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 (until 30 September 2021).
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 until (currently) 30 June 2021. However chances are that this period may be extended.
Also, the tax credit related to the advance tax payments to be made for the third and fourth quarters of tax year 2021 is (temporarily) 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 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).
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 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.
- 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 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).
- 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 31 December 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 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 30 September 2021, face masks and hydro-alcoholic gels will be subject to 6% VAT.
- From 8 May 2021 until 30 September 2021, restaurant and catering services 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 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 50-400(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.
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.