Cars and taxation – Never Ending Story – new from 2018

Posted on 7 December 2017 by odb — No Comments ↓

Tax deduction scheme starting from 01/01/2018 to 31/12/2019:

In the corporation tax: the deduction scheme as we know it today, is retained to 31/12/2019. The car will be classified according to its CO2 emission in a particular level of deduction.

Personal income tax: from 01/01/2018 the general deduction percentage of 75% won’t be applied anymore. Since the Government wants to encourage the self-employed in greening their vehicle fleet, the deduction will be comparable to the corporation tax but with a minimum deduction of 75%. You can get a higher deduction as a self-employed if the CO2-emission of your car is lower and consequently in a higher level deduction.

A distinction is, however, made from 01/01/2020:

– Vehicles purchased before 01/01/2018 remain of the above-mentioned deduction regulation as long as they are used (that is, if you used the car for 15 years, you’ll have right to the deduction arrangement for 15 years of at least 75%).
– Vehicles purchased after 01/01/2018 will be brought into line with the then-current arrangement in 01/01/2020 (further explained below).

Tax deduction scheme from 01/01/2020:

Starting from 01/01/2020, the deduction arrangement both in the corporate income tax as income tax will be adjusted. There will be a formula that will be applied to determine separately the deduction of each car.

The formula will look as follows:

120% – (0.5 x grams of CO2/km x coefficient)

The coefficient is:
1 for diesels and hybrid diesels
0.95 for gasoline and hybrid petrol
0.90 for natural gas with less than 12 tax HORSEPOWER

The maximum deduction will 100% and the minimum 50% deduction. However, if the CO2 emission is 200 grams or more per kilometer, the deduction is 40%.

For cars purchased before 01/01/2018 this scheme will not be applied on the personal income tax!!!
Special tax deduction for hybrid cars:

Starting from 01/01/2020 the so-called ‘ fake ‘ hybrid cars will be …….clearly we’re talking about hydride plug-in vehicles and not cars that might be considered as hybrid and obtain their electric power from, for example, the remactiviteit and charge while driving.

To determine the deduction percentage of ‘ fake ‘ hybrid cars, it is important to know the capacity of the battery. There are two possibilities:
– Capacity of at least 0.6 Kwh per 100 kg vehicle weight = CO2 from the hybrid version to handle.
– Capacity less than 0.6 Kwh per 100 kg vehicle weight = CO2 by the same type of vehicle with a classic fuel engine or if there is no comparable version with fuel engine is, the CO2 emissions of the hybrid version 2.5 times.

The obtained CO2-emission will be used to determine the percentage of deduction of the car expenses as for the calculation of the benefit in kind!

There is an important exception for the hybrid cars ordered before 01/01/2018. These cars continue to benefit the CO2-emission of the hybrid version, even after 01/01/2020.
It is not necessary that the vehicle has been delivered or registered for 01/01/2018. If you are considering the purchase before 01/01/2018, it is sufficient that you a signed order form or a signed leasing contract dated before 01/01/2018.

Corporate tax reform: update

Posted on 20 September 2017 by odb — No Comments ↓

Following link provides more details about what the summer tax agreement holds for you.

Source : tijd.be

Corporate tax reform: the winners and losers

Posted on 17 August 2017 by odb — No Comments ↓

The federal government decided to lower corporate tax. From next year, the standard corporate tax rate will be 29 percent (or 29,58 percent taking into account a 2 percent crisis contribution). From 2020, the corporate tax rate will further drop to 25 percent and the crisis contribution will even expire.

The winners :

As from 2018 SMEs – Companies with an annual turnover of no more than 9 million euros, a balance sheet total of less than 4.5 million euros and less than 50 employees – will be taxed on their first installment of 100.000 euros at a rate of only 20 percent.

SMEs can also deduct 20 percent of their investments from taxes over the next 2 years, compared with 8 percent applicable today.

At the same time, the beneficial scheme “vvpr-bis” – in the jargon – remains applicable to small companies allowing dividend payments to be subject to a withholding tax of 15 instead of 30 percent.

In addition, the liquidation reserve scheme remains unchanged which allows the company to pay out the reserves “tax-free” at the moment of liquidation .

But: a company is now required to pay a salary of at least € 45.000 per year to a company manager. If she does not comply, she must pay a special 10% surcharge on that amount (or the difference between € 45.000 and the effective salary if it is lower). The amount of € 45.000 will also be the new minimum remuneration in Article 215 (3), 4 ° WIB 92 (instead of € 36.000). Failure to comply with that rule will not only lead to the levy of the 10% special surcharge but also to the loss of the SME status. It is enough to assign that amount of salary to only one manager. Starting companies remain free from that measure (that is, the first four years after the establishment).

