Notional interest deduction
As from assessment year 2013, the notional interest deduction (NID) rate may no longer exceed 3% (3.5% for SMEs). Since the average return on the 10-year government bond, the so-called OLO, for the year 2011 was higher than 3%, it is this maximum rate that applies in assessment year 2013.
Moreover, the possibility of carrying forward to the 7 following taxable periods any excess NID that could not be deducted because of insufficient taxable profits has been eliminated.
However, a transitional measure provides that the stock of carried forward NID at 31 December 2011 or at the end of the taxable period linked to assessment year 2012 (year ending at the latest on 30 December 2012) can still be carried forward and deducted from the profits of the 7 following taxable periods. The amount of the deduction for each taxable period is limited, however: when the taxable income exceeds EUR 1 million, the amount of deduction above EUR 1 million is limited to 60%.
Any amounts that could not be deducted because of this limitation can be deducted from the profits of subsequent periods, even beyond the 7 subsequent taxable periods. The deduction of notional interest deduction carried forward becomes the last operation for purposes of determining the taxable income subject to corporate tax.
All these measures apply as from assessment year 2013. However, the law contains an anti-abuse provision as regards their entry into force: any changes made since 28 November 2011 to the closing date of the annual accounts shall have no effect regarding the application of these measures.
On 1 July 2012, a general provision intended to counteract company thin capitalisation entered into force.
In accordance with this provision, no deduction for interest on loans is accepted if, and to the extent that, the total amount of debt exceeds 5 times the sum of the taxable reserves at the beginning of the taxable period and the paid-up capital at the end of that period.
This deduction limitation applies where the beneficial owners of the interest:
- are either established in a tax haven;
- or belong to a group of which the debtor is a member. The concept of a ‘group’ covers all affiliated companies within the meaning of Article 11 of the Belgian Companies Code.
The beneficial owners of the interest are deemed to be established in a tax haven if they are not subject to income tax or, with regard to the income, are subject to a tax regime that is substantially more advantageous than the one provided for in the common law provisions in force in Belgium.
In the event of debt guaranteed by, or financed by, a third party, the latter is considered to be the beneficial owner of the interest, when the guarantee or the provision of financing is intended primarily for purposes of tax avoidance.
It should be noted that the term ‘debt’ does not apply to bonds issued under the terms of a public offering or to loans granted by financial institutions established in the European Economic Area.
The ‘thin cap’ measure does not apply to debt held by:
- companies engaged in movable leasing or companies whose principal activity consists of factoring or real estate leasing, notably within the financial sector, and to the extent that the borrowed amounts are actually used for leasing and factoring activities;
- companies whose principal activity consists of carrying out a public-private partnership project awarded through a public tendering process.
For treasury centres, which carry out financing operations under a framework agreement for centralised group cash pooling, the thin cap measure applies to the positive difference between:
- the interest paid in respect of sums made available by the group’s companies, and
- the interest received in respect of sums made available to the group’s companies.
Exemptions for capital gains on shares realised by companies are subject to an additional condition. It is thus no longer enough for the potential income from these shares to fulfil the qualitative conditions for the application of the dividends-received deduction, but the shares must also have been held in full ownership for an uninterrupted period of at least one year. If this condition of ownership is not met (but the qualitative conditions for the dividends-received deduction are fulfilled), then the capital gains are taxed at a separate rate of 25% (to be augmented by a 3% crisis surcharge).
A system of derogations is instituted for trading companies (companies subject to the Royal Decree on the annual accounts of credit institutions and investment firms) regarding the capital gains on shares that they hold in their commercial portfolio.
For these companies, capital gains are taxed at the standard corporate tax rate, and capital losses on the same shares are deductible.
- Disallowed expenses: company cars
As regards companies, 17% of the benefits in kind resulting from the private use of company cars provided to employees or executives are henceforth a disallowed expense. This measure applies to benefits in kind provided since 1 January 2012.
- Adaptation of the investment deduction in the event of the transfer of the investment’s right of use
The transfer of the right of use of a tangible asset no longer prevents an SME from claiming an investment deduction in the event that the beneficiary of the right of use also fulfils the conditions for claiming this deduction. This measure applies as from assessment year 2013, insofar as the assets concerned were acquired or built up on or after 1 January 2012.
