The Belgian government has recently come to an agreement on the federal budget plan for 2013, aiming to reduce the deficit to 2.15% of GDP. This agreement contains several tax measures, which should be adopted by the Chamber of Representatives by the end of 2012. Hereby follows a summary of the most relevant tax measures:
I. Corporate Income Tax (“CIT”)
A. Notional interest deduction (“NID”)
The so-called notional interest deduction entitles Belgian companies and Belgian establishments of foreign companies to annually deduct from their taxable basis a “fictitious” (notional) interest expense computed on their aggregate equity.
The maximum NID rate, which is currently set at 3% for large companies and 3.5% for small and medium sized companies, should not be modified.
Criteria for small and medium sized companies are the following:
- Net turnover of € 7.300.000;
- Balance sheet total € 3.650.000;
- Employees number of 50 (average annual workforce).
If the above limits are met (or exceeded) companies are considered to be large.
For the financial year 2013, the NID rate is set at 2.74% for large companies and 3.24% for small and medium sized companies for tax year 2014.
B. Capital gains on shares
Capital gains on shares are tax exempt provided that the company which shares are sold has been subject to “normal” taxation and that these shares have been held for minimum one year.
Capital gains on shares which do not meet the holding period requirement are taxed at the rate of 25.75%. Capital gains which do not meet the taxation requirement are taxed at the rate of 33.99%.
Capital gains currently qualifying for the exemption would be subject to a “separate tax” of 0.412% (i.e. 0.4% + 3% crisis contribution), computed on the net amount of the gain that until now would be exempt. Netting of capital gains subject to the 0.4% tax with capital losses on share would not be possible. Furthermore, such separate tax would not be creditable, nor tax deductible. The separate tax should not be applicable to small and medium sized companies.
II. Withholding tax
Increase of the 21% withholding tax rate to 25%
Interests are currently subject to a 21% withholding tax on the gross amount.
Additionally, Belgian resident individuals are subject to an additional 4% tax on earned interests if the total amount of movable income exceeds EUR 20,020 per year.
If the 4% additional tax has not been withheld in addition to the Belgian withholding tax at the moment of payment, the taxpayer is required to declare the interest income in his/her personal income tax return. Moreover, in such case, certain information (including the amount of interest income and the identity of the taxpayer) is communicated to a central contact point operated by the Belgian ministry of Finance (separated from the tax administrations) which in turn communicates the relevant information to the tax administration on an annual basis.
As from 2013, all movable income will be taxed at 25% and will no longer have to be mentioned in the annual tax return. As a result, the 4% surcharge and the notification to the central contact point will be abolished as of 2013. The 4% surcharge will still apply for movable income earned in 2012 and the taxpayers will need to report the qualifying income in their 2013 tax return. Royalties, interest on regulated savings deposits (in excess of the tax-exempt bracket) and certain bonds issued end of 2011 by the Belgian State will remain at 15%. Income from real estate investment trusts (“sicafi/vastgoedbevak”) will also become subject to 15% withholding tax as of 2013 (instead of currently 0%). Finally, liquidation bonuses will remain subject to 10% withholding tax.
III. Indirect tax
A. Insurance premium taxes
Insurance premium taxes would be increased from 1.1% to 2% for unit-linked life insurance products (“Branche 23/Tak 23”) and insurance savings products (“Tak 21/Branche 21”) for premium paid as of 2013. This tax applies to the amount of insurance premiums paid as part of individual life insurance.
Pension savings contracts would remain exempt from insurance premium taxes and the increase would also have no impact on group insurance contracts or pension funds. The increase would also not apply to credit balance insurances.
B. Excise duties The 2013 federal budget plan includes increases of excise duties: plus 12% on alcoholic beverages and spirits (to the exclusion of beers) and plus EUR 0.20 per pack of cigarettes and rolling tobacco.
IV. Other measures
A. Tax amnesty
A new – and final – tax amnesty procedure allowing taxpayers to regularize undeclared income and capital would be set up. This procedure would only last for the year 2013. Permanent tax regularization through the Ruling Commission would no longer be possible.
The procedure would be open to individuals, corporate taxpayers and legal entities subject to the legal entities taxation regime.
The regularize income would be subject to its ordinary tax regime. However, a 10 to 15% penalty would additionally be due.
B. Combat against tax fraud
The statute of limitation in case of tax fraud would only start running as from the moment where the taxes due have been settled. Therefore, as long as the taxpayer keeps using false documents in the context of a dispute with the tax authorities, the prescription term would not start running.
A new criminal offense - “Severe Tax Fraud” - would be introduced and could be sanctioned with imprisonment of up to 5 years.
Foreign life insurance products would have to be reported in the personal income tax return in addition to the foreign bank accounts.