Tax shelter for start-up companies

Private individuals can enjoy a tax reduction of 30 or 45% if they invest directly in the capital of start-up companies. A company can raise a maximum of €250,000 in this way over the course of its existence. The investor may invest a maximum of €100,000 per year. The tax shelter applies for investments that are implemented as of 1 July 2015.

Who qualifies as a beneficiary company?
Conditions for the beneficiary companies
This measure is addressed to small companies that meet the following cumulative conditions:
• It must be a domestic company or a company from the European Economic Area (EEA) that possesses a ´Belgian establishment´ in Belgium. The company may have been set up at the earliest on 1 January 2013.
• The company may not have been set up within the framework of a merger or splitting of companies, since in these cases it is not a start-up company.
• The company may not yet have, in the past, implemented a capital reduction or paid out dividends.
• The company does not form the object of a collective insolvency proceeding nor does it find itself in the conditions of a collective insolvency proceeding.
• After the payment of the sums by the tax subject, the company may not have received more than €250,000 of tax-incentivised contributions over the course of its existence. This amount is not indexed.
The company must meet the following conditions during a period of 48 months following the payment of the shares. If these conditions cease to be fulfilled during this period, the tax reduction will be partially revoked:
• The company may not be an investment, cash pooling or financing company.
• The company may not be a ´real-estate company´.
• The company is not listed on the stock exchange.
• The company may not use the amounts received for distributing dividends or purchasing shares, nor for extending loans.

Definition of a “start-up company”
The investment must take place on the occasion of the incorporation of the company, or on the occasion of a capital increase within 4 years after its incorporation. In both cases this involves companies that were set up on 1 January 2013 at the earliest. A company is deemed to be incorporated:

• on the date of filing of the deed of incorporation with the Clerk´s Office of the Commercial Court;
• or on the date of a similar registration formality in another member state of the EEA.
When the activity of the company consists of the continuation of an activity that was formerly exercised by a natural person or some other legal entity, the company is deemed to have been incorporated at the time of the first registration in the Crossroads Bank for Enterprises by that natural person, respectively of the filing of the deed of incorporation of that other legal entity with the Clerk´s Office of the Commercial Court or of the fulfilment of a similar registration formality by that natural person or other legal entity in another member state of the EEA.
Definition of a “small company”
For the assessment year that is associated with the taxable period in which the capital contribution is made, it must be a small company (as defined in §§1 to 6 of article 15 of the Companies Code) which for the most-recently closed financial year, exceeds no more than one of the following criteria:
• annual average of the staff: 50 employees;
• annual turnover, exclusive of VAT: €9,000,000;
• balance sheet total: €4,500,000.
If more than one of the criteria are exceeded or are no longer exceeded, this only has consequences if it occurs in two successive financial years. The consequences then enter into effect as of the following financial year.
The criteria must be looked at on a consolidated basis if this is a parent company or a company which belongs to a consortium. If no accounting consolidation is drawn up, one can opt for an alternative consolidation: increase of the criteria by 20%.
A company that has just started its activity, and thus does not have these figures, must estimate the criteria in good faith at the beginning of the financial year.

Definition of a “micro-company”

A micro-company (as defined in article 15/1 of the Companies Code) is a small company with legal personality which, on the date of the annual closing, is not a subsidiary or a parent company and which exceeds no more than one of the following criteria:
• annual average of the staff: 10 employees;
• annual turnover, exclusive of VAT: €700,000;
• balance sheet total: €350,000.
There are no limitations regarding the sector of activities in which the company is active. In principle, non-profit associations are not subject to the corporate income tax.
You can find more details about these conditions on the Finance website.
Who qualifies as an investor?
The investor is a natural person who invests “directly” in the company, via a crowdfunding platform or via a starter fund, and must meet the following conditions:
• Both the national residents (subject to the personal income tax) and the non-national residents (subject to and regularised in the taxation of non-residents, natural persons) are intended.
• The investor is obliged to hold the shares on which he has paid in for a minimum of 4 years (not applicable e.g. in the case of a bankruptcy). In the event of a voluntary exit during the first four years, the tax benefit will be repaid in proportion to the number of months between the withdrawal and the 4th year.
• Both the family members of the founders and the employees of the company can obtain this tax benefit if they invest in the start-up company.
• The contribution of capital by the manager himself or the directors of the company cannot qualify for application of the tax shelter arrangement. This covers the directors, business managers, liquidators, those in similar positions and independent managers. This exclusion also applies to persons who indirectly exercise a management position as permanent representative of another company or through intervention of another company of which these persons are shareholders.
The investor can invest a maximum of €100,000 per year via the tax shelter arrangement. The maximum participation in the capital that qualifies for the tax benefit amounts to 30%. If this threshold of 30% is exceeded, the tax reduction is limited to an investment in the amount of the first 30%.
Amount of the tax benefit for the investor

