1. New tax legislation
Tax on interest and dividend income has been, as a rule, increased from 15 to 21%, except for interest on regulated savings accounts above EUR 1,830 and interest on government bonds issued between 24/11 and 2/12, which continue to be taxed at a 15% withholding rate. The tax rate on profits from share buybacks also increases from 10 to 21%, while the rate on liquidation gains remains at 10%. Interest and dividends that were already taxed at 25% remain subject to a 25% withholding tax rate.
A surcharge tax of 4% is applied to movable income (dividends and interest) exceeding the (indexed) sum of EUR 20,020. The surcharge tax is only applicable to dividends and interest to which the 21% rate applies (in other words, not to dividends and interest taxed at the 10, 15 or 25% rate). In order to determine whether the threshold of EUR 20,020 has been exceeded, the dividend and interest income to which the surcharge tax does not apply is first deducted; liquidation gains and the interest on the aforementioned government bonds (and the exempted interest on regulated savings accounts) need not be taken into consideration. No communal surcharge can be levied on top of the 4% surcharge.
Taxpayers may choose whether this surcharge tax should be withheld immediately at source by the taxpayer (not only financial institutions but also, for example, regular companies that pay dividends or interest) or should instead be reported on the individual income tax return.
In the latter case, the party owing the withholding tax must submit information regarding the dividends and interest and identifying the recipient of the income in question, to a central contact point at the National Bank of Belgium. The central contact point sends the information about the taxpayer in question to the tax administration upon the latter’s request or, if the threshold of EUR 20,020 has been exceeded, automatically. The tax authorities establish the surcharge tax via the assessment based on the tax return, supplemented by the central contact point, if necessary, from any information not reported therein.
The taxpayer must report all movable income, with the exception of dividends and interest on which the surcharge tax has been withheld at source.
The new rule applies to income paid or payable as from 1 January 2012.
Benefits in kind in the form of the free use of a company car must be calculated on the basis of the following formula:
Benefit in kind = 6/7 of the list price * CO2%
The list price should be understood to be the invoiced value including VAT and options but excluding discounts, reductions, rebates or refunds. The CO2 emission coefficient (CO2%) is determined based on a reference coefficient of 5.5% for diesel engines producing 95g/km or for petrol, lpg and gas engines producing 115g/km, to be increased or reduced by 0.1% per g/km with a maximum of 18% and a minimum of 4%.
The minimum benefit per year in 2012 (indexed) is EUR 1,200. As before, the contribution of the recipient of the benefit is deducted from the benefit. The lump-sum business expenses for travel between home and work deducted for individual income tax purposes (EUR 0.15/km) may not be higher than the benefit (the recipient’s contribution included).
In corporate tax, 17% of the benefit in kind is included in the disallowed expenses, and no deductions or compensation with the loss of the taxable period may be made on these disallowed expenses.
The new method of calculation applies to benefits in kind as from 1 January 2012.
The maximum rate is reduced to 3% as from assessment year 2013 (for SMEs: 3.5%).
For stock options offered as from 1 January 2012, the basic percentage is increased from 15 to 18%.
A tax rebate of 40% on expenditures on furnaces, solar panels and double glazing in 2012 applies only if the contract was signed before 28 November 2011. The tax rebate on expenditures in 2012 for the insulation of roofs, walls and floors is set at 40 or 30%, depending on whether the contract was signed at the latest on 27 November 2011 or after that date. The tax rebate for expenditures in 2012 may be carried over only if the contract was signed before 28 November 2011. There is a tax rebate of 30% only on expenditures on roof insulation as from 1 January 2013 (for a maximum of EUR 2,000, increased by EUR 600 provided the increase applies to a carryover of a tax rebate on solar panels).
The tax rebate on low-energy, passive and zero-energy homes will be discontinued as of assessment year 2013 unless the certificate was issued no later than 31 December 2011, or at the latest on 29 February 2012 if the application for the certificate was submitted no later than 31 December 2011.
The tax rebate on interest on green loans will be reduced from 40 to 30% as from assessment year 2013.
The discount will be discontinued for expenditures incurred as from 1 January 2012 (with a transitional scheme for vehicles ordered before 28 November 2011).
As from 1 January 2012, notaries and bailiffs may no longer be exempted from VAT and the rate on pay television is increased from 12 to 21%.
The rates for transactions carried out as from 1 January 2012 are increased from 0.07%, 0.17% and 0.50% to 0.09%, 0.22% and 0.65% respectively. The ceilings are raised from EUR 500 and 750 to EUR 650 and 975 respectively.
The parliament has implemented a tax on the conversion of bearer securities into dematerialised or registered securities (with an exception for securities maturing prior to 1 January 2014). The rate is 1% for conversion in 2012 and 2% for conversion in 2013. The tax will be calculated on the date of deposit, based on the latest market quotation (for listed securities), the nominal value of the debt instrument (in the case of non-listed debt securities), the latest inventory value (units in open-ended investment vehicles), or, in all other cases, the book value (to be determined by ‘the one who handled the conversion’). The tax is to be paid by a professional intermediary (if converting into dematerialised securities) or by the issuing company (if converting into registered securities).
