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On Wednesday 26 July 2017, the federal government approved the 2018 budget and announced a series of new tax measures. Taxand Belgium provides an overview of the most important of these measures.
The most important new tax measure clearly concerns the gradual reduction of corporate income tax rates. The normal rate, currently 33.99%, will be reduced to 29% in 2018 and in 2019, and will further decrease to 25% in 2020. For SMEs (small and medium-sized enterprises) a reduced tax rate of 20% will apply as of 2018 on that part of the taxable profit not exceeding 100,000 EUR.
It is generally expected that the reduction in corporate income tax rates will encourage the use of companies by individuals. In this respect, the government announced that it will introduce additional tax measures to discourage the purely fiscal use of companies, amongst others by reviewing the taxation of certain advantages deemed to be granted by a company to its directors or shareholders.
If certain conditions are fulfilled, companies benefit from a full tax exemption on capital gains realised on shares of which they are the legal owner. This tax exemption will continue to apply, but will be subject – as of 2018 – to the condition that (a) the shares are part of a participation held during at least one year and (b) the participation amounts to at least 10% (in the subsidiary company) or has a value of at least 2.5 million EUR. These conditions already apply to the dividend deduction on shares under the present tax rules. The separate tax rate of 0.412% which applies on certain capital gains on shares realised by large companies will be abolished.
As of 2020 fiscal unity for corporate income tax purposes will be introduced (a fiscal unity regime already exists for VAT purposes). As a result of such fiscal unity the tax results of the various companies being part of the same group will be consolidated for tax purposes, and will lead to one single tax result for the entire group.
Modification of the rules for calculating the notional interest deduction and for applying various tax deductions
New rules will be introduced to limit the deduction of certain tax deductible elements, such as tax losses carried forward, dividend received deductions carried forward, innovation deductions carried forward and notional interest deductions carried forward. As a general rule, these tax deductions can be fiscally deducted from the taxable profits which do not exceed 1 million EUR. Profits in excess of 1 million EUR can only be fiscally compensated for a maximum of 70% by these tax deductions. In this respect, the government clearly wishes to introduce some sort of “minimum corporate tax” since at least 30% of that part of the taxable profits exceeding 1 million EUR will become subject to effective taxation, even if the company avails of higher tax deductions. Also the rules for calculating the notional interest deduction will be modified and will become more restrictive.
Various compensatory measures will be introduced, the most relevant without any doubt being the so-called “securities account tax”. If the securities account of a taxpayer amounts to more than 500,000 EUR, this new tax of 0.15% on the total balance of the account will apply.
The government also announced various measures to make the existing so-called “Cayman-tax” more efficient.
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In addition to the changes outlined, the government also announced that it will strengthen its battle against tax fraud.