• Service: Tax, International Corporate Tax, Global Compliance Management Services
  • Type: Regulatory update
  • Date: 4/10/2014

Belgium - Guidance for calculating the “fairness tax” 

April 10: Belgium’s tax authorities have issued guidance in the form of a circular letter, concerning how to calculate the “fairness tax” as applicable from assessment year 2014.

The fairness tax is a separate tax under the Belgian corporate income tax system and is independent of―and is applied, when applicable, in addition to (i.e., on top of)―other corporate income taxes. Read TaxNewsFlash-Europe: Belgium - “Fairness tax” on corporations, other changes receive approval

Steps in calculating the fairness tax

  • First, determine the “positive difference” between the gross amount of distributed dividends and the final taxable result subject to corporate income tax. The fairness tax will only be due if the amount of distributed dividends is greater than the final taxable result. The final taxable result is the amount that is subject to tax, after application of all available tax deductions.
  • Second, the result of the first step (above) is reduced by the amount of the distributed dividends originating from previously taxed reserves, but no later than during assessment year 2014.
  • Finally, a “link” with the reduction of the taxable result through “harmful” tax attributes (i.e., previous tax losses and the notional interest deduction for the year) is made. The results achieved after the first and second step will be multiplied by a percentage that reflects the proportion between (1) the ‘harmful’ tax attributes, and (2) the taxable result for the tax period—i.e., the result after the first operation: sum of reserves, disallowed expenses and dividends, excluding exempt write-offs, provisions and capital gains.

Assessment year 2014

Dividends pertaining to assessment year 2014 can never be deemed to originate from the reserves taxed during assessment year 2014. The circular letter guidance clarifies that for assessment year 2014, only dividends originating from previously tax reserves (but no later than during assessment year 2013) can be excluded. Distributed profits of the financial year, thus, will in principle be subject to fairness tax.

Read an April 2014 report prepared by the KPMG member firm in Belgium: Fairness tax: tax authorities publish circular letter

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