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Belgian Parliament Considering Amendments to Interest Deduction Restriction and Defensive Measures for Non-Cooperative Jurisdictions — Orbitax Tax News & Alerts

The Belgian parliament is considering draft bill 1683/001, which was submitted on 3 December 2020 and includes amendments to comply with the EU Anti-Tax Avoidance Directive (ATAD) interest deduction restriction measures. The amendments are needed following the issuance of a formal notice by the European Commission that Belgium's implementation was not fully in line with the ATAD. This includes the alignment of Belgium's definitions of long-term public infrastructure projects and financial undertaking with the ATAD definitions in relation to possible exemptions from the interest restrictions for such projects and undertakings. The interest deduction restriction amendments will apply for tax periods closing on or after 31 December 2020.

In addition to the ATAD amendments, the draft bill also includes defensive measures based on the EU list of non-cooperative jurisdictions, which include:

  • The non-deductibility of costs that are allocated to persons or entities established or located in a listed jurisdiction;
  • The application of CFC rules on foreign entities established in a listed jurisdiction, regardless of meeting control or subject to tax tests; and
  • The non-application of the participation exemption (dividends received deduction) in respect of dividends distributed by a resident of a listed jurisdiction.

The CFC defensive measure will apply for tax periods closing on or after 31 December 2020, while the non-deduction of costs and non-application of the participation exemption will apply from 1 January 2021.

Lastly, measures are included for the reintroduction of the legal basis for providing a salary withholding tax exemption to R&D personnel holding bachelor's degrees, which was unintentionally removed in prior legislation. This includes the reintroduction of the required provisions to provide an 80% exemption with retroactive effect from 1 January 2020.