Measures from 2018 (tax year 2019)
Corporate tax rate
The basic rate of corporate tax declines from 2018 from 33% to 29%, and 25% starting from 2020.
Companies that qualify as an SME within the meaning of article 15 w. Venn. can enjoy a rate of 20% on the first tariff of EUR 100,000. Therefore, only small companies qualify for this reduced rate. The condition stating that there may not be payed a dividend by more than 13% of the paid-up capital, has been deleted. The minimum salary is raised to EUR 45,000 (see below under “fight against “incorporationizings “).
The crisis contribution that sits on top of the basic rate, drops in 2018 to 2% (instead of 3%) and in 2020 it will be completely abolished.
In addition, there will be a minimum tax for companies with a profit of more than EUR 1 million. Businesses with a taxable result of over EUR 1 million can no longer deduct certain taxes above this amount.
The deduction of losses, previously transferred DBI, transferred deduction for innovation-incomes and the new incremental revenue and transferred NIA (see below) are now limited to an amount of EUR 1 million. This subtractions may only be reduced for 70% above 1 million EUR: 30% of the profit above 1 million can therefore no longer be neutralized by previously mentioned substractions.
This results in a de facto minimum tax of 7.5% on taxable income above 1 million EUR (in particular, 30% x 25%).
The subtractions that cannot be applied by this settlement, remain transferable to the future.
For starters, the losses carried forward during the first four fiscal years are not subject to this restriction.
To 100% DRD
Starting from 2018 (tax year 2019, for financial years beginning on 1 January 2018 at the earliest), the DRD (deduction of definitive taxable income) will be applied for 100% instead of 95%.
Review of the notional interest deduction
The regime of the notional interest deduction is no longer calculated on the equity of the previous year.
In the adjusted regime is the risk capital, to be taken into consideration, equal to one fifth of the positive difference between the annual amount of the capital at risk at the beginning of the taxable period and the annual amount of the risk capital at the beginning of the fifth preceding taxable year.
Fight against incorporationizings
Now the rate in the corporate income tax drops sharply, the Government wants to counter the conversion of sole proprietors (self-employed natural persons) into companies, on the basis of:
- An increase in the minimum salary to at least one business leader of 36,000 EUR to EUR 45,000 to be able to enjoy the reduced tax. If the remuneration is lower than this amount, than it must at least be equal to the taxable result of the company.
- An additional and separate tax of 5% on the deficit, when the remuneration is less than the minimum of EUR 45,000 or half of the tax base. This tax is tax deductible. For associated companies of which at least half of the business leaders are the same people, can the total of remunerations to this person be used to determine the height of the remunerations. The total of the minimum remuneration in this case is EUR 75,000. Start-up companies (set up within four years from January 1 of the tax year) are excluded from this particular tax.
The stoppage capital gains in the personal income tax drop to 10% of capital gains that a stand-alone realizes at the stoppage of his sole proprietorship from the age of 60 years because of death or forced stoppage. Stoppage capital gains on financial fixed assets and other shares are only subject to the rate of 10% when the taxable amount is higher than the total amount of the previously adopted tax assets impairment losses.
Capital gains on shares
The tax rate of realized capital gains on shares of 0.412% for large companies is cancelled starting from 2018.
The capital gains on shares are therefore again completely exempt from corporation tax. However, by analogy with the procedures for the DBI-deduction, this is only true if the participation is held for more than one year and at least is 10% or when the purchase price of the shares is at least EUR 2.5 million.
Prepaid expenses: tax matching principle
The matching principle works also in future tax accounting. This puts an end to the (end-of-year) planning technique, which costs accounting to the next fiscal year must be attributed, if payment is made in the current financial year as fully professional costs. By also applying the matching principle in the corporate income tax, costs associated with activities or income of a subsequent fiscal year are now only deductible in this next fiscal year.
