Notional interest deduction
Interest and dividend withholding tax
Tax exemption for capital gains on shares
Anti-thin capitalisation measures
Tax on stock exchange transactions
General anti-abuse measure
VAT on notary and bailiff services
As part of Belgium's budgetary discussions at the end of 2011, a number of tax law amendments came into force on January 1 2012. Other measures resulting from those, and more recent, discussions are expected to be voted on in the next few weeks. This update reviews some of the recent and expected changes affecting corporate taxpayers.
Since 2006 the tax base of a Belgian company (or a foreign company with a permanent establishment in Belgium) has been reduced on a yearly basis by a deduction for risk capital, corresponding to a notional interest amount calculated on the basis of the entity's total equity(1) at the end of the previous financial year (for further details please see "Notional interest deduction: two forms of artificial transaction in focus" and "Notional interest deduction rebalances equity and borrowings").
The applicable interest rate is the average rate of the 10-year government bond for the previous year. Pursuant to a new rule, the rate will be capped at 3% (or 3.5% for small enterprises).
Interest and dividend withholding tax
As of January 1 2012, the withholding tax rate applicable to interest and qualifying dividends rose from 15% to 21%. In some cases an additional 4% applies.
In the event of a company's liquidation, the amount reimbursed to shareholders in excess of the paid-in capital - termed a 'liquidation bonus' - remains subject to 10% withholding tax.
The applicable withholding tax exemptions and reductions remain unchanged.
Tax exemption for capital gains on shares
As a rule, capital gains realised on shares are tax exempt, provided that the issuer complies with a 'subject to tax' condition. The exemption is expected to become subject to a one-year, full-ownership holding period. Capital gains realised on shares in the first year after acquisition will be subject to tax at a rate of 25%.
Capital losses realised on a transfer of shares remain non-deductible (with the exception of losses of paid-in capital realised on the issuer's liquidation).
The exemption will no longer apply to capital gains realised by qualifying trading companies in respect of shares in their trading portfolio. However, corresponding capital losses realised by qualifying trading companies will be deductible.
Anti-thin capitalisation measures
Belgian tax law includes two measures to counter thin capitalisation. The first measure concerns loans granted to a Belgian company by a natural person holding shares, a director, a manager, a liquidator or a person with a similar function (or a relative of any of these persons). The second measure applies to loans granted to a Belgian company by entities subject to a beneficial tax regime.
A third measure has now been announced. It will apply in respect of intra-group loans granted to a Belgian company to the extent that the company's debt is more than five times greater than its own funds. An exception will apply to finance and cash companies.
Tax on stock exchange transactions
The tax on stock exchange transactions has risen.
A new measure which should allow the tax authorities to address income tax law abuses more effectively is being discussed in Parliament.
VAT on notary and bailiff services
As of January 1 2012, Belgian value added tax has applied at a general rate of 21% to the services of notaries and bailiffs, which were previously exempt.
For further information on this topic please contact Henk Verstraete or An Kuijpers at Liedekerke Wolters Waelbroeck Kirkpatrick by telephone (+32 25 51 15 15), fax (+32 25 51 14 14) or email ([email protected] or [email protected]).
Endnotes
(1) Share capital plus retained earnings as they appear on the balance sheet, subject to a couple of fiscal corrections aimed at countering abuse and 'double dipping'.