After long negotiations, the Belgian Government Di Rupo I has finally come to an agreement on the federal budget for 2013!
Perhaps as important as the new measures announced, are the measures that finally will not be implemented (such as a substantial modification of the notional interest regime, general capital gains tax for individuals, wealth tax, etc…).Over the past weeks, various “wild” rumors on these topics circulated, but finally the Government preferred to respect fiscal stability. As a result, Belgium remains a very attractive harbor for foreign wealthy individuals (the capital gains exemption on privately owned shares remains applicable) and corporations (exemption on dividends and shares, notional interest deduction, etc…). .
Please find hereafter an overview of the tax measures that will be put in place and have been announced by the Prime Minister:
1. Withholding tax measures
The withholding taxes on savings products will increase from 21% to 25%. This measure (finally) ends the existing difference in tax treatment between dividend and interest income.
Fortunately, the withholding tax will become “liberating” again, which means that the taxpayers will no longer have to declare their movable income in their annual tax returns. The tax provisions introduced in 2012 abolished the “liberating” character of the Belgian withholding tax on movable income, which lead to several practical problems, as well as a lot of administrative hassle. As of 2013 the withholding tax will therefore again be “liberating” and as such constitutes the final tax on said income.
As the withholding tax rate is set at 25%, this furthermore implies that the 4% surcharge – introduced in 2012 – de facto disappears. The investment income gained in 2012 remains subject to the 4% surcharge but special transitional measures will be introduced to facilitate the payment of the surcharge.
Interest from regulated savings deposits below a tax-free threshold (EUR 1,830.00 for 2012) will remain untouched by the new tax measures. The so-called “Leterme” state bonds issued in November and December 2011 will also remain subject to a lowered withholding tax rate of 15%. It also seems that – for now - liquidation bonuses remain taxed at 10%.
The increase of withholding taxes will mainly affect the “defensive” savers (since essentially the taxes on the so-called “low risk” products increase), which has lead to a lot of commotion in recent press articles, whereby the opposition parties criticize the new measures as being another set of taxes mainly affecting the Belgian middle-class citizen, without however introducing any substantial or structural tax reform.
2. Corporate tax measures
Capital gains on shares gained by holdings and large companies will become taxable at a separate tax rate of 0.4%. Small and medium-sized companies will not be affected by this measure. It will need to be defined further in detail which “holdings” and “large companies” are envisaged and what the exact modalities of such capital gains tax will be.
The notional interest deduction (“NID”) regime remains unchanged , although the annual NID-rate drops from 3% to 2.74% as of tax year 2014 (financial year 2013). For small and medium sized enterprises, the annual NID-rate will be set at 3.24%.
Please also note that the carry forward of excess NID-losses will probably be modified or even abolished in the coming future. The draft act implementing the latter measure is still up for discussion in Parliament.
3. Indirect tax measures
The excise duties on tobacco will be increased with 20 cent per package of cigarettes.
There will also be an increase of excise duties on alcohol (+ 4 cent per bottle of wine). This increase will, however, not apply to beer.
4. Other tax measures
Life insurance premium taxes will increase from 1.1% to 2%. This increase will, however, not apply to credit balance insurances. Pension savings contracts will remain exempt.
Also the exemption for Branch 21 and 23 insurance products with a minimal contract period of 8 years or death coverage of at least 130% remains intact.
5. Fiscal amnesty
Last but not least, a new and “final” round of tax amnesty will be put in place. However, at this moment we still lack precise information on the details thereof. We were, however, informed that the amnesty would end as of January 1st, 2014.