Facilities and cost restrictions
In order to prevent that facilities prior to the tariff reduction in the corporate income tax (see above) would be laid out to take back later (without use) to a lower nominal tax rate, the take-back of these facilities is taxed at the nominal tax rate that applied at the time of construction of the facility. In addition, only facilities that result from a legal or contractual obligations are fiscally exempt.
Valuation of reinvestment gains
Also, enterprises can no longer anticipate a rate reduction under the system of the taxation when discussing reinvestment gains. The reinvestment gains that are taxed because:
- They are not reinvested within the legal conditions and term;
- Or the taxable capital gains spontaneously posed before the expiry of the reinvestment period
are now taxed at the rate that applied at the time the capital gains were achieved
In addition, on taxable capital gains that were made spontaneously without adequate interest payable reinvestment are from now on also obliged to pay negligence interests .
Withholding tax on capital reductions
Capital reductions are now subject to the withholding tax in proportion to the share of the remaining reserves in the charge of paid-up capital, increased by the reserves responsible for outside of the capital. Consequentially, to the pro rata charging of a capital reduction on the taxable reserves is therefore withholding tax of 30% (in principle).
Untaxed reserves remain in principle untouched. A capital reduction shall not result in tax-free reserves becoming taxable. That’s just the case when a capital reduction would exceed the total capital and taxed reserves. In addition, under article 537 WIB “fixed” reserves under the relevant conditions are completely tax free.
One-time investment deduction temporarily 20%
The one-time 20% reduction is raised from 2018 to 2019 from 8% to 20% for SMEs and sole proprietors. This temporary measure is not linked to a tax but to a period in which the investment takes place (from 1 January until 31 December 2018 2019).
The transferred investment deduction is not part of the basket of tax subtracts that from now on will be limited (see above, minimum tax).
Taxes with the exception of the DRD of the years themselves are no more allowed tax deductions on taxes supplements that are established as a result of a tax audit when a tax increase is imposed.
Exemption by deposit withholding tax
Exemption by deposit withholding tax that applies to staff employed in scientific research, has been extended to holders of certain academic bachelor degrees: biotechnology, industrial sciences and technology, nautical sciences, product development and business administration (focused on informatics). The exemption accounts for 40% in the year 2018 and 2019 and will be 80% in 2020.
The deduction limit at passing on car costs will in future only apply to third parties in virtue of that third party and not the taxpayer who passes the costs on. The costs must be indicated separately and clearly on the invoice.
Measures from 2019 (tax year 2020)
Transfers of constituents
For the transfers of constituents for the so-called ‘ inbound transfers ‘ where constituents (assets) from abroad are transferred to Belgium, these transfers with later realized capital gains, losses, depreciation and impairment losses will be valued at real value at the time of the operation and so not to at book value or acquisition cost.
It concerns following transactions:
- the transfer of components connected to a foreign device (whose profits in Belgium are exempt) to a Belgian company
- transfer of constituents of a foreign corporation to a Belgian decoration
- the transfer of components of a foreign decoration to a Belgian decoration as far as both are part of the same foreign company
- The transfer of constituents (which permanently be used) of a foreign establishment of a foreign company of that establishment to Belgium
These arrangements will be active starting from 1st of January.
The ATAD international directives are active from 2019 (assessment year 2020) or later transposed into national law:
- Adjustment of the interest deduction on borrowed capital (as of assessment year 2021)
- Introducing CFC legislation (starting from assessment year 2020)
- Adjustments to the exit valuation (as of assessment year 2020)
- Scheme against hybrid mismatches (as of assessment year 2020)
The Government wants as of assessment year 2020 (attached to a taxable period that begins at the earliest on 1 January 2019) enter a system of limited fiscal consolidation similar to the Swedish model. As a result, the group members still have different taxable bases, but they contribute in the losses of the group. A member of the consolidation can thus deduct a “group contribution” of his taxable reserved profits, and these group contribution is taxable at the receiving company in the same taxable period. An anti-abuse provision provides, however, that companies already have at least 5 taxable periods a connection before a deductible “intra-group contribution” can be done.
