Budget 2012

Corporate tax measures

Last update: 10 May 2012 - 14:20 CET

Individual tax measures | Indirect tax measures | Other tax measures

Overview of corporate tax measures in the Budget 2012 agreement.

Capital gains on shares

Meerwaarden op aandelen | Les plus-values sur actions

The capital gains exemption of 100% of the net capital gains amount is maintained but the exemption has become subject to a 1-year holding requirement. For the capital gains exemption to apply, the shares must have been held in full ownership during an uninterrupted period of 1 year.

A special rule exists for the calculation of the 1-year period for shares acquired in exchange of tax-neutral transactions (i.e. those covered by Art. 46, §1, 1st indent, 2°, 211, 214, §1 and 231, §§2 and 3 and meeting, where required, the business purpose test of Art. 183bis ITC). In these cases the 1-year period needs to be computed as of the date of acquisition of the exchanged shares and not as of the date of acquisition of the shares received in exchange (i.e. the tax-neutral transaction is disregarded).

If the 1-year holding period is not satisfied, the capital gains will be subject to a separate tax at the rate of 25.75%. The practical modalities of application of this tax still need to be determined.

Capital gains on shares will thus be subject to one of the following three tax regimes:

Exemption: if the taxation and holding period requirement are met;
Taxation at 25.75% if the taxation requirement is met but not the holding period requirement;
Taxation at 33.99% as soon as the taxation requirement is not met.

Nothing has changed with respect to capital losses and write-offs on shares: their deduction will remain disallowed, unless there is a liquidation of the company in which the shares are held.

So-called “trading companies” governed by the Royal Decree of 23 September 1992 (credit institutions, investment entities and management companies of collective investment undertakings) are not caught by these new rules as far as the shares recorded as part of their trading portfolio are concerned (e.g. shares held as trading stock to resell them within a short period of time). Capital gains on such shares are fully taxable whereas capital losses and write-offs will be fully deductible. Special rules are also be foreseen for internal transfers of shares from and to the trading portfolio.

The new rules are applicable as of tax year 2013. They also apply to capital gains (as well as capital losses and write-offs) realised as of 28 November 2011 during a taxable period closing at the earliest on the date of publication of the law, i.e. 6 April 2012. Any modification to the closing date of the annual accounts made as of 28 November 2011 will be disregarded for purposes of the new rules.

Source: Program law of 29 March 2012, Article 146 (Dutch | French)

Withholding tax rates

Tarief roerende voorheffing | Taux du précompte mobilier

The Law of 28 December 2011 containing miscellaneous measures (Dutch | French) provides an increase of the reduced withholding tax rate of 15% on dividends to 21%. The 15% rate applied to (i) dividends related to shares that have been publicly issued from 1994; (ii) dividends related to shares issued in exchange of private (non-public) cash contributions made from 1994; and (iii) dividends related to shares in recognised investment companies.

The default withholding tax rate for dividends is maintained at 25%. Liquidation boni remain subject to the 10% withholding tax rate. Share buybacks no longer benefit from the 10% rate,and are also subject to a 21% withholding tax. The existing withholding tax exemptions are not affected.

The default withholding tax rate on interest is increased from 15% to 21%.

For interest from government bonds, the withholding tax rate is maintained at 15% for bonds issued and subscribed during the period from 24 November to 2 December 2011. All other government bonds become subject to the 21% default rate.

The withholding tax rate for royalties remains at 15%

The increased withholding rates apply to interest and dividends paid or attributed as of 1 January 2012.

Source: Law of 28 December 2011 containing miscellaneous measures, Article 25-38 (Dutch | French)

Notional interest deduction

Notionele interestaftrek | Déduction pour capital à risque

Rate

The NID rate continues to be determined annually based on the OLO rate but the previous maximum of 6.5% for large companies and 7% for SME’s is decreased to 3% for large companies and 3.5% for SME’s. These new maximum rates apply as of tax year 2013. Based on the average OLO rate for2011, the NID rates for tax year 2013 based on the OLO rate would have amounted to (rounded) 4.2% and 4.7%. Hence, for tax year 2013 the new maxima of 3% and 3.5% constitute the NID rates to be applied (Dutch | French).

Source: Law of 28 December 2011 containing miscellaneous measures (Dutch | French)

Carry forward

The possibility to carry-forward excess NID for 7 taxable periods will be abolished as of tax year 2013.

However, the current “stock” of NID carry-forwards will remain available but its use will be restricted.

The NID stock deduction will become the last operation in the corporate tax return to determine the taxable base. The maximum NID stock deduction that a company can use per tax year will be limited to 60% of the taxable base. This limitation will however not apply to the first €1 million of the taxable base remaining before the deduction of the NID stock. The NID stock which remains unused further to this limitation can be carried forward until full utilisation of the amount which would have been deductible if the 60% restriction had not existed (regardless of the expiration of the 7-year carry-forward period). This comes down, in principle, to allowing deduction of NID stock which would have been deductible under the current 7 year carry-forward rule, but spread over a longer period.

Thin capitalisation

Onderkapitalisatie | La sous-capitalisation

The 7:1 thin cap rule has been replaced by a general 5:1 debt to equity ratio.

The new regulation has been implemented by the Program Law of 29 March 2012 (Dutch | Frenc h).

From the press release of the Council of Ministers of 27 April 2012 which was published on 2 May 2012 (Dutch | French) it appears that the Council of Ministers approved an amendment (see below) to the new thin cap rule as introduced by the Program Law of 29 March 2012.