- Internal pension provisions
Since 1 January 2012, it is no longer possible to record internal provisions for new individual pension commitments. The existing provisions may be maintained but may not be further increased. Companies that have recorded such provisions must pay an additional tax of 1.75%, payable at the same time as the corporate tax for assessment year 2013. The payment of this additional tax may, however, be spread over 3 years at an annualized rate of 0.60%. It is not tax deductible.
- Tax-neutral transfer of internal provisions and directors and officers liability insurance
In order to facilitate the transfer of existing internal provisions or key man insurances to an insurance company, a pension fund or an institution for occupational pensions, the legislator has instituted a tax-neutral system: the transfer is exempted from the annual 4.4% tax on insurance operations which is in principle payable on life insurance premiums.
The rate of withholding tax on certain forms of interest and dividends has increased from 15% to 21% (there are exceptions, however, notably as regards the portion of interest on regulated savings accounts over EUR 1,830 (exempted portion of interest from regulated savings accounts).
Moreover, an additional levy of 4% is payable by individuals if the total amount of interest and dividend income received in 2012 exceeds EUR 20,020. This tax is calculated on the portion of interest and dividend income that exceeds that threshold. The interest and dividends subject to a withholding tax of 10 or 25% are not, however, subject to this additional levy.
Investment income must in principle be reported in the individual income tax return. However, if withholding tax and, where applicable, the 4% surcharge were withheld at source and the taxpayer declares that he or she has not received any additional investment income that may be subject to the 4% surcharge, there is no obligation to report the investment income.
- Deductible expenses converted into tax reductions
With the exception of alimony payments and the deduction for private dwelling, deductible expenses have been converted into tax reductions. This conversion applies to gifts, remuneration of household staff, child care expenses, as well as expenditures for the maintenance and restoration of monuments and sites.
Gifts and child care expenses confer a right to a tax reduction of 45%, while for remuneration of household staff and expenditures on monuments and sites the tax reduction is 30%.
- Change in the method for calculating tax reductions
As from assessment year 2013 (income year 2012), the tax reduction will be calculated on the basis of a uniform 30% rate for expenditures on long-term savings, local employment agency (LEA) vouchers and securing dwellings against theft and fire.
Furthermore, in the event of joint taxation, the tax reduction will be divided up in proportion to the taxable income of each spouse as regards the renovation of dwellings in a major urban zone of positive action, the renovation of affordable housing units, and local employment agency and service vouchers (as from assessment year 2013) as well as for securing dwellings against theft and fire (as from assessment year 2012).
- Alimony payments pursuant to a foreign legal provision: deductible on the part of the debtor; taxable on the part of the beneficiary
The administrative practice allowing the deduction (at a rate of 80%) of alimony payments made pursuant to a foreign legal provision has received legal confirmation. The legal provisions relating to the method for allocating these payments have also been adapted to the administrative practice consisting of distributing the expenses proportionately across the net income of each spouse when these expenses are payable jointly by the two spouses.
The priority of allocation on the net income of the spouse who owes the payments (with the potential allocation of any balance to the net income of the other spouse) is maintained.
Finally, the taxation as miscellaneous income of 80% of the alimony payments received by a resident of Belgium has also been adapted in order to include payments made pursuant to a foreign legal provision.
These changes will apply as from assessment year 2013.
- Tax on income from the transfer of the right to use a site in order to install mobile phone equipment
Income received (as from 1 January 2012) from the transfer of the right to use a real estate site in order to install equipment for transmission and reception by mobile phone operators will be taxed at a separate rate of 15%.
- No additional municipal taxes on interest and dividend income that is not of a professional nature
Interest and dividend income that must be reported in the individual income tax return for assessment year 2013 are in principle subject to additional municipal taxes, unless the withholding tax and the special levy of 4% have been withheld at source. Following the ruling of the Court of Justice of the European Union of 1 July 2010 in the Dijkman case, income from investments made in another Member State of the European Economic Area is, however, excluded from the tax base for calculating the additional municipal taxes.
The law eliminates this difference in treatment and provides that dividend and interest income that is not of a professional nature will be excluded from the tax base for calculating the additional municipal taxes, whatever their origin (Belgian or foreign).
It should be noted that this provision also applies to income of assessment year 2012 when the conditions for subjection to individual income tax ended before 31 December 2012 as a result of moving abroad, for example.