The losers:

Mainly large companies are target of the first share of measures which enter into force as from next year:

Profits above the first million euro will be isolated for 30 percent on which the basic rate will be due (minimum tax);
Costs that cannot be deducted due to the 30% isolation will be transferred to a subsequent year. Only deductions for investment and innovation can be fully charged;
Limitation of ‘Notional Interest Deduction’: Currently, the NID is calculated on equity. From next year the base is the growth of capital calculated on average growth over the previous five years. The transfer scheme remains unchanged;
The investment reserve disappears;
Prepaid costs will no longer be fully charged to the year of payment but will be deductible only in the following years (matching principle) E.g.: it will therefore no longer be possible to fully deduct prepaid rent in the year of payment;
Exemption of capital gains on shares becomes more restricted (additional condition as from 2018 in accordance with DBI terms: minimum participation of 10% or 2.5 million). Capital gains on shareholdings that do not comply to this are, in principle, always subject to a tax of 25%;
Capital reductions will now be charged pro rata to the paid-up capital and the reserves (whether or not capital incorporated). The possibility of allocating the reduction with priority and solely to the paid-up capital expires with as a consequence a more difficult avoidance of the withholding tax on movable income;
The tax benefits for enrollment companies (cfr. double exemption of the growth of taxable profits) are abolished;
Additional penalties for non-submission of tax returns: the minimum lump-sum profit that can be taxed in those cases increases – in two steps – from € 19.000 to € 40.000;
No deductions (such as losses) can be claimed to reduce the additional taxation imposed by the tax authorities.

The second share of measures expected in 2020 will also target SMEs:

Limitation of interest deductions on loans;
Fictional interest rates applicable to intra-group loans will no longer be deductible as costs;
Abolition of degressive depreciation;
Pro rata temporis depreciation for all companies;
Reduction of deductibility of certain costs (including stricter deduction of car costs and elimination of 120% deductibility for electric vehicles and safety);
Deductibility of both the secret commission assessment and VAT fines is abolished;
Abolition of the exemption for complementary and additional staff;
Difficulty to channel profits abroad without paying taxes due to the introduction of CFC legislation, which allows that the income of a “controlled foreign company” can still be taxed in Belgium;
Deduction of losses made by foreign branches will in most cases no longer be possible.

Large companies will again be able to fiscal consolidate from 2020: losses and profits from different group companies will be offset from then on. This would only apply to the future (i.e., no compensation of one company’s profits by transferred losses from another group company dating back to 2020) and predominantly for subsidiaries in the European Union.

In addition, the base rate for prepayments is increased from 1% to 3%. Companies that do not prepay will therefore pay more.

The above input is limited to the broad lines of the proposal since not all details are yet available. We will of course inform you as soon as more information is available about these new measures.

VAT revolution for the real estate sector

Posted on 17 August 2017 by odb — No Comments ↓

Letting real estate in Belgium is in principle a VAT-exempted activity (Art. 44, 3, 2 W.BTW).

The down side of this exemption implies that the VAT due by property developers and rental agencies of commercial properties to contractors for new constructions and renovations is not recoverable.

The non-recoverable VAT is therefore an expense that is often recharged in the rental price.

The summer agreement refers to a change to the current exemption for letting real estate. Concrete texts are not yet available, but the amendment would provide in an optional VAT system.

For lease agreements coming into effect from 1 January 2018, the charge of 21% VAT on the rental price would be possible.

Those who choose for this option will be able to eventually recover the full VAT paid to the contractors.

The application of VAT is an option and no obligation.

Earlier concluded lease contracts are explicitly excluded.

The rented property must also be used for professional purposes (B2B environment). Other tenants like public institutions (if not primarily used for VAT activities), individuals, etc. would not be eligible.

For the tenant is the VAT neutral as he can deduct the VAT charged on the rent. The minister even expects rental prices to fall because landlords will no longer need to recharge the non-deductible VAT as there is none.

This amendment would also imply an administrative simplification as tax structures, such as usufruct or immovable leasing that were built in the past to enable landlords to however recover VAT, will no longer be required.

The reform should also put an end to the competitive handicap vis-à-vis surrounding countries. In the Netherlands and in the UK, property developers have long been able to recover VAT.

Comments:

A VAT unit already provides for deductibility of VAT to the extent that the building is used for the exercise of VAT activities and, in most cases, offers other benefits, such as avoiding pre-financing of VAT on mutual transactions.

The start date of January 1, 2018 immediately raises questions about the fiscal fate in renewal of contracts, the possibility of a revision of input VAT for older buildings for investment within the review period (5 or 15 years depending on the nature of the works) , as well as the impact on registration fees due for such leases.

We will of course keep you informed of further developments in this regard.

Cycle to work : would you be happy with a company bicycle or would you rather prefer a company mountain bike?

Posted on 27 April 2017 by odb — No Comments ↓

The legislature has provided in a favorable statute to promote cycling. This favorable statute foresees following benefits:

23cent / km can be deducted as commuting expense in case the deduction of actual business expenses is claimed;
no benefit in kind needs to be charged (not even for purely private travel) provided that the bicycle is actually used for commuting fully or partly between home and work;
The employer may also intervene in the commuting expenses by granting 23cent / km for the commuting route which is made by bicycle.

