granted a six-month delay to fulfil the first reporting obligations under the DAC6 legislation by way of administrative tolerance (see Disclosure and exchange of cross-border arrangements by tax advisers (DAC6) in the Other issues section).
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.