Expected Pillar Two enactment in Belgium
Draft Pillar Two legislation is expected to be published in the summer of 2023, with a vote shortly after that. In general, the Pillar Two implementation will be in line with the Organisation for Economic Co-operation and Development (OECD) model rules and the European Union (EU) Council Directive 2022/2523 of 14 December 2022 on “ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the Union”. The Belgian government already agreed on some core principles of the Pillar Two implementation in Belgium, including a decision that a Qualified Domestic Minimum Top-up Tax (QDMTT) will be introduced, that the Pillar Two QDMTT will be payable in the course of the year (via the Belgian tax prepayment system), and that the research and development (R&D) tax credit will be modified to qualify as a qualifying tax credit. It is expected that Belgium will follow the overall implementation timeline proposed by the EU Council Directive 2022/2523 of 14 December 2022, i.e. 2024 for the Income Inclusion Rule (IIR) and 2025 for the Undertaxed Payments Rule (UTPR).
Program Law of 26 December 2022 (Official Gazette of 30 December 2022)
From a corporate income tax (CIT) perspective, the relevant provisions of the Program Law of 26 December 2022 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 European Union (so-called ‘Pillar Two’) 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 1 million euros [EUR] 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 (NID) 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 withholding tax (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)
Law of 20 November 2022 contains the following substantial changes to the investigation, assessment, and retention periods in direct tax and value-added tax (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:
- Four years in the event of failure to file a return or for late submission of a return.
- Six years for certain cross-border cases.
- Ten 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.
Other measures include the following:
- 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 [DAC7]) in the Other issues section).
Tax measures to tackle the energy crisis
To implement the EU Regulation 2022/1854, Belgium introduced a so-called ‘excess profit tax’ and a ‘temporary solidarity contribution’ for certain energy producers.
- The Law of 16 December 2022 (Official Gazette of 22 December 2022) subjected inframarginal producers of electricity to a 100% tax for market revenues above EUR 130 per MWh in the period between 1 August 2022 and 30 June 2023. In some specific cases, the cap may be higher, but never more than EUR 180 per MWh. This excess profit tax is tax deductible.
- Another Law of 16 December 2022 (Official Gazette of 22 December 2022) established a temporary solidarity contribution that is payable separately for the years 2022 and 2023 by two categories of oil companies:
- EUR 6.9 per tonne of crude oil processed between 1 January 2022 and 31 December 2023 is due by registered oil companies active in the refining sector that have refining capacity in Belgium.
- EUR 7.8 per cubic metre of products released for consumption between 1 January 2022 and 31 December 2023 is due by registered oil companies defined as primary participants for the year 2022 in accordance with the Royal Decree of 5 February 2019.