All benefits are also cumulative.

There are also benefits for employers: all costs related to the facilitation of a business bicycle entitle to an increased deduction of 120%. Not only the cost of the provided bicycle, but also the costs of showers and bike are envisaged.

But a bicycle is not to be considered as a vehicle with two wheels and pedals!

For tax purposes is a mountain bike or racing bike not (fully) equivalent to a ‘bicycle’

The 1st and 3rd benefits of the favorable statute remain applicable in case of sport bikes. However, a taxable benefit in kind is allocated to the employee beneficiary in cases where the ‘bike’ is provided by the employer. This taxable benefit in kind is considered as wage and therefore subject to withholding tax and social security.

According to the Minister of Finance, the 2^nd benefit of the favorable statute is only applicable to city bikes and hybrid bikes (intermediate between a city bike and a mountain bike). The law does not make such distinction.

Further makes the minister of Finance also a distinction between “pedelecs” (electric bikes whose speed is limited to 25km/h) and “speed pedelecs” (electric bicycles speeding up to 45km/h).

“Pedelecs” are fiscally treated as bicycles and enjoy of all three possible tax benefits.

“Speed Pedelecs” are categorized by the Traffic Code as a “Class B motorcycle”. This qualification is extended to fiscal purposes with as a result that none of the advantages of the favorable statute for bicycles apply to speed pedelecs. The increased tax deduction of 120% for electric motorcycles is also not applicable because the speed pedelec is not purely electrical driven!!

If an employer purchases or leases a “fast electric bike” and grants it to an employee as a “business cycle”, the employee will be taxed on the actual value of the advantage derived from the free use of the business cycle.

Remarkable is that the taxable benefit in kind for speed pedelecs might be higher than the minimum tax benefit of € 1.280,00 which applies to some company cars with low CO² emissions.

VAT advance payments abolished. Is the 20th of the month still important to you?

Posted on 3 February 2017 by odb — No Comments ↓

Individuals and companies who opted for the regime of quarterly VAT declarations, need to consider 5 instead of 12 payments a year going forward.

As from April 1, 2017 VAT taxpayers with a quarterly tax return will no longer pay monthly VAT advances. For the sake of clarity, for month taxpayers nothing changes.

The purpose of the abolition of VAT advance payments is to simplify the VAT procedure.

This simplification comes down to:

Currently quarter taxpayers must pay VAT advances for the first and second month of the quarter equal to 1/3 of the outcome due of the previous quarter. The payment related to the third month of the quarter is done based on the actual VAT return.

In other words, the arrangement for quarter taxpayers involved monthly payments whereby a settlement of the actual VAT balance took place on quarterly basis.

The simplification implies that the payment of VAT will coincide with the tax return obligation. If you are a quarter taxpayer, you will be paying the VAT on a quarterly basis as well.

This simplification does not mean that:

First, you will not pay less taxes. The VAT debt remains the same, you only pay it on quarterly basis instead of through monthly payments.

For some VAT taxpayers will the above result in a substantial payment each quarter. If applicable, put money aside throughout the quarter to fund the payment.

Second, not all advance payments are abolished. Both month as quarter taxpayers are now required to pay December’s advance. The advance payment arrangement for the fourth quarter will therefore apply to all VAT taxpayers.

Were you quarter taxpayer before 1.1.2017, then you still owe the advances for January and February. The simplification is namely foreseen to enter into force as of April 1, 2017.

The 2017’s deadlines for VAT purposes are as follows:

Still questions, email us at info@odb.solutions

Financial protection against costs of tax audit

Posted on 4 January 2017 by odb — No Comments ↓

As your accountant and tax adviser we would like to introduce ‘Omnifisc‘. An insurance policy covering tax audits and judicial procedures in relation to income taxes and VAT.

The insurance is not intended to cover the additional tax liability due as a result of the audit.

The insurance covers up to € 30,000.00 of expenses and fees of your accountant, lawyer and bailiffs to conduct the fiscal procedure, of which € 15,000.00 is meant for the administrative phase and € 15,000.00 for the judicial phase.

The premium is tax deductible:

It remains difficult to predict if and when a tax audit will take place and how much time it will request. Our fees relating to tax audits (including requests for information, notices of amendment, objections and / or onsite support) are therefore not included in our standard rates. These services are always separately charged at an hourly rate based on the actual time involved.

On the other hand, legislation is becoming increasingly complex and offers less legal certainty. Where it used to be quite clear which approach the tax authorities would take with respect to certain structures, this is no longer the case.

In the search for additional revenues the tax authorities are also asked to make targeted and follow-up tax audits.

In short: the risk of extensive fiscal control, disputes and discussions of the tax administration has increased significantly.

To hedge against unexpected costs such tax audit might involve, you can consider underwriting an ‘Omnifisc’ insurance. For more information you can contact us at info@odb.solutions.