New budget control 2013 measures
On 30 June 2013, the Belgian government reached an agreement on various tax measures to be implemented following the June 2013 budget control. These measures will consist of a combination of additional cost savings and new tax measures (including new taxes, as well as tax increases).
The tax measures can be summarized as folllows:
1. Fairness tax
The government has decided to impose a so-called “fairness tax” or minimum tax on large companies in Belgium. In an effort to increase tax equity and to ensure that everyone in Belgium contributes according to their financial means, the government plans to levy a minimum contribution on companies that distribute dividends, but that do not effectively pay taxes.
The fairness tax would apply if, for the same taxable period, (i) a company distributes dividends and (ii) benefits from a reduction of its taxable base by offsetting previous year losses and current year notional interest deduction.
Apparently, liquidation proceeds would not be envisaged by the fairness tax.
The fairness tax rate would be set at 5%, to be increased with the so-called crisis contribution, leading to an effective tax rate of 5.15%.
The fairness tax would apply as of tax year 2014 (financial year ending on 31 December 2013, or on any later date).
2. Dividends received deduction
Dividends received by Belgian companies or permanent establishments are 95% tax exempt provided certain conditions are met, i.e. the so-called dividends received deduction.
Currently, dividends on shares not representing a 10% participation but with an acquisition value of at least EUR 2,500,000 can also benefit from the dividends received deduction. In the future, the dividends received deduction will only apply if the minimum participation threshold of 10% is reached, irrespective of the acquisition value of the shares.
3. VAT
As of 1 January 2014 the currently existing VAT exemption for lawyers will be abolished, meaning that the services rendered by lawyers will be subject to VAT (at the standard rate of 21%).
4. Miscellaneous measures
The excise duties on tobacco and alcohol will be increased, combined with a general indexation. Furthermore, there will be an increase of the subscription tax for banks.
Recently implemented tax measures
The past weeks, various tax measures have been implemented by recently published laws. More specifically, the Law of 17 June 2013 containing fiscal and financial measures (Belgian Official Gazette of 28 June 2013) and the Program Law of 28 June 2013 (Belgian Official Gazette of 1 July 2013), both contain measures executing the 2013 budget plan.
1. Withholding taxes
Dividends attributed by SME’s (“Small and Medium Enterprises”) will again be able to benefit from a reduced withholding tax rate of 15% when the following conditions are met:
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The company – existing or newly established – qualifies as an SME in the sense of article 15 of the Companies Code
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The dividends originate from newly issued and non-preferential shares;
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The shares have to be issued following new cash contributions made as of 1 July 2013 (However, the contributions may not originate from the distribution of taxed reserves benefiting from the new regime on liquidation bonuses - see below);
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The capital contribution has to be fully paid up.
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The shares have to be kept in full ownership as of the date of the capital contribution;
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The dividends are attributed out of the profit allocation for the financial year following that of the capital increase;
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The dividends have to be distributed out of the profit allocation as of the 3rd financial year following the financial year of the contribution.
If the dividends are distributed out of the profit allocation as of the 2nd financial year, the rate is set at 20%.
Only companies with the minimum paid-in capital may benefit form these withholding tax rates. If through the new cash contribution the paid-in capital equals at least the minimum paid-in capital of a BVBA/SPRL, the new rules will apply as well.
2. Liquidation bonuses
The withholding tax on liquidation bonuses will increase from 10% to 25% as of 1 October 2014. However, a transitional regime has been introduced, making it possible to distribute formerly taxed reserves at the rate of 10% if the following conditions are met:
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The taxed reserves have been approved by the shareholder’s meeting at the latest on 31 March 2013;
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The amount received must be immediately incorporated into paid-in capital;
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The incorporation must be performed during the last financial year closing before 1 October 2014; and
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The increased capital must be maintained by the receiving company during a fixed period of time, i.e. 8 years for large companies and 4 years for SME’s. If a capital decrease occurs within this period, the decrease will be considered as a dividend and additional withholding taxes will be due.
3. Registration duties
The registration duties on long-lease rights ("recht van opstal en recht van erfpacht / droit de superficie et droit d’emphytéose") has increased from 0.2% to 2% on authentic deeds executed as of 1 July 2013. For non-profit organizations the registration duties will only be increased to 0.5%. Furthermore, the fixed registration duty has been increased to 50 Euros.
As a result of all these measures, the Belgian fiscal landscape has become even more complex and challenging.