Measures from 2020 (fiscal year 2021)
Further tariff reduction in the corporate tax income
The tariff in the corporate tax rate drops further to 25% as of assessment year 2021 as explained above.
Interest on debts, loans, deposits, etc. are normally only deductible to the extent that they are not higher than the market interest rate. In addition, interest on money loans made by a shareholder or manager first category to the company are provided to the extent that the market interest rate is exceeded, reclassified in dividends. The height of the market interest rate on current account with credit stand turns out in practice to give rise to much discussion. For more legal certainty, the criterion ‘ market rate ‘ as maximum interest fee from 1 January 2020 (for interest relating to periods after 31 December 2019) will be replaced by the MFI interest rate (interest rate provided by the Belgian monetary financial institutions will be charged for loans of less than EUR 1 million to non-financial institutions with a duration of less than one year), and increased by 2.5%.
This measure applies from 1 January 2020 for the interest relating to periods after 31 December 2019.
Adjustments tax shelter for audiovisual works and performing arts
The regime of the tax shelter for audiovisual works and performing arts changes in accordance with the new rate in the corporate income tax, so that the same efficiency can be guaranteed as before the rate reduction.
Discount for debts
It in effect taking a discount for future debt for non-depreciable assets is no longer a tax-deductible costs.
A temporary measure should encourage companies for two years to convert exempted reserves into loaded reserves, and this at a reduced rate of 15%. This rate drops further to 10% provided that the amount invested in:
- property, plant and equipment, other than those listed in art. 75, 5° WIB92 (e.g. passenger cars)
- that are depreciable and
- not count as reinvestment for the staggered taxation of capital gains.
Please note: this exempt reserves will actually be taxed. There are no tax subtracts possible and no set off for charges. Also the increase because of insufficient advance payments shall apply.
A number of exempt reserves are not eligible for this voluntary take-back:
- tax shelter for audiovisual works
- spread taxable gains
- Gains concerning corporate vehicles and inland ships
- Temporarily exemptions from profit of reorganization or settlements
- Capital subsidiaries
- Investing reserves where the investment term of 3 years is not exceeded
- Provisions of social passives including year 1990
- Net-active VSO or commercial corporates
- Exemption for actualizing diamonds supply
Final losses of foreign permanent establishments
Final losses of foreign permanent establishments will only be deductible if it is established that the taxable person has exhausted all opportunities abroad to deduct the losses there. In addition, the term “permanent establishment” will get a more economic interpretation.
Diggresive depreciation cancelled
The regime of digressive depreciation is cancelled rom 2020 abolished. In addition, SMEs are required to depreciate pro rata temporis.
Fee disallowed expenses
Some costs should in the future be completely accounted as disallowed expenses of the company, such as fines that until now were still deductible (e.g. proportional tax fines) and the tax on secret commissions.
For the deduction of car costs are the parameters for the deductibility changing and there will be a maximum deduction of 100% as of assessment year 2021. Tax regimes that allow a deduction of 120% of car cost (e.g. electric cars, collective transport of staff for commuting as of assessment year 2021), will thus disappear.
Personal income tax
Tax on the securities account
As small change for the reduction of corporation tax from 1 January 2018 the government decided that the much discussed tax on securities accounts (subscription fee) will enter anyway at a rate of 0.15%. The first 500,000 EUR is excluded. Securities accounts for retirement savings and life insurance are excluded.
There is also a new anti-fraud mechanism introduced: shares or other securities of a securities account will be converted to registered shares in order to stay under the limit of 500,000 EUR, still count for one year for the calculation the effects of dog.
The law on the introduction of a tax on securities accounts shall enter into force on 10 March 2018.