- Reporting life insurance contracts concluded abroad
In their individual income tax return for assessment year 2013, taxpayers will for the first time have to report any life insurance contracts they may have concluded abroad.
The anti-abuse measure of Article 344, § 1, of the Belgian Income Tax Code 1992, which was difficult to implement in practice, has been replaced by a new provision. Legal actions are not enforceable against the tax authorities when the latter demonstrates, in light of objective circumstances, that there has been tax abuse.
Tax abuse is present when, by virtue of his legal actions, the taxpayer:
- in violation of the objectives of a legal provision, either places himself outside the latter’s scope,
- or claims a benefit under a legal provision the granting of which would be contrary to the objectives of the said provision, when the essential aim of the taxpayer is to obtain the said advantage.
The taxpayer may provide proof to the contrary by demonstrating that his choice of legal actions is justified by other reasons than the desire to avoid taxes. If the taxpayer does not provide this proof, the taxable base and the calculation of the tax will be restored so that the operation is subject to a levy that is in compliance with the objective of the law, as if the abuse had not taken place.
This new measure applies as from assessment year 2013, and to legal actions performed in the course of a taxable period ending at the earliest on 6 April 2012 and relating to assessment year 2012. Any change made after 28 November 2011 to the closing date of the annual accounts shall be without effect.
A similar provision has been introduced as regards registration (and inheritance) duties where it applies to legal actions performed as from 1 June 2012.
The measures announced by the government at the time of the preparation of the 2013 budget have not yet been fully implemented into law (in particular, a change in the calculation of the notional interest deduction rate). New laws will therefore need to be voted in the coming months. Among the measures already implemented, however, we can mention the following.
- Tax on capital gains on shares
Capital gains on shares that are currently still exempt – that is, those capital gains that fulfil the qualitative conditions for the dividends-received deduction and the holding period condition of at least a year – will be subject to a tax of 0.4% as from assessment year 2014. This measure does not apply to ‘small companies’ within the meaning of Article 15 of the Belgian Companies Code.
- New condition for the deduction of supplementary pension contributions
Premiums and contributions paid as from 1 January 2013 will no longer be deductible if the obligation to provide information to Sigedis for the purpose of entry into the DB2P database (the so-called second pillar pension plans database) has not been fulfilled.
The withholding tax rate on investment income increases to 25% for income attributed or paid as from 1 January 2013. There are a few exceptions, however. Thus, the following types of income are subject to a 15% withholding tax:
- Dividends of residential real estate SICAFIs/BEVAKs
- Interest on regulated savings accounts that exceed the exempt portion (EUR 1,880 in 2013);
- Interest on government bonds subscribed to between 24 November 2011 and 2 December 2011 (the so-called ‘Leterme bonds’)
- Royalties considered as investment income (first tranche of EUR 56,450).
As for liquidation gains, these remain subject to a withholding tax of 10%.
The withholding tax is once again definitive as regards interest and dividend income, and the additional levy on certain investment income is eliminated.
- Tax on supplementary pension benefits
The tax rate applied to pension capital constituted through employer contributions increases from 16.5% to 20% (when paid at the age of 60) and 18% (when paid at the age of 61). The table below sums up the applicable rates for pension capital paid as from 1 July 2013.
For payments after an insured’s decease, the rate of 16.5% is maintained.
| Age of beneficiary at the time of payment
||Applicable rates |
| 60 years
| 61 years
| 62 to 64 years
| 65 years
NB: The supplementary pension capital subject to these tax rates is also subject to the additional municipal taxes.
- Deduction of VAT on company cars
As from 1 January 2011, the rules for deduction of VAT on company cars were changed: VAT could thereafter be deducted for business use only. Taxpayers could, however, continue to apply the old rules in 2011 and 2012. As from 1 January 2013, the new rules apply in full. The tax administration has published practical guidelines regarding the application of the new system.
The tax administration proposes three methods for determining the business use of company cars made available free of charge:
- The first method is based on the number of kilometres driven, which are recorded for each journey in a log book specific to each vehicle that indicates in detail all daily business journeys. It should be noted that the journey between home and the workplace is considered to be a private journey.
- The second method of calculation, referred to as semi-flat rate, is based on a determination of private use. The latter corresponds to the sum of the use for purely private purposes (estimated at a flat rate of 6,000 km/year) and the (actual) distance between home and the workplace (multiplied by a flat rate of 200 working days). This private use is then compared to the number of kilometres actually driven.
