As part of the tax shift from labour to capital, banks and insurance companies will have to contribute an additional EUR 100 million to the Belgian budget by way of a new tax. The so-called bank tax, which isn't so much an additional levy as it is a reduction in qualifying deductions from the tax base, was introduced by the Omnibus Act of 10 August 2015 (Belgian State Gazette, 18 August 2015) (hereinafter, the "Omnibus Act").
The new measure will apply as from assessment year 2016 (Art. 100 Omnibus Act) to (i) credit institutions incorporated under the laws of Belgium, accredited in accordance with the Act of 25 April 2014 on the status and supervision on credit institutions, and other credit institutions carrying out activities in Belgium (Art. 97 Omnibus Act and new Art. 207 Income Tax Code, hereinafter the "ITC"), (ii) insurance companies incorporated under the laws of Belgium, accredited in accordance with the Act of 9 July 1975 on the supervision of insurance companies, and other insurance companies carrying out activities in Belgium (Art. 97 Omnibus Act and new Art. 207 ITC), and (iii) credit institutions and insurance companies incorporated under the laws of another EEA member state which are authorised to carry out activities in Belgium in accordance with the abovementioned laws, either through a branch or in the framework of freedom to provide services.
The government chose to introduce the new tax by means of a reduction in (i) the notional interest deduction (Arts. 205bis to 205novies §3 ITC, pursuant to which all companies subject to Belgian corporate tax can deduct from their taxable income a fictitious amount of interest calculated on the basis of their shareholders' equity), (ii) the dividends received deduction (Arts. 202 to 205 ITC)), and (iii) loss carryforwards (Art. 206 ITC).
The calculation is done in two phases. In the first phase, the applicable reduction is first determined, while in the second phase, this amount is subtracted from the abovementioned deductions.
In the first phase, the reduction is determined. This amount is the product of three factors:
- for credit institutions, obligations to clients (for example bank deposits), and for insurance companies, technical reserves;
- a fixed annual percentage, e.g. 2.37% for credit institutions and 1.88% for insurance companies for assessment year 2016;
- the percentage fixed for the notional interest deduction, e.g. 1.63% for assessment year 2016.
In the second phase, the hypothetical deductions under the normal rules are first determined. Subsequently, the reduction calculated in the first phase is subtracted from the hypothetical loss carryforwards, dividends received deduction, and notional interest deduction, in this order.
As far as loss carryforwards and the dividends received deductions are concerned, unused portions can be carried forward to the next year, under certain circumstances. However, any unused portion of the notional interest deduction cannot be carried forward and will therefore be lost.
Finally, the Omnibus Act amends Articles 207 and 536 ITC to ensure that the reduction does not result in a higher notional interest deduction due to the carryforward of unused deductions from previous years.