2. Yet to be enacted in law
The carryforward of excess notional interest deduction will be abolished (at the moment, carryforward to the next 7 taxable periods is possible). The utilization of the stock per 31 December 2011 of excess notional interest deduction carryforward will be the last step in calculating the tax base before the application of the tax rate. This utilization will be limited to 60% of the remaining profit (not applicable to the first million euro of profit). Any unused deduction on account of the limitation can be carried forward for an extra taxable period.
A general thin cap rule will be introduced: interest will no longer be deductible to the extent that a ratio of 5 to 1 between intra-group loans and equity has been exceeded; the condition of the considerably more advantageous taxation of the actual recipient is abolished. For the definition of the concept of a ‘group’, reference would be made to the coordination centre regime.
The corporate tax exemption for capital gains realised on shares will only apply on the condition that the shares are held for at least 1 year. In the absence of the exemption, a separate tax rate of 25% (instead of the normal rate of 33.99%) would be applied.
The lump-sum benefits in kind for free heating and electricity offered to company executives will be raised to EUR 1,820 and EUR 910 respectively (with future indexation). The lump-sum valuation for free use of a built property will also be increased (the multiplier for dwellings with a deemed net rental value above EUR 745 is raised to 3.8).
Individual pension commitments to company executives will be required to be vested in a pension fund or insurance company. For existing internal pension provisions, there will be a transitional period of three years during which a reduced insurance tax of 1.75% applies.
The deduction of group insurance premiums for corporate tax purposes will be limited to the extent that the legal + supplementary pension is higher than 80% of the last normal gross annual salary (80% rule). The legal + supplementary pension may not in future exceed the highest government pension, which in practice means the introduction of a salary cap of approximately EUR 110,000 (with reservation).
The tax rebate for individual pension contributions will be calculated on the basis of a 30% rate for all taxpayers (instead of the special average rate of between 30 and 40% depending on income). The tax on pension capital built up via employer contributions will be increased from 16.5 to 20% (if retiring at 60) and 18% (if retiring at 61) (rates of 16.5% at 62-64 years and 10% at 65 years remain).
The deductible expenses (with the exception of alimony payments) will be converted into tax rebates at a rate of 45% (deduction for primary residence, child care costs and donations) and 30% (for the rest).
The price of service vouchers will be increased by 1 euro to EUR 8.50 as from 2013 (thereafter the price will be indexed). The tax rebate of 30% remains.
The new federal government reached an agreement on a number of anti-fraud measures:
- in the context of the general anti-abuse provision, new legislation will be drafted to allow the authorities to requalify one or more acts without having to demonstrate the existence of identical or similar legal effects;
- the recommendations of the parliamentary investigative committee on cases of major tax fraud will continue to be implemented;
- greater harmonisation (in principle: upwards) of the investigative and procedural rules for federal taxes will be sought;
- usufruct constructions will be opposed either via increased monitoring or via a regulatory initiative that is to determine the values of the benefit in kind;
- reporting all foreign accounts to the central register of the NBB will be made mandatory;
- the notification obligation for notaries will be extended to the inheritance tax return.
3. Tax legislation under the caretaker government
This is mainly related to adjustments as a result of European infringement proceedings or case law.
Companies may apply spread taxation also to capital gains realised on tangible and intangible fixed assets as from the 2012 assessment year, provided they reinvest the proceeds in eligible fixed assets that are used for professional activities within the EEA (previously limited to assets in Belgium).
Interest is deductible only if it is not higher than the amount corresponding to the market rate. This limitation was not applied before 1 January 2011 on the deduction of interest paid to Belgian financial institutions. Since that date, this has been extended to interest paid to comparable institutions in the European Economic Area (EEA). In addition, an anti-abuse provision has since come into force that applies the limitation if the debtor of the interest is linked to the institution in question.
The system of the ‘dividends received deduction (DRD)’ has been changed on various points since 1 January 2011:
- The condition that the shares must qualify as financial fixed assets has been eliminated;
- The scope of the carryforward of excess DRD to later taxable periods has been extended to companies that hold shares which meet the shareholding conditions laid down by the domestic Belgian legislation – i.e. a share of at least 10% or with an acquisition value of at least EUR 2,500,000 (and no longer the conditions laid down by the European directive).
Since 1 January 2011 tax neutrality has been extended, in the event of a transfer of the registered office of a Belgian company to another Member State of the European Union, to all resident companies as regards the elements of a Belgian company that are maintained in a Belgian establishment (previously limited to transfers of the registered offices of European companies (SE) and European cooperative companies (SCE)).
Since assessment year 2011 (income from 2010), interest and dividend income from investments in other Member States of the EEA collected without the intervention of an intermediary in Belgium (and thus without final withholding tax) are no longer subject to supplementary municipal taxes.