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Belgium Cabinet Approves Proposed Tax Reform for 2018 — Orbitax Tax News & Alerts

According to a 27 October 2017 release from the Belgian government, the Belgian Council of Ministers has approved the proposed corporate tax reform measures for 2018 Budget. Measures include:

  • A reduction in the corporate tax rate from 33% to 29% from 2018, and to 25% from 2020;
  • The introduction of a simple flat 20% corporate tax rate for SMEs on the first EUR 100,000 of taxable income (SMEs must meet certain conditions, including that no more than one of the following is exceeded: 50 employees; EUR 9 million annual turnover; and EUR 4.5 million balance sheet total);
  • The reduction of the of the 3% austerity (crisis) surcharge to 2% in 2018 and the repeal of the surcharge from 2020;
  • An increase in the dividends received deduction from 95% to 100%;
  • An increase in the investment allowance (deduction) rate from 8% to 20% for investments made by qualifying SMEs between 1 January 2018 and 31 December 2019;
  • The extension of the salary withholding tax exemption for R&D personnel to include bachelors degree holders in certain fields (40% exemption for 2018-2019 and 80% from 2020);
  • The introduction of a tax consolidation regime from 2020 allowing for the offset of losses between group companies, subject to a number of conditions, including that the regime is only available for Belgian companies with at least a 90% participation throughout the year, the companies must have been connected for at least five years, the companies must have the same financial year, etc.;
  • Changes in the notional interest deduction to provide that only the additional capital as compared to a moving average of the past five years is considered as the calculation basis, with certain transitional provisions;
  • The abolishment of the investment reserve for new investment and ongoing investments;
  • The introduction of new rules to limit the deduction of carried forward losses, the notional interest deduction, the carried forward dividends received deduction, and the carried forward income innovation deduction, which will be taken together in a single basket that is limited to 70% of taxable income plus EUR 1 million;
  • Amendments for capital gains taxation, including:
    • The repeal of the 0.4% minimum rate on capital gains for large companies (0.412% with current surcharge); and
    • Harmonization of the participation exemption conditions for capital gains on shares with the conditions for the dividends received deduction, including the introduction of minimum participation of at least 10% or investment of at least EUR 2.5 million;
  • Penalty Increases, including:
    • An increase in the penalty for non-filing (non-declaration) of corporate tax returns, including an increase in the deemed taxable lump sum amount from EUR 19,000 to EUR 34,000 for 2018-2019 and increased to EUR 40,000 from 2020, as well as further increase in the case of a second, third, fourth and subsequent infringements by 25%, 50%, 100% and 200%, respectively; and
    • An increase in the base interest rate from 1% to 3% for determining penalties for insufficient prepayment (2.25 multiplier remains unchanged); and
  • The implementation of the minimum standard of the EU Anti-Tax Avoidance Directive (ATAD1) and its amendment (ATAD2), including the replacement of the current debt:equity ratio-based thin cap rules with a 30% of EBITDA interest deduction limit, the introduction of new controlled foreign company (CFC) rules and hybrid mismatch rules, and the amendment of existing exit tax rules.

Click the following link for an overview of the measures (Dutch language).