The fairness tax is essentially a minimum tax imposed on companies that distribute dividends and pay no or very little corporate income tax because of certain tax deductions. As from tax year 2014, large companies will be subject to a 5% tax on their distributed dividends. This tax would have to be increased with the crisis contribution, leading to an effective tax rate of 5.15%.
The tax is only applicable if, during the taxable period, dividends have been distributed and the taxable profit has been offset against notional interest deduction and/or carried forward tax losses. Therefore, the fairness tax is not applicable where a company has distributed dividends in a specific year without using notional interest deduction and/or carried forward tax losses in that year.
First step: The taxable basis is determined by the positive difference between, on the one hand, the gross dividends distributed during the taxable period and, on the other hand, the taxable amount that is effectively subject to the ordinary corporate tax of 33.99%.
Second step: This positive difference (as determined by the first step) is reduced by the amount of the dividends that stems from taxed reserves, built up at the end of 2012. In order to identify the origin of the dividends, a LIFO (last-in-first-out) method is applied. Dividends distributed during tax year 2014 cannot be considered as stemming from taxed reserves of this same tax year.
Third step: The outcome of the above calculation is limited by a percentage, which is calculated according to the following fraction:
- The numerator consists of the amount of carried forward tax losses and notional interest deduction that has been effectively used in the taxable period.
- The denominator consists of the taxable amount during the taxable period, excluding tax-exempt reductions in value, provisions and capital gains.
The fairness tax itself is not tax deductible.
Although bonis of liquidation are normally considered as dividends, the fairness tax does not apply to these bonis (resulting from the repayment of capital at the time of liquidation). According to the Minister of Finance, the fairness tax is however applicable to the bonis of acquisition (resulting from a share buyback). This view is challenged by the doctrine.
However, the fairness tax is applicable to large companies or their Belgian branches. Therefore, SMEs are not involved.
Finally, it is important to note that this fairness tax has actually been strongly criticized, notably by the Council of State. Indeed, doubts exist as to whether the text of the law is compatible with EU law and double tax treaties.