Debt is defined as:

on the one hand, all intra-group loans – group is defined by reference to the company law concept of affiliated companies laid down in Art. 11 of the Companies Code; and
on the other hand, all loans where the beneficial owner of the interest is not subject to income tax or where he is subject (in respect of the interest income) to a substantially more beneficial tax regime than the Belgian common tax regime.

Bonds and other debt issued by public offering are excluded, as well as the loans granted by banks and other financial institutions as meant in Art. 56, §2, 2° ITC.

Similarly, the new rule does not apply to loans contracted by:

companies engaged in movable leasing (cf. Art. 2 RD n° 55) and companies with factoring or real estate leasing as main activity, provided these companies belong to the financial industry and to the extent that the sums borrowed are effectively used for leasing and factoring activities. According to the Explanatory Memorandum, the “financial sector” should be understood as companies which are under permanent prudential control of the National Bank of Belgium and the Financial Services and Markets Authority;
companies with as main activity the execution of a PPP project obtained in accordance with public procurement legislation.

Equity is defined as the sum of the taxed reserves at the beginning of the taxable period and the paid-in capital at the end of the taxable period. For non-profit organisations subject to corporate income tax, paid-in capital is defined as the funds of the association as reflected on the balance sheet.

An anti-abuse measure provides that loans guaranteed or funded by a tainted third party (bearing part or all of the risks of the loan) will be deemed granted by this third party (cf. the anti-channeling provision for foreign tax credit purposes).

The amendment proposed by the Council of Ministers aims to provide the announced solution for the potentially adverse consequences of the new thin cap rule on groups who centralise certain intra-group financing activities in Belgium. The solution proposed by the Council of Ministers would consist in a netting of the interest relating to qualifying central treasury management activities. The proposed netting mechanism would imply that the interest paid or attributed would be reduced with the interest received for the application of the thin cap rule.

The netting of interest would be possible if the taxpayer would be able to demonstrate that the interest relates to qualifying transactions performed under a framework agreement for centralised treasury management within a group of companies. Centralised treasury management would mainly include cash pooling (i.e. daily treasury management) and exceptionally certain longer-term treasury management. Income received from affiliated entities located in tax haven jurisdictions would not be eligible for netting.

In the first version of the draft Program law, the date of the entry into force of the new thin capitalization regulation was set at the date of the publication of the law in the Belgian Official Gazette.

However, the Finance Commission introduced an amendment to the bill in order to defer the entry into force until 1 July 2012 at the very latest. This deferral should enable the Government to work out a “budgetary neutral and legally and technically solid” solution for the potentially adverse consequences of the new thin cap rule on groups who centralise certain financing activities in Belgium. The date of entry into force would be aligned with the date of entry into force of the proposed amendments.

Source: Program law, Article 147, 2° & 3° (Dutch | French) and press release of the Council of Ministers of 27 April 2012 (Dutch | French).

Extra-legal pension schemes

Extra-legale pensioenschema’s | Plan de pension extra-légale

As of 1 January 2012, it would no longer be possible for a company to set up pension accruals to finance an individual pension scheme for self-employed key executives (“pensioenbelofte / promesse de pension”). Such commitments would need to be outsourced, i.e. be funded via an insurance company or a pension fund. Payments in respect of such pension schemes are subject to the 4.4% insurance premium tax.

Initial plans to introduce an obligation to also outsource existing pension accruals in companies seem to have been dropped. According to the latest news, internal pension accruals existing at the end of the taxable period relating to tax year 2012 would not need to be outsourced and would be subject to a one-time taxation at 1.75% (which might be spread over 3 years at 0.6% per year). This 1.75% tax would not be tax-deductible and would be due irrespective of whether or not the existing accruals would be outsourced. Existing pension accruals that would be outsourced before the end of tax year 2015 would be exempt from the 4.4% insurance premium tax.

Also, the plans to introduce a new cap to the so-called 80% rule by linking the deductibility of pension contributions (also) to the highest pension for public servants seem to have been dropped. As an alternative, the Government now seems to have the intention to apply a special 1.5% social security rate contribution on pension contributions exceeding certain thresholds.

As from 1 January 2013 payments in relation to extra-legal pension schemes would only be tax-deductible if duly reported to a pension database in order to allow a better audit of the so-called 80% rule. A similar condition would be introduced for pension and allowances (“renten” or “rentes”) directly paid by the employer as well as for the internal accruals which have been constituted in view of such extra-legal pension schemes or allowances.

Company car expenses

Kosten van bedrijfswagens | Frais de voiture de société

The deduction of company car expenses varies currently from 50% to 100%, depending on the CO2 emission level and the fuel type (or even 120% for electric cars). Fuel costs are deductible up to 75%. Under current practice, the disallowed expenses in the hands of the company can be reduced with the benefit in kind reported in the hands of the beneficiaries. According to a recent decision of the Antwerp Court of Appeal (17 May 2011), this reduction can also be applied for the personal contributions paid by the beneficiaries.

In the Law of 28 December 2011 containing miscellaneous measures (Dutch | French), a new additional disallowed expense for company cars has been introduced. This additional disallowed expense equals 17% of the benefit in kind for the beneficiary (i.e. 6/7ths of the car’s list price X the CO2 coefficient). This new, additional disallowed expense will constitute the company’s minimum taxable base (code 112 of the tax return). In case the company has a tax loss to be carried forward, the minimum taxable base will not impact the amount of the carry-forward (i.e. the carry-forward will not be increased with the minimum taxable base).

The new additional disallowed expense applies to benefits in kind granted as of 1 January 2012.

Note that this disallowed expense also becomes taxable for entities referred to in Article 220, 2° and 3° ITC subject to the legal entities tax.

Source: Law of 28 December 2011 containing miscellaneous measures, Article 49 (Dutch | French)