6.000 km + (home-workplace x 2 x 200)
% private use = ------------------------------------------------------------------------ x 100
Taxpayers may also opt to combine the first method with the second. The third method of calculation, however, must be used for the entire fleet.
When the employee is asked to make a contribution for the private use of a company car, the maximum VAT deduction on all car expenses is set at 50%, and VAT must be paid on the employee contribution, which must be the equivalent of at least the ‘normal value’ of the private use of the vehicle, if and to the extent that this private use (calculated using one of the three methods set out above) exceeds 50%.
- New rules on invoicing and chargeability of VAT
The rules on electronic invoicing have been relaxed, while the rules governing VAT chargeability, self-billing and receipt of payment changed as from 1 January 2013.
The fact that the issuing of an invoice is no longer considered to trigger VAT chargeability has given rise to a number of concerns as regards the consequences for VAT deduction.
Given the significance of the consequences of these new rules, in particular for accounting, the software publishers, professional associations and other representatives of the business sector have urgently requested that the VAT authorities postpone the entry into force of the new law as regards the rules on VAT chargeability.
The VAT authorities complied with this request and published a decision at the end of December 2012 (Decision No. E.T. 123.563 of 19 December 2012), in which a transitional period is granted for the year 2013 in the course of which the old chargeability rules may continue to be applied (which means, on the one hand, that the supplier/service provider will pay the VAT immediately with the VAT return for the period in which the invoice for the advance is issued and, on the other hand, that the client will be able to deduct the VAT immediately without having to wait for the payment or for the delivery of the goods or the provision of the services).
This transitional system is optional, however. Any taxpayers wishing to apply the new chargeability rules in 2013 may do so, provided that the following conditions are met:
- For B2B operations (with the exception of intra-Community and reverse charge operations), taxpayers will have to request an advance via a document other than an invoice (e.g. a request for payment) without mentioning the VAT, the VAT rate and the reason for which no VAT is mentioned.
- For reverse charge operations (other than intra-Community operations), taxpayers will not have to pay the VAT with the return for the period during which an invoice for an advance was received but rather in the period during which payment is received or during which the event occurs for which payment is due. Taxpayers may likewise exercise the right to a deduction within the same VAT return.
- For intra-Community services, the tax authorities allow that the recipient of the services does not have to draw up a specific type of document as provided for in Article 9 of Royal Decree No 1 in cases where an invoice is issued a few days before receipt of payment or the occurrence of the event for which payment is due. The recipient may not, however, deduct the VAT in question until the time when the event giving rise to a VAT liability occurs (i.e. when payment is received or when the service is provided). As regards the service provider, the tax authorities likewise allow the invoice to be issued a few days before the receipt of payment or the provision of the service, but the provider will not have to pay the associated VAT until one of the events giving rise to a VAT liability occurs.
- For exempted intra-Community deliveries, the tax authorities allow that an invoice be issued a few days before the event for which payment is due. However, it is only when that event occurs that the taxpayer is to report the operation in its VAT return and its statement of intra-Community operations. As a corollary, for intra-Community acquisitions located in Belgium, the tax authorities allow the invoice to be issued a few days before the event for which payment is due. The Belgian acquirer will not, however, have to pay and deduct the VAT until the VAT return relating to the period in which the event occurs for which payment is due
- For services or deliveries of movable goods carried out for the benefit of individuals by a taxpayer who habitually provides goods or services to individuals, and for which he is not required to issue an invoice, the VAT becomes liable as payment is received. However, the tax authorities specify that even where an invoice is made on an optional basis, the taxpayer is allowed to make a voluntary payment of VAT in advance at the time when the invoice is issued or when the event occurs for which payment is due.
Finally, the administration informs us that a new decision will be published in the course of the first quarter of 2013 regarding the definitive system of VAT chargeability, which will apply as from 1 January 2014.
- Increase in the tax on conversion of bearer securities
The tax on conversion of bearer securities to dematerialised or registered securities increases from 1% (conversions in 2012) to 2% for conversions made in 2013.
- Tax increase on insurance contracts
The rate of tax on individual life insurance premiums has been increased from 1.10% to 2% for premiums paid as from 1 January 2013.
There is one exception, however, for outstanding balance insurance (guaranteeing a mortgage loan taken out in order to acquire or retain real estate), for which the rate of 1.10% is maintained.