Exemption on savings income drops
The exemption on savings is halved from 1 January 2018. The exemption will only apply on interest on savings accounts for EUR 940 EUR instead of 1,880.
Tax reduction on dividends
Furthermore, there will be a partly exemption for dividend on shares. De exemption of 30% of withholding tax is active staring from 1st of January for the first 800EUR of dividends. The rule is meant to encourage to invest.
Collective profit premium
The introduction of a collective profit allows companies to let their employees share in the profits:
- Without the obligation for the employer
- Without participation in the capital
- Accessible to all employees within an enterprise (but not for company directors)
- Premium is not eligible for the calculation of the wage norm
- No shift will be allowed at the expense of the awarded classic remuneration
- Premium may not exceed 30% of the wage bill
- For the employee: subject to the 13.07% employee social security contributions and 7% income tax
- For the employer: the profit premium is tax not deductible
The new system applies from 1 January 2018. Profit premiums can then be awarded based on the profit for the financial year with closing date at the earliest on 30 September 2017.
Who wants to do to retirement savings, now has the choice between:
- The current system: 30% tax reduction on 940 EUR;
- or a new system: 25% tax reduction on 1,200 EUR.
The dual system shall enter into force as of assessment year 2019.
Harmonisation flat-rate professional expenses for self-employed
The expenses for self-employed persons in the personal income tax will be harmonized and progressively expanded in the advantage of the self-employed. The measure shall enter into force for gains obtained from 1 January 2018.
Tax shelter for growth companies
The existing tax shelter scheme for start-ups expands into growth companies and is therefore no longer only for start-ups.
Growth companies are small companies with at least 10 full-time equivalents and which have an annual turnover over the last two years that on average grows at least 10 or the number of full-time equivalents of staff increases with an average of 10% per tax year.
The tax reduction is 25%, with a maximum of EUR 100,000 per taxable period. This is called a global limit for the tax shelter for both starters as for these growth companies. The measure shall enter into force as of assessment year 2019.
Taxfree extra jobs
There can be tax free up to 6,000 EUR extra jobs per year, free of tax and social contributions. Employees and self-employed persons who already have a regular job should have at least a 4/5 employment. The extra activities are limited to so-called ‘ casual work ‘, such as income from sports activities, Babysitting, grass cutting, and others. A Royal Decree will provide a comprehensive but very specific list of extra activities.
The measure shall enter into force for income earned or obtained from 20 February 2018
Deduction of car expenses system undergoes a facelift with changed parameters for the deductibility and the introduction of a maximum deduction of 100%.
In the personal income tax the deduction of car expenses is determined as in the corporate income tax according to the CO2 emissions of the car. This means that the standard-deduction arrangement of 75% disappears for vehicles purchased from 1.1.2018. For the cars that were purchased before 1.1.2018, the deduction is determined in function of the CO2 emissions, but with a minimum of 75%.
As of assessment year 2021 (for taxable periods beginning on 1.1.2020 that at the earliest) also the deduction percentage changes on the basis of following formula:
120%-(0.5% x number of grams of CO2/Km)
for a petrol car is the aforementioned formula multiplied by 0.95.
Deduction is only possible for maximum 100%. The deduction of 120% for electric cars is therefore abolished. There will be a minimum of 50%, but when the CO2-emmision is more than 200 gr/km the deduction will be limited to 40% .
This is also true for the lesser values on passenger cars.
The professional gains realized on cars are also taxed in the same way as in the personal income tax based on CO2 emissions.
So-called ‘ false ‘ hybrid cars are excluded from tax regimes. When the battery has not sufficient energy capacity (0.5 KWh per 100 kg or a emissions of more than 50 g/km), the deduction of car expenses is calculated on the basis of the fuel engine present in the car.
Also the benefit in kind of such a hybrid commercial vehicle will be taxed as a car that runs purely on fuel. This is, just like the rules for deduction of car expenses, for hybrid vehicles purchased from 1 January 2018.