For a direct investment or investment via a crowdfunding platform (recognised by the FSMA) the tax reduction depends on the size of the company at the time when the funds are raised:
• the tax reduction amounts to 30% of the invested amount in SMEs;
• the tax reduction amounts to 45% of the invested amount in micro-companies.
The tax reduction is neither refundable nor transferable.
For an investment in a starter fund, the tax reduction will apply in the income year in which the fund made its investments. The tax reduction amounts to 30% of the invested amount in the start-up compartment.
In order to qualify, the starter fund must meet certain conditions:
• the fund must have a special compartment for investments in start-ups;
• at least 80% of this compartment must be invested in start-ups that meet the criteria of the tax shelter;
• the fund must be approved by the FSMA.
The tax reduction is neither refundable nor transferable.
Currently, only direct investment is possible. A number of formalities still have to be clarified with regard to the starter fund and the recognition of crowdfunding platforms by Royal Decree.
Additional conditions
• The investment must take place in registered shares that are newly issued by the company on the occasion of its incorporation or of a capital increase.
• The contribution must be made in money. In-kind contributions are thus impossible, as are debt securities and other financial instruments (options, warrants, etc.).
• The investment must take place:
o within 48 months of the incorporation of the start-up company;
o or on the occasion of a capital increase within 4 years after the incorporation of the company. Here one looks at the date of the subscription to the capital increase, not to the date of the actual payment.

• If you dispose of the shares of a start-up company within 48 months after their purchase, the tax reduction will be partially revoked.
• Sale of currently-existing shares does not qualify.
• A company can raise a maximum of €250,000 via the tax shelter arrangement during its existence.
• No specific conditions are imposed with regard to how the monies raised are spent. However, these monies may not be used to pay dividends, acquire shares of other companies or furnish loans.
Application procedure
The tax reduction is only retained on condition that the tax subject, in support of his income tax returns over the next 4 taxable periods, furnishes proof that he still holds the involved shares or rights of participation in a recognised starter fund. This condition no longer has to be met starting with the taxable period in which the tax subject shareholder or participant in the fund has died.

Auditor may now also inspect data you store in the cloud

If you, as a tax subject, receive a visit from an auditor, you must allow him to look through your books and records if he asks to do so.
What about electronic data?

These days, tax subjects often keep such documents on a computer or server. Such electronically-stored documents may today already be inspected by tax officials.
Inspection in the cloud

In order to also harmonise the right of inspection of the officials with this evolution, the Programme Law of 1 July 2016 amended article 315(b) of the 1992 Income Tax Code – which regulates the right of inspection – by adding that the obligations set forth in this article (= preserve the documents and allow them to be inspected) also apply when the data that the administration requests exist digitally in Belgium or abroad. In other words, the auditor can also inspect data in the cloud.
A similar adaptation was made in the VAT Code so that the VAT officials receive the same power as well.
Starting when?

The new measure applies as of 14 July 2016

What tax audits to expect in 2016?

You might be the target of an audit. When do you run an increased risk?
You’re a private individual and you find yourself in one of the following situations;
• the special assessment system for foreign executives applies to you;
• he/she declared that he/she is entitled to a tax reduction for revenues of foreign origin;
• the automated processing of the return reveals that:

o he/she did not declare all of his/her professional income, Belgian and foreign,
o he/she did not make a declaration of an immovable property of which he/she is the owner in Belgium or abroad,
o he/she deducts gifts without possessing a tax certificate.
You are an independent manager and prove your expenses
You have a company
The company might be audited if:
• it, as a debtor of incomes, did not correctly and completely fill in the 281 tax forms, as a result of which the recipients cannot be identified;
• it operates a business in the hotel, restaurant and cafe sector and does not fulfil the obligation to use a registered POS system;
• as a VAT unit or as a member thereof, it has not complied with specific VAT obligations;
• during liquidation a presumption exists that not all tax levies were paid for certain liquidation transactions.
As in previous years, tax subjects who – despite the fact that a reminder was sent to them – did not file their tax return, will be audited. Particular attention will be paid to tax subjects who have already repeatedly failed to file a return.
The citizens and companies that we audit will be selected on the basis of indicators that point to a heightened tax risk. For citizens, the automated processing of the return can lead to a selection for auditing any irregularities.
Besides these specific points of concern, the FPS Finance naturally conducts other audits of the tax situation